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Getting Staked vs. Borrowing
By Sean Lind
Regardless of their current bankroll or financial situation, many poker players will sit down at certain games to play on someone else's money.When making a deal to play with someone else's money, the first thing you have to decide is if you're getting staked or borrowing the money.
Risk vs. Reward
The most obvious difference between the two options is the risk versus the reward. If you're getting staked, you have no monetary risk, but you are greatly limiting the size of your reward. In a $1,000 buy-in tournament, let's say the first-place winner makes $125,000.
Stake (at 50%): ($125,000 - $1,000)/2 = $62,000
Loan (at 0%): $125,000 - $1,000 = $124,000
As is fairly obvious, the reward for taking a loan of $1,000 is a net gain of $62,000. If you feel that you will win this tournament one out of every 61 times you play it, you will be losing money by taking a stake. What you lose on the bottom line you gain in reduced variance.
The staking equation I've used here is only applicable if this is your first tournament being staked by this specific horse. In the real world of professional staking, your back stakes accumulate and you're accountable for all of them.
Even the game's biggest names reduce variance by getting staked.
If you have a deal to be staked by your horse into the $1,000 tournament every week and you bust out before the money in the first 20 prior to finally taking it down, your net earnings will look like this:
Stake (at 50%): [($125,000 - $1,000) - $20,000]/2 = $52,000
There are many cases where the backlog of money owed becomes so large that a player will drop his horse and try to find a new one to start fresh with.
This is viewed as a complete scumbag maneuver, and I'd think twice before ever attempting anything like it ... even if it does suck to win $125,000 and go home with only $4,000 in your pocket.
Stake Deals
Unless you're a proven winning player, or are making a deal with a friend, it's uncommon to receive 50% of the pull as the player. People willing to stake poker players are gamblers looking for a high-yield, high-risk, short-term investment.
The more risk the stake horse takes on, the larger they will expect their end to be. Unless you can prove your poker results are sufficient to reduce the risk of the stake, do not expect your end to be as high as 50% if someone other than a friend is staking you.
Loan Sharks & the Juice
On the other hand, if you take a loan, you have to have the ability to cover the full amount of the loan in the agreed-upon timeframe. Depending on the person you got your loan from, you might have some heavy juice if you don't.
It's also a good idea to get to know the person, and their collection methods, before ever taking a loan.
If you're used to loans from a bank, you're used to an interest rate in the neighborhood of 5-6%. In the world of private loans and loan sharks, how many points you pay depends on the amount you're borrowing, and on your credit.
Expect to pay anywhere from 10 points to 95. And the interest is compounded weekly.
Loans from friends can be one thing, but I'd advise you to stay away from loan sharks. There's a reason for all the Hollywood stereotypes of loan sharks: there are many out there who aren't all that far from the mark.
The type of trouble you can get yourself into with the wrong loan shark is not the type of trouble you really want.
Don't get me wrong; there are a lot of good poker players out there who are willing to give stakes and loans - good people who are interested in doing solid business. Just make sure you're dealing with them and not with the other guys.
If you're going to get backed, make sure it's with a stand-up guy doing solid business.
Easy Money? Not So Fast
Only in rare situations is it wise to take a loan to play poker. All of them revolve around you having the roll and the money, but being unable to access it at a given time. For example, you head down to Bermuda and happen to sit in a cash game you don't have cash for, since you left it all in your box at the Bellagio.
If you can't afford to play the game, you really should not be playing it. Or you should be playing on a stake. There are many players good enough to beat games they simply cannot in reality afford to play - most often because their bankroll management skills are poor to nonexistent.
You cannot play No-Limit poker successfully unless you're truly willing to lose all the money you have in play in front of you. You need to be able and willing to put it all-in on a read, or to make a move with your stack. To do that you need to be able to afford to lose what you have at stake.
If you're taking loans hoping to hit a big pot to clear your debt, you're fighting an uphill battle.
Don't play a game unless you have a roll, or a way to support the loss. If you don't have either of those options, play on a stake.
When both parties involved understand how a stake differs from a loan, it frees you up to play strong poker without having to get gun-shy at the thought of losing your stack.
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