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Debt Isn’t Your Enemy with Eddie DeAngelis · Budget Your Business

0:00
SPEAKER_01: These big millionaires and even billionaires, you listen to some of them and you see how they leverage debt as a catalyst to continue to grow and scale the business, how to let other people's money work for you.
0:11
SPEAKER_01: So when I think of debt now and I'm speaking to a lot of our clients and small business owners that are maybe on the fence about taking debt, it's all about really calculating your ROI and building out a plan and executing on your plans.
0:25
SPEAKER_00: Welcome to the Budget Your Business podcast, where small business owners go to learn how to financially plan for every aspect of their business.
0:32
SPEAKER_00: Let's get started with your host, Scott Geller.
0:36
Scott: Hello, and welcome to Budget Your Business.
0:38
Scott: I'm Scott Geller, and today I have Eddie D'Angelo, CEO and co-f and founder of Qualify.
0:45
Scott: Hello, Eddie.
0:46
SPEAKER_01: Hey Scotty, how are you?
0:48
Scott: I'm good.
0:48
Scott: I'm good.
0:50
Scott: So today we're gonna talk about a little bit about two-point of direction here.
0:56
Scott: One, Eddie has a really interesting backstory that he shared with me that I wanna I want to walk down through his transformation of kind of a what is credit to now starting and running a credit company.
1:11
Scott: So Eddie, uh thanks for joining me.
1:13
Scott: And for those that don't know you, uh why don't you just give us a little bit about who you are and what you do?
1:19
SPEAKER_01: Absolutely.
1:20
SPEAKER_01: So thank you for having me.
1:21
SPEAKER_01: It's my pleasure to be here.
1:22
SPEAKER_01: Um my name is Eddie DeAngelis.
1:23
SPEAKER_01: I'm the founder and CEO of a boutique uh brokerage firm called Qualify.
1:28
SPEAKER_01: Uh we're located just outside Philadelphia PA in the suburbs in Delaware County.
1:34
SPEAKER_01: We at Qualify, we help clients that aren't getting much love from their local bank.
1:38
SPEAKER_01: Generally, you know, 80 to 85% of businesses across the country are unable to meet conventional banking requirements and they're forced to go out into the market elsewhere when they need capital to grow and scale their business.
1:50
SPEAKER_01: So we like to fill that gap when clients need funding, whether they have a bank line of credit that may be nearly maxed or maxed out, or they're just unable to, you know, basically qualify and meet the requirements for conventional bank options.
2:03
Scott: Thank you.
2:04
Scott: And when we were talking, we we we we kind of went all the way back to the beginning.
2:08
Scott: And what I really love was your the roots of where you got started.
2:13
Scott: And maybe you can start there around selling, you know, you're a salesman for perfumes and colognes and kind of some of the financial challenges that you that you were hitting back then.
2:25
SPEAKER_01: Yeah, we're go we're going way back, you know, to just a few years, Eddie, right?
2:29
SPEAKER_01: Three three decades ago.
2:31
SPEAKER_01: 28-year-old Eddie, I like to say, when I kind of got my first taste in any kind of business, uh, I was selling five, six dollar perfumes and colognes outside of a welfare office on two milk crates.
2:42
SPEAKER_01: And, you know, back then, I know I 28's not a kid, but I fairly still consider it a kid and young and didn't know much about business uh until I discovered I had a talent in sales, a God-given talent.
2:54
SPEAKER_01: And uh when it comes to the financial side of it, I didn't have any money back then.
2:58
SPEAKER_01: I literally started with maybe$50 or$100 and ran into this gentleman outside of the famous, uh world-famous Pat Steaks and Gino Steaks in in Philadelphia, uh, selling these bottles of cologne and uh and perfume outside of his hats back.
3:14
SPEAKER_01: And I purchased, you know, maybe I went over and he had a big sign under and it had the hats popped up out of his little SUV, and it had a big sign that said, Why pay more?
3:23
SPEAKER_01: And he had all these men's colognes.
3:24
SPEAKER_01: So I went over just to see what it was, started spraying them, and I ended up, they I couldn't believe how great they smelled or how similar they sell, they smelled to the real the real thing.
3:34
SPEAKER_01: And uh I ended up buying a few bottles for myself and then took them home and then really, really liked them and was amazed with the quality, how long it lasts, the fragrances.
3:42
SPEAKER_01: And all my friends started asking me about them.
3:45
SPEAKER_01: Hey, where'd you get them?
3:46
SPEAKER_01: And I was telling everybody.
3:47
SPEAKER_01: Next thing you know, I'm going back to Pat Stakes to find the same guy.
3:51
SPEAKER_01: I guess he was out there often, and I and I I end up just buying more and more.
3:55
SPEAKER_01: But to make a long story short, I eventually turned it into a little business of mine and started seeing the growth opportunity.
4:01
SPEAKER_01: But where the where the capital uh lesson comes in, Eddie back then, I eventually was able to source the distributor that was providing these, the manufacturer that was out of New York City at the time.
4:13
SPEAKER_01: And when I finally, you know, found out where they were coming from, I went to New York, took a trip, and I maybe maybe had a couple hundred hours at the time and bought as many bottles as I could.
4:23
SPEAKER_01: You know, I might have been paying$1.50 a bottle or$1.25 a bottle back then.
4:27
SPEAKER_01: And, you know, just being able to come back with everything and then the next day potentially selling out or two days, and then finding myself to have to run back to New York again with another two or three hundred dollars.
4:39
SPEAKER_01: And the lesson that I kind of want to say, if Eddie at 28 had access to or had any kind of knowledge of financing and how to obtain a bank line of credit or a business loan, you know, instead of going back and forth every couple of days or every couple of weeks and taking a year or two to actually build the business, if I would just had a measly$20,000 loan or$30,000 line of credit or a$50,000, whatever the amount may be, it would have skyrocketed that like learning curve of just, you know, just scaling the business like so manually without any, you know, without the help of the financial support, where let's just say I could go to New York and I could load up a ton of inventory that's going to last me through the month or a couple months.
5:20
SPEAKER_01: And then able to, you know, because I eventually went from, you know, the perfumes and colognes into adding a lot of other items and products that as once I found New York City, it opened, exposed me to a whole world of opportunity.
5:34
SPEAKER_01: All the manufacturers and and distributors and wholesalers, you know, are selling watches, they're selling apparel, hats, you you name it, anything that you wanted to sell, you could buy it really low wholesale price in New York City and come back into Philly and sell it for double, sometimes triple that amount.
5:51
SPEAKER_01: So once I seen that opportunity, you know, my eyes lit up and I'm like, holy, you know, I know I could sell all this merchandise, but when you're sitting there with two, three hundred dollars in your pocket, you can only bring back so much.
6:01
SPEAKER_01: So, you know, it took me like a good year to two years to really build up a sufficient inventory for I was able to then open up my first little brick and mortar storefront.
6:10
SPEAKER_01: So just the the little point that we're we're we were talking about, you and I, is if I just had access to$10,000,$20,000,$30,000 line of credit, you know, having all that inventory, if you're a business owner and you have a good product or a good service and you have the clientele and that demand is there, the access to capital should be the last thing you want to hold back or stomp, stump your growth, if that makes sense.
6:35
Scott: Yeah, it it definitely does.
6:37
Scott: What were some of the signs that you needed to learn more?
6:40
Scott: Like you needed to understand this, the financial.
6:43
Scott: You're a salesman, right?
6:44
Scott: You know how to sell.
6:45
Scott: Uh, but what about the finance side of that business?
6:48
Scott: Like, what were some of the signs that you needed to learn more?
6:51
SPEAKER_01: Yeah, that's a great question, Scott.
6:53
SPEAKER_01: And to be honest with you, 28-year-old Eddie didn't really know anything about finance or business, even at that matter.
7:01
SPEAKER_01: What I seen was an opportunity that, you know, when you put it into perspective, prior to that, I was working a part-time job at UPS, making maybe$15 an hour, a couple hundred dollars a week.
7:14
SPEAKER_01: And then my first day out outside the uh the welfare office with the perfumes in colognes, you know, I might have made$400 in a matter of five or six hours.
7:25
SPEAKER_01: And I'm like putting that into perspective, and I'm like, holy shit, you know, this is this is$400 cash.
7:30
SPEAKER_01: I just made it in less than a day, times that by five.
7:33
SPEAKER_01: One thing I was good at was math, times that by five.
7:36
SPEAKER_01: Now we're talking a couple thousand dollars a week, times that by 52 weeks in a year.
7:40
SPEAKER_01: Now we're talking about a six-figure income, and I'm just this little kid standing out there with two milk crates and a bunch of imitation perfumes.
7:46
SPEAKER_01: So I saw like the opportunity, which got me really excited.
7:50
SPEAKER_01: Well, wow, this could, this is something serious.
7:53
SPEAKER_01: And then I just, again, like I said, there was no business plan.
7:56
SPEAKER_01: There was no, it just I just took action, right?
7:58
SPEAKER_01: I seen a little opportunity and I took action.
8:01
SPEAKER_01: I think that's that's one of the biggest lessons learned because now, fast forward 30 years later, I know so many entrepreneurs and business owners that I've helped along the years and have intimate relationships with a lot of our clients.
8:13
SPEAKER_01: Sometimes, you know, I think fear holds a lot of people back.
8:18
SPEAKER_01: In addition to fear, sometimes over planning, and people think you need, you know, the millions of dollars in investment capital, or you need this big elaborate business plan that you have to work on for a year or two.
8:29
SPEAKER_01: Honestly, if you have a product or a good service, in many cases, just take action.
8:33
SPEAKER_01: Go out and get your first customer, make your first sale.
8:36
SPEAKER_01: And then, you know, like Shark Tank, build your proof of concept, right?
8:39
SPEAKER_01: They always want to see a proof of concept.
8:40
SPEAKER_01: What have you sold?
8:42
SPEAKER_01: Make sure you have a good product and service that you're gonna deliver that there's gonna be a demand for.
8:46
SPEAKER_01: So the big lesson is just take action and get your plan in the works and start selling.
8:51
SPEAKER_01: Like most entrepreneurs, they end up being good at a specific craft.
8:55
SPEAKER_01: And to your point, to your question, you know, you might have, let's just say, a plumber and they go in and they learn how to do plumbing and they maybe go to a technical school and they become great at it.
9:04
SPEAKER_01: Next thing you know, they start building up a business and they start working with their friends and building it up.
9:09
SPEAKER_01: And it eventually one day it organically grows into a real business.
9:13
SPEAKER_01: And you're like, you know, now you realize, hey, I'm not just a sales guy anymore, I'm a business owner.
9:18
SPEAKER_01: And that business owner title comes with many different hats, right?
9:21
SPEAKER_01: You're now the accounts payable department, you're the accounts receivable department, you're the marketing team, you're the processing team.
9:26
SPEAKER_01: And that's just where it organically grows, if that makes sense.
9:30
SPEAKER_01: The business kind of pushes you organically into what needs to be done next.
9:35
SPEAKER_01: So if there's if I need product and I'm just 28-year-old Eddie selling on the street corner and I have no money, well, obviously, I need more money to be able to buy the amount of product that I know I can sell in a given period.
9:47
SPEAKER_01: So I've always learned hands-on and organically, just jumping in and taking action and just grew it, you know, one step at a time like that.
9:55
SPEAKER_01: And and even in today's world with Qualify, we still take those same lessons where we've experienced a ton of growth over the last three years.
10:05
SPEAKER_01: And a lot of people say, well, how do you know when you have to hire a sales team or when you have to hire new sales reps or when you have to look at new technology?
10:12
SPEAKER_01: The business, if it's growing, it's organically pushing you to get out of your comfort zone.
10:18
SPEAKER_01: And that's what a lot of us realize here, even our management team, like we're doing things that we're not usually doing.
10:23
SPEAKER_01: Like I'm doing podcasts right now.
10:25
SPEAKER_01: This was never a part of my plan or my uh or my dream or my goal or my vision.
10:29
SPEAKER_01: Didn't even know what a podcast was three or four years ago, right?
10:32
SPEAKER_01: So here we are today having a podcast that's all about the marketing and growing the, you know, the vision and the strategies for the business.
10:39
SPEAKER_01: So, you know, I know I talk fast and I'm throwing a lot of information out there, but that's genuinely, you know, to take action and just do and jump in the water and get your first sale and just continue to keep pushing.
10:50
SPEAKER_01: And you'll you'll eventually learn your business will organically push you into those next steps in many cases.
10:57
Scott: And I like the I like the description.
10:59
Scott: I I like to think of it as business owners are excellent at what they do, but they may not be excellent at all the other support staff than actually running the business.
11:09
SPEAKER_01: Absolutely.
11:10
SPEAKER_01: There's no there's no man, I mean, maybe there is a manual.
11:12
SPEAKER_01: There's a lot of information out there in books, of course, but unknown unbeknownst to myself, I, you know, I only lasted about a year at LaSalle University.
11:20
SPEAKER_01: I went into computer programming, which I did not like even a little bit, and I ended up dropping out in my first year.
11:26
SPEAKER_01: And, you know, this is the way my path and God took me.
11:30
SPEAKER_01: And I wouldn't trade it for the world because I I had to learn with hands-on and and just learning and growing every day.
11:37
SPEAKER_01: And by the failures and everything that didn't work, how to keep pushing forward and keep moving.
11:41
SPEAKER_01: That's the name of the game.
11:42
Scott: Well, what would you recommend at business owners who may not have that business and or finance background of how to handle it?
11:51
SPEAKER_01: That's a great question.
11:52
SPEAKER_01: A lot of business owners, as you're growing your business, right, they get to a to a point in the size of the company or the revenues that they're growing where they would eventually need a CPA to come in.
12:05
SPEAKER_01: And in many cases, they can't afford that.
12:07
SPEAKER_01: I remember to the point before we finally hired our uh our our CPA, an accounting firm that that does our books currently.
12:14
SPEAKER_01: But in that, in that, in the in the earlier stages before you can afford a full-time accountant, as you know, it's your industry, uh a CFO, like a part-time CFO, would be a great interim choice to get it to get a hold of, coming in and helping the company structure.
12:30
SPEAKER_01: Like one thing that we did initially back in the early days, that I think every business owner should do is look into QuickBooks, into it, the software financing platform, as you know.
12:38
SPEAKER_01: I know there's a few others out there, like Net Suites that are more complex or a little bit for larger companies.
12:44
SPEAKER_01: But QuickBooks, once you get someone to set that up for you, and I'm sure you did your share setups, really helps structure the business like a real business, where you have all your vendors and your payables and your accounts receivables.
12:55
SPEAKER_01: And once you set it up properly and you're just entering your sales in the system as you go, the QuickBooks does everything for you.
13:02
SPEAKER_01: Then it everything's like one click.
13:03
SPEAKER_01: Look at your accounts receivable report, how much money's owed to the business, how much do I owe out to my vendors and such like that.
13:09
SPEAKER_01: So my recommendation would be to seek out a part-time CFO like yourself to really start getting that advice.
13:16
SPEAKER_01: And then obviously with the guidance of a CFO or eventually a full-time accountant, then then you have your numbers guy, right?
13:21
SPEAKER_01: It may not come natural for a lot of business owners, just like it didn't come natural for me either.
13:26
SPEAKER_01: You know, we we had to learn as we go.
13:28
Scott: Right.
13:28
Scott: And and I think a big part of what doesn't come natural is because of this stigma that debt is a bad option for companies, right?
13:38
Scott: You can get yourself in trouble if you take out debt.
13:42
Scott: At the same time, yeah, well, I don't think they a lot of businesses fully appreciate how it can be a catalyst for growth in the business.
13:50
Scott: Can you maybe touch on that a little bit of examples of what you've seen in your career as well or maybe some clients?
13:58
SPEAKER_01: You're a hundred percent correct.
13:59
SPEAKER_01: That debt can be detrimental to a business if you're not utilizing it properly and you're just recklessly taking on debt without the regard of any type of return on investment or any type of plan or execution for what you're gonna utilize those funds for.
14:16
SPEAKER_01: I like to look at debt and and and listen, I was a big guy that felt the same way like my whole life.
14:22
SPEAKER_01: Like always wanted, like as I'm working and growing these businesses, I'm like, oh, if I can only just pay this mortgage offer, I can only just pay this line of credit off.
14:28
SPEAKER_01: Like I always want it to be debt-free.
14:30
SPEAKER_01: And then as you continue to learn and you see what other huge companies out there are doing, and these big, you know, these big millionaires and even billionaires, you listen to some of them and you see how they leverage debt as a as a catalyst to continue to grow and scale the business, how to let other people's money work for you.
14:48
SPEAKER_01: So when when I think of debt now, when I'm speaking to a lot of our clients and small business owners that are maybe on the fence about taking debt, it's all about really calculating your ROI and building out a plan and executing on your plan.
15:02
SPEAKER_01: So, for example, for simple math, let's take a$100,000 loan.
15:06
SPEAKER_01: Uh let's take a$100,000 loan or line of credit, and let's just say even expensive money, let's say it's 20% money, and maybe over the cost of a year it costs you$20,000, right?
15:15
SPEAKER_01: You now have$100,000 to invest in the business.
15:19
SPEAKER_01: What are we going to use that money towards?
15:21
SPEAKER_01: Can we use that money to market and drive some good traffic and business to the to the company?
15:26
SPEAKER_01: Are we able to buy some equipment to be able to upgrade our efficiencies and our processes and be able to turn over and sell more?
15:32
SPEAKER_01: One of the biggest things that we've learned is how to lean in and really recruit and hire A players, A performers.
15:41
SPEAKER_01: As you know, and everyone knows that usually when you look at companies that are growing, 80% of the revenue is pretty much driven by the 20% of the top 20% of your sales team.
15:51
SPEAKER_01: So we really leaned in on the hiring and the onboarding and the training of really trying to find a great culture fit and A players where we like to say that they have the ambition and drive and the business acumen to really want to be successful.
16:06
SPEAKER_01: And what I've learned is that the difference between hiring like two A players, even A, B players, just decent performers, versus making two bad hires is like light years apart and could be the difference between success and failure in your business.
16:23
SPEAKER_01: I've seen it firsthand where two new hires literally can take the business almost into another another stratosphere.
16:30
SPEAKER_01: And two bad hires can really cost the company a lot of money.
16:33
Scott: You touched on on a really important aspect of debt, and that is where and how to use it.
16:40
Scott: Which and I have my own opinion and I have my own you know uh recommendations around that.
16:46
Scott: But what I what I like to flip that around a bit is ask from your perspective, what do you think debt should not be used for?
16:54
SPEAKER_01: Great question.
16:55
SPEAKER_01: So typically businesses could be in a some sort of a drop in revenue where they're struggling.
17:04
SPEAKER_01: You know, a lot of founders are spending more money than they're making, they're funding their business with their line of credit.
17:10
SPEAKER_01: I mean, I'm I'm guilty of that myself.
17:12
SPEAKER_01: When I spent 17 years in the apparel business, I was paying myself a salary, and if we ever had a shortfall or a bad month, I would just supplement the bills with the line of credit.
17:22
SPEAKER_01: So I know it could be tempting and easy when the cash is there, readily available, to just, oh, I'll just take$20,000 out of the line of credit this month to cover payroll and and and you know the the expenses for the business.
17:35
SPEAKER_01: But I guess when businesses are struggling and they're not necessarily looking to really hone in on the issue, like we've seen a lot of businesses come to us and they need money to make payroll, and then we get the capital for them, and then a month and a half later they're back for more money because they never really fixed the issue.
17:54
SPEAKER_01: They just hatched it and used the capital as a band-aid and then continued with the same behaviors without making any serious uh adjustments or changes or cuts to the business expenses.
18:05
SPEAKER_01: So the biggest advice is like you said, really come in with a plan and know what you're using the money for, how much you need, and know specifically for the most part, right, where that money's gonna go to and what type of, you know, plan it out.
18:18
SPEAKER_01: What type of what type of return on the investment, you know, do you see happening?
18:22
SPEAKER_01: Is it gonna take one or two months to start seeing that that income come in?
18:25
SPEAKER_01: Is it a six to twelve month plan and so on?
18:28
Scott: Yeah, and I I like that as well as I'm gonna throw one other in there just selfishly around, don't spin it on personal reasons, right?
18:35
Scott: Like spin it on the business.
18:37
SPEAKER_01: Of course.
18:37
SPEAKER_01: You like to say that's a given, right?
18:39
SPEAKER_01: But you you'd be surprised.
18:41
SPEAKER_01: You'd be surprised what we've seen over the years.
18:43
SPEAKER_01: And and yes, listen, we're all human beings, right?
18:45
SPEAKER_01: We all have flaws, nobody's perfect.
18:47
SPEAKER_01: People make mistakes, you know, and and and they get into a little bit of a jam and they'll fund their personal lifestyle, whatever that may be.
18:54
SPEAKER_01: But yeah, of course, you you want to use the money for the business.
18:57
SPEAKER_01: Business is number one, because without the business income, a lot of us don't have that personal lifestyle that we're trying to live.
19:03
Scott: Exactly.
19:04
Scott: How do smart business owners prepare for themselves before applying, before they even come to you?
19:12
Scott: What do you find business owners doing that that makes them a little bit better prepared for getting credit?
19:18
SPEAKER_01: Yeah, that's a really good question.
19:20
SPEAKER_01: A lot of business owners or CFOs, we speak to a lot of accountants and CFOs that are working on behalf, you know, out searching for capital on behalf of the business owners.
19:28
SPEAKER_01: The smartest ones and the ones that typically will see the best interest rates and the best terms are typically the ones that are being proactive and not reactive, right?
19:36
SPEAKER_01: Really preparing.
19:37
SPEAKER_01: If you see a down month coming, you know, you're projecting it out.
19:41
SPEAKER_01: Or if you have clients that are slow paying, you're projecting when you're going to need cash.
19:45
SPEAKER_01: Um, but the the smartest business owners are applying for capital when the business is doing well and they're projecting out where they might have a shortfall in their revenue stream.
19:56
SPEAKER_01: Are they somewhat seasonal?
19:57
SPEAKER_01: Are they really busy, you know, now going into the Christmas shopping season from September to December?
20:02
SPEAKER_01: And then in January, does it slow down?
20:04
SPEAKER_01: Are you prepared?
20:05
SPEAKER_01: Are you looking for a line of credit?
20:06
SPEAKER_01: Because what we see is that the business owners that are applying when they really aren't strapped for cash and not waiting till the last minute until they're in a desperate situation.
20:15
SPEAKER_01: Well, when we get your financials and your bank statements and we review everything, the business is not showing any signs of stress if you're applying when everything is going well.
20:24
SPEAKER_01: And unfortunately, when the business is going well, most people aren't thinking about, hey, I should get a line of credit now.
20:29
SPEAKER_01: So that's one that I talk about a lot.
20:30
SPEAKER_01: I really try to educate our clients is don't wait until that last minute.
20:34
SPEAKER_01: So God forbid something happens.
20:35
SPEAKER_01: You need any money in three days for payroll because you don't have time to prepare.
20:39
SPEAKER_01: If you've already seen a big uh dip in revenue, your top line sales, that's going to be reflective in your bank statements, where, you know, looking at a trailing history of about six months, your bank balances, right?
20:50
SPEAKER_01: If you're having some cash flow stress, you'll see your bank balances going down.
20:54
SPEAKER_01: Sometimes we'll see overdrafts and negative days into your account, which will heavily impact any type of approval and sometimes automatically decline it, depending on how many.
21:02
SPEAKER_01: So, yeah, so it's all about being proactive versus being reactive for the most part.
21:07
Scott: Well, you're you're singing my tunes.
21:08
Scott: I love it when businesses are proactive.
21:11
SPEAKER_01: Absolutely.
21:12
Scott: Uh Qualify is not a bank, and businesses, I think a lot of times start with a bank when they're looking for credit simply because they have a checking account, right?
21:21
Scott: They have their their basic transaction, their relationship with the bank.
21:26
Scott: Walk through how a business like Qualify is different than a bank when it comes to getting credit.
21:32
SPEAKER_01: Yeah, so the the first thing that I'd like to say, we kind of touched on it earlier.
21:36
SPEAKER_01: Uh, conventional banks, as you know, have pretty tough requirements, especially for like newer, young, smaller businesses and startups.
21:44
SPEAKER_01: You know, the basic general requirements that are pretty much across the board for all banks, or most banks, I should say, is a minimum of like 680 to 700 personal credit, which means if your personal credit score is suffering a little bit and it's maybe even average at 600 or 650 or below, you're not even an option.
22:00
SPEAKER_01: For a bank line or a bank loan.
22:01
SPEAKER_01: Time in business.
22:02
SPEAKER_01: Banks typically want to work with clients that have been in business for at least two years to three years of trailing history with supporting documentation, tax returns, and such.
22:11
SPEAKER_01: One of the biggest areas I'd say where most of the clients or a big portion of the clients that do come to us for financing, banks require like two to three years of consistent profitability in the tax returns.
22:23
SPEAKER_01: And that's where a lot of clients miss the mark.
22:26
SPEAKER_01: They may have a great company, great credit.
22:28
SPEAKER_01: They could have been around for 20 years, but they just had one bad year last year or the year before.
22:32
SPEAKER_01: And they showed loss.
22:34
SPEAKER_01: In a lot of cases, as you know, especially as a CFO yourself, a lot of clients are trying to not show as much income to save on tax exposure.
22:42
SPEAKER_01: And then they'll be at a break-even or a small loss, so they don't have to pay much in taxes.
22:46
SPEAKER_01: But now that comes back, you know, that comes back to bite you in the butt when terms around, you know, that you're looking for financing.
22:52
SPEAKER_01: So that's one of the biggest areas I'd say where clients are missing the mark.
22:56
SPEAKER_01: They don't have two that two to three years of consistency of profitability.
22:59
SPEAKER_01: And as you know, that's a no-go for most banks.
23:02
SPEAKER_01: So clients come to us in that scenario where they are unable to, you know, to secure bank financing.
23:10
SPEAKER_01: And also a lot of our clients already had bank financing and were able to secure a bank credit line, but in the most recent year, they didn't meet the covenants and their debt-to-income ratio may have changed, or they're falling out of covenant because they filed a loss on that tax return.
23:26
SPEAKER_01: And as you know, the banks typically do a new annual review each year and they review those prior year financials.
23:32
SPEAKER_01: So if you miss a covenant, a lot of times, you know, the line gets called and then they have to come into our market.
23:37
SPEAKER_01: So with regards to like the alternative in the alternative lending industry, which is where we live in, of course, we do asset back transactions just like a bank.
23:46
SPEAKER_01: So if they have accounts receivable or if they have real estate, you know, we could do a home equity line on real estate, we could do cash-out refinances.
23:53
SPEAKER_01: We have credit and cash flow driven uh credit facilities where they don't require assets.
23:58
SPEAKER_01: So we have a lot of options that don't necessarily have the stiff requirements that the conventional banks have.
24:06
SPEAKER_01: Most of them are pretty much credit and cash flow driven if it's a non-asset back transaction.
24:11
SPEAKER_01: So we have so many different lenders and so many different solutions.
24:15
SPEAKER_01: I like to say we try to have a home for almost every client that we're talking to, right?
24:19
SPEAKER_01: We we like to say that we meet the client where they are, wherever they are in their business journey, we meet them where they are.
24:25
SPEAKER_01: And our job is to educate them as to what may be available to them in the market, whether it's an SBA loan, a five-year term loan, equipment financing, a line of credit, whatever we feel is is going to help get them to whatever they're hoping to accomplish with their need.
24:38
SPEAKER_01: And then our goal is to continuously elevate them each time around and refinance them into a better facility with a lower interest rate as the business continues to improve.
24:47
SPEAKER_01: So we educate them on all the requirements that you know specific lines with specific interest rates are looking for.
24:54
SPEAKER_01: So we leave at least leave the business owner with, you know, pretty much a navigational roadmap as to where they need to be to get refinanced into the next best facility.
25:03
Scott: Speaking of requirements, and that that's a big part of lending is the companies having to meet certain requirements.
25:11
Scott: Aligning that with the very what I think is a bit of a unique economy that we're in right now.
25:17
Scott: Are there any like what are lenders looking for?
25:20
Scott: Is there anything different or specific that lenders are looking for today in the third quarter of 2026, rolling into next year?
25:28
SPEAKER_01: Interesting.
25:29
SPEAKER_01: So this year's been a little, it's been a little, I'll use the word wonky.
25:33
SPEAKER_01: Uh we started off the year uh with a with a bang, like our entire industry.
25:37
SPEAKER_01: I have a lot of friends in the space, a lot of lenders and brokers that we have relationships with.
25:41
SPEAKER_01: And it seemed like everybody jumped out of the box this year and did really well.
25:45
SPEAKER_01: It was probably our best quarter in the history of the company.
25:48
SPEAKER_01: And then once we hit May, something just took a step back and it dropped down 20, 25%.
25:55
SPEAKER_01: And from May through this month, August, it's just been like a little bit off.
25:59
SPEAKER_01: And every I, everyone I speak to in the industry are kind of seeing the same thing.
26:03
SPEAKER_01: So I know it's not just qualify specific, which makes me feel a little bit better.
26:07
SPEAKER_01: But to your point, I think there's so much going on, like between the economy and the gas prices, and you know, being a political year with elections and the midterms.
26:18
SPEAKER_01: I think a lot of business owners are hesitant and they're they're afraid to pull the trigger.
26:21
SPEAKER_01: They want to wait and see what happens and they're on the sideline.
26:24
SPEAKER_01: So I think overall, when you have all that background noise, it it does at some point trickle down, you know, into the economy and kind of slow things down for everybody.
26:33
SPEAKER_01: And that's kind of what I feel like we're seeing right now.
26:35
SPEAKER_01: So banks see that and feel that as well.
26:38
SPEAKER_01: And they sometimes you'll see them tighten up their boxes and may not approve with the larger approvals.
26:44
SPEAKER_01: They may get a little bit conservative on approval email, they may shorten the term sometimes when it when it gets a little tight like that.
26:50
SPEAKER_01: If they're seeing some defaults in their portfolios, they get a little bit more tight.
26:54
SPEAKER_01: So our banks are more, you know, we have a lot of private banks and smaller lenders in addition to some very large ones, but the smaller ones are more with the flow of what's going on.
27:03
SPEAKER_01: They're able to adapt pretty quickly.
27:05
SPEAKER_01: So if one or two big defaults trigger, all of a sudden they're squeezing, or if things are going well and it's performing, they're loosening their box.
27:12
SPEAKER_01: And we're kind of in tune to which lenders are putting out the really good offers and what, you know, which lenders are writing a lot of paper and looking to grow market share.
27:20
SPEAKER_01: And that's why we're able to get a lot of deals facilitate it, you know, just by being so in tune to what's going on in the market and with specifically our market and our our relationships.
27:29
Scott: Okay, well, thank you for that.
27:31
Scott: That that that was a nice summary of of a lot of different variables in the market today.
27:36
SPEAKER_01: Yeah, absolutely.
27:38
Scott: I I like to wrap up our shows, uh, Eddie, with one or three takeaways that our listeners could literally put into action as they turn off the episode.
27:47
Scott: It could be, I mean you you you've had an interesting career in your background, it could be from financially running your business or or planning your own businesses, or it could be around debt.
27:57
Scott: But what are what are one to three takeaways that you'd be that you could share with us?
28:03
SPEAKER_01: So one would be kind of what we touched on in in some pretty much detail.
28:08
SPEAKER_01: Debt is not your enemy.
28:10
SPEAKER_01: If you're using it it properly and you have a plan, debt can be the catalyst to help your business grow and scale much faster than you think.
28:17
SPEAKER_01: Uh that would be one proactive versus reactive, right?
28:21
SPEAKER_01: When your business is doing well, that's the best time to apply.
28:24
SPEAKER_01: Don't wait until it's too late.
28:26
SPEAKER_01: Uh, that's my little saying.
28:27
SPEAKER_01: Don't wait until it's too late.
28:28
SPEAKER_01: Apply now and secure a line of credit and be prepared for those, you know, those bad days that, you know, you never know when something's going to happen to the business.
28:36
SPEAKER_01: We see a lot of businesses that are doing everything right and executing on a great level and executing their business plan.
28:43
SPEAKER_01: And then something that's out of their control, one of their clients that they're giving net 30 terms to or net 60 terms, all of a sudden have having trouble paying them.
28:50
SPEAKER_01: And it's a huge client of theirs.
28:52
SPEAKER_01: And just that one little instance is just one small scenario among hundreds where a business owner could get blindsided, and we see it every day where something out of their control happens or something in the economy shifts and it affects their industry, like tariffs or something like that.
29:06
SPEAKER_01: You never know when the unexpected is going to hit.
29:10
SPEAKER_01: One thing I could tell you as an entrepreneur for you know three plus decades now is that I don't think any business gets to just go straight like this up, up, up, up, and up, and never hit any bumps and bruises.
29:22
SPEAKER_01: There's always going to be bumps and bruises along the way, and the best entrepreneurs and the ones that succeed and get through it are the ones that are best prepared.
29:29
Scott: Yeah, you're right.
29:30
Scott: It's never a straight line.
29:32
Scott: There's always dips, there's always drops, as well as huge jumps, you know, huge increases here and there.
29:38
SPEAKER_01: So I'd like to say we're always we're always in the grind, even today, right?
29:41
SPEAKER_01: We were fortunate enough to make the Inc.
29:42
SPEAKER_01: 5000 list this year for the very first time.
29:45
SPEAKER_01: And, you know, from the outside looking in, you know, fastest growing private companies, it may look like everything's great and you know, we're doing well, which we are doing well, and we we do have a great team here, but we're in the grind every day and and we question things every single day in the same making decisions based on risk and gut, you know, and planning, of course, and the data, but that's that's just all part of it.
30:06
SPEAKER_01: Like it seems like the bigger you get, you just have more more growth and and more learnings and more things to dive into and really learn, and and the learning never stops.
30:15
Scott: Yeah.
30:15
Scott: Well, we also like to ask for a favorite book or podcast recommendation.
30:21
SPEAKER_01: Favorite book, uh, one of the very first books that I read.
30:23
SPEAKER_01: I'll give you two.
30:24
SPEAKER_01: The Millionaire Next Door is one of my favorites, and the E-Myth Worldwide is also one of my favorites, which really dives into just understanding how to run a business and the importance of systems and processes and everything in between.
30:38
Scott: Yeah, both of those are are great.
30:40
Scott: Well, Eddie, that this has been great.
30:42
Scott: Where can people find out more about you online?
30:45
SPEAKER_01: Uh, our website is www.goqualify, and that's qualify within I.
30:51
SPEAKER_01: So g-o-q-u-a-l-i-f I.com.
30:55
SPEAKER_01: You can contact us at info at goqualify.com or give us a call today at 215 qualify.
31:02
Scott: Well, hey, this has been great.
31:04
Scott: Thank you so much for joining me today.
31:06
SPEAKER_01: Scotty, my pleasure.
31:07
SPEAKER_01: Thanks so much for having me.
31:08
Scott: Absolutely.
31:09
Scott: Well, folks, that's it for today.
31:11
Scott: Uh thanks for joining us and listen to the next budget your business episode.
31:16
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31:23
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31:34
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