How to Get Funded After the Banks Have Told You No with Brett Denton: An EOFire Classic from 2021

0:01Light that spark fire nation JLD here and welcome to entrepreneurs on fire brought to you by the HubSpot Podcast Network, the audio destination for business professionals with great shows like Created with John Ushai. Today, we're pulling a classic episode from the archives and we'll be breaking down how to get funded after the banks have told you no. To drop these value bombs, I brought Brett Denton into EO Fire Studios. Brett is the founder and owner of kevellefit.com and a2zbusinessfunding.com. Brett found himself frustrated and out of the loop when tried to get traditional funding to expand his cash-positive business.

0:37He founded A to Z Business Funding to help small business owners like himself who are tired of the traditional lenders who deny funding to over 95 % of businesses that apply. In today's value bombs, Fire Nation, having access to capital is critical to long-term business success. Know the crucial things and questions to ask yourself to get funding and owe so much more. And a big thank you for sponsoring today's episode goes to Brett and our sponsors. The Next Wave, your chief AI officer, hosted by Matt Wolf and Nathan Lanz, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals.

1:11Matt and Nathan are leading AI creators in your guiding light in the AI and technology frontier. AI technology is transforming the way we do business and the media landscape is fragmented. The Next Wave strives to be the leading podcast on AI technology and how you can apply it to growing your business. Listen to The Next Wave wherever you get your podcasts. Brett, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with. Absolutely, John. First of all, I am extremely happy to be here. And what's up, Fire Nation? We today are going to be talking about what I think many people don't think about when they're starting a business, and that is capital.

1:54I believe that having access to capital is critical to long-term business success. Right. So we can bootstrap it. We can save. We can penny pinch. We can do all those things. But according to SCORE, which is a small business mentorship organization, they teamed up with the U.S. Bank and they did a study and they found that 82 percent of business failure is because of poor cash management, which, again, access to capital and not properly managing or deploying that capital. That's exactly what I'm here to talk about today is how to access capital to grow your business. And I'm excited because I've said multiple times, I was very fortunate to start off with very low six figures, but I had six figures of my little war chest I had built up at the age of 32 when I launched Entrepreneurs on Fire, mostly because of my deployment to Iraq and being able to save a lot of money while I was overseas.

2:46And that was my capital. That allowed me to launch my business. But without that, I never would have been able to if I was living paycheck to paycheck. So I want to start by having you share your background. Now, we have a lot to get to, so let's be a little brief here. But I think this is important to really give Fire Nation an understanding of why you do what you do. From a bootstrapping standpoint, that's kind of how I grew up. That was my mentality for a long time. And so, you know, going back to the college days, I actually walked on at Boise State. So again, I'm bootstrapping my college career.

3:20I walked on as a running back at Boise State. I was an internal backup, unfortunately, but I did have one small moment of glory. I had 125 yards against the mighty and vicious Utah State Utes. And then that was on the Smurf turf, you know, so that when you're watching on TV, it burns your retina. Yeah. Oh, yeah. That's you can't see straight for a few days. Why do they do that? Like, what's their justification for that? You know, I have no school colors. I mean, it is school colors. And, you know, I think they wanted to stand. I think it was a marketing ploy, to be honest with you. I think it was marketing.

3:50Um, so I started on the, on that blue turf. And then from there, um, I graduated, I started a business, Cavell fitness nutrition. Um, so you can go, you can see what that looks like at Cavell fit.com K V E L L fit.com. And I had a successful business. I was growing, I had cashflow, I was profitable. And so I was trying to get funding. And so I went to bank after bank after bank, and they just kept telling me no, and I didn't understand it. I I thought I had everything that I needed. And so I started looking and digging, and eventually I found out there is other forms of funding. There is other ways to grow with capital.

4:26And so that's why I started A to Z Business Funding dot com so that I can help other business owners get the funding they need when they need it. Now, you did already mention this briefly, but you believe because you've read some stuff and you've seen the literature that 82 % of businesses fail because they don't have access to capital. Now, let's talk about this more. Like, why is this such a problem? When it comes to business growth, I mean, you've been there. You had a stack of cash to help you, which what happens is these business owners get into it and things start to come at them. You have, you know, equipment go out or you have advertising expenses or you have to start hiring employees or you're looking to start another facility or you're, you know, you just end up needing capital in order to get the needle to move, right?

5:16There's only so much that each business owner can do on their own. And eventually when you need to start scaling and growing the gross revenues, you need the capital. You need the capital, Fire Nation. You literally need the capital. Again, this statistic that I've shared a few times in Entrepreneurs on Fire that's particularly scary is that like 40 % of Americans right now cannot write an unexpected$400 check. Now that is crazy. And of course, how can you start a business that takes capital when you don't have any capital at all and you don't have access to any capital? So what the heck is the solution for all these businesses out there that need and are being denied access to capital?

5:59Yeah. And I'll give you a prime example of where some unforeseen circumstance like a pandemic came up and people needed capital and they didn't have the ability to know how or understand the process. Right. And so that's luckily the government stepped in with the paycheck protection program and it helped over a thousand businesses get that. But without that, many of these businesses would not have made it through the pandemic. They would not have survived. And so when it comes to, to getting capital, um, there's a few things that you need to have, right? So, uh, there's three most important things.

6:32And what are those most important things? The first one is you have to look like a legitimate business, right? So you can't be, um, going with, uh, no website and no business account and, um, using personal credit cards. So you have to look like a legitimate business, right? And so we got to get that set up first and foremost. Second, we go into, um, the questions that you need to ask yourself before you seek business funding. So a lot of people come to me and they just say, hey, I need funding, but they don't understand everything that goes into it. And so I'm going to go through those questions with you.

7:07And then the third thing is, well, if I can't get bank funding, that traditional bank funding, what are my options? And again, I'll dig into those three things here today. Fine. We're going to be digging into all these things because there are some really critical factors that you need to know as far as getting business financing for you. We're talking revenues, time and business credit, personal credit, business credit. We're going to be going over that and so much more when we get back from thanking our sponsors. The overwhelm that comes with choosing the right software and tools for growing your business is real.

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8:20Plus, with built-in AI to answer common customer questions, brainstorm and write marketing content, easily pull reports and more, your teams can slash their busy work, meaning your marketers, sales reps, and service teams actually have the time to be, well, marketers, sales reps, and service teams. And when they grow, the sky's the limit for your business too. Grow better, faster with HubSpot's all-in-one intuitive customer platform. Visit HubSpot.com to learn more. One of my favorite places to visit in the late summer months is my home state of Maine. There's just something about being on a lake in August and September that I absolutely love.

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9:40Find out how much at airbnb.com slash host. So Brett, we're back. And as we kind of tease before the break, We're going to really start to dive in now to the nitty gritty that our listeners really need to know in order for them to get business financing. So what are those important factors that Fire Nation needs to become well aware of? Yeah, I'm going to fire a lot of information at you here. And before I do that, I just want to make sure that I am here to help you. That's what I'm here to do. I'm here to get you capital. So if you're looking for capital, one way to get a hold of me and ask any questions you have is just to send me a text at 208-991-6537.

10:20Or you can email me at brett, B-R-E-T-T, at a to zbusinessfunding.com. And if you get in touch with me here in the next few months, we are going to give away$1 ,000 cash to somebody. So either way, you're going to get funded. Either I'll help you get funded or we will get you funded in that drawing. Now, here's a few things that you need to look at. Okay, so are you a legitimate business or do you look that way to the lenders? And there's kind of four components that they look at. So do you have a business bank account? All right. So if you don't have a business bank account, if you're using your personal bank account, it's hard to get business funding.

10:56Professional website and then a physical address. That physical address can be your house, but we do need a physical address. Are you parking money in an account that is increasing your average daily balance? So if you remember, lenders really want to fund people who look like they don't need funded. And so you want to do as much as you can to look like you don't necessarily need the money, but it's going to help you grow and it's going to help them get paid back. So are you parking some money and not touching it in a business bank account? Do you keep your personal and business expenses separate?

11:27So again, the reason that we have a separate bank account. And then do you have a rock solid business plan? right so that business plan is going to be more for uh bank lending but it's good to have that as a backup when they ask hey where are you going what are you going to be doing with this money right so those four things are going to make you look legitimate in the lender's eyes so fire nation again you need to be understanding what is going to make you look legitimate in the lenders in the funders eyes because they're the people that need to be convinced because frankly their jobs on the line frankly their business on the line you know their safety their security so So you can't be overly frustrated with these individuals that hypothetically are trying to do what they think is best.

12:07Unfortunately, they don't know you. Unfortunately, they don't know how hard you want it, how hard you're willing to work, how much value you're going to give to the world if just given the chance. Because there's always bad apples out there. Unfortunately, those bad apples are always the ones that are getting all of the media, all of the attention. And although they're a very tiny percentage of this, they're the ones that people think about when they make their final decision. So you went through some things that we really need to be focusing on. Anything you want to kind of follow up on when it comes to revenues, time in business, credit, both personal and business, by the way.

12:42And then let's really kind of nail down the questions that we need to be able to answer even before we get into the process of seeking the business financing. Yeah. So there's a few things that just kind of pop out, right? The more revenue you have, the more likely people are going to want to give you money. So as a business owner, we want to increase revenue. Our lenders want to increase revenue. So let's get our revenue up. Okay. Number two, you mentioned their time in business. So we can get funding for startups, but generally if you're two years or more in business, you're going to get far more offers.

13:16Now the important part here, probably the most important part of this entire conversation is the credit. So we have two types of credit. We have personal credit and then we have business credit. And I'm going to go through those briefly, what they are and how to improve them. So with personal credit, everybody knows what that is. Two statistics on business credit. According to Experian.com, 80 % of financial resolutions Americans make for the new year include improving their credit score and better handling of their credit card usage. So we all know we need to do it. And then on the business side, according to research by the Federal Reserve, 86 % of employer firms, that's anywhere from one to 499 employees.

13:52They relied on their personal credit to seek funding, right? So here's the ways that we improve our personal credit. Three major ways. There's about 10 total, but here's the major things that you can, here's the moves you can make, the super moves. So get and review your credit reports from the three big reporting agencies, Experian, Equifax, and TransUnion. And that's easy. You just go to annualcreditreport.com, just plug that in, select those bureaus, and you're ready to go. Now, here's the thing you want to do once you get the reports. You've got to review those for inaccuracies. Things like, are there late payments that are on there that weren't actually late?

14:25Dispute those. If you have more than one collection account or debt for the same loan or the same credit card, dispute those. If your credit report doesn't show at least two active credit accounts, you need to think about getting a credit card so you can get some credit history on there. All right. So, and again, I can help you with all of this. you can just text me at 208-991-6537 and I'll walk you through it. Okay. The next thing you need to do is you got to pay your bills on time. I know that's crazy, but we got to pay the bills on time. That is the single most important factor to build credit.

14:58So set up an auto pay, set up a reminder in your calendar, do whatever you need to do, get your bills paid on time. And then the third thing with our personal credit, we have to reduce our debt usage. So debt usage is basically how much credit we have and then how much of that we're using. Okay. So at first we want to get that down to 30 % initially for all credit cards. So if you can get that down below 30 % of debt usage, you're good to go. And then eventually, so the people with the highest credit scores, they're under 10 % of usage. Now, if you charge, here's what, here's where I got caught before I started learning all this stuff.

15:30I paid my credit card. I maxed it out. I paid it off every month, maxed it out, paid it off. Unfortunately, when the credit cards report that to the credit bureaus, it's after the billing cycle closes, which is before you pay. And so actually what they're doing is they're submitting a high balance, which is going to bring your credit score down. So you want to pay earlier than the billing cycle on those balances to get a lower balance. Okay. And then of course you can ask for credit limit increases. That's going to increase that credit usage. Consolidate credit cards with a small business loan, a business credit card, or some other type of loan that doesn't appear on your personal credit.

16:07So there's some business credit card companies that actually report your credit card usage on your personal credit and your business credit. So for businesses, we're looking only for the ones that are going to put it on our business credit. All right. So those are the big things to improve personal credit. Fire Nation, a lot to take in there. But again, if you simply send a text to Brett, 208-991-6537, he's going to get back to you. He's going to be able to walk you through this process because again there is a lot and as you can just hear what he said and this is why it sometimes can be a little scary but guess what maybe it's worth you being a little scared because the little things done incorrectly can really add up to big problems but the little things done done right can lead to big opportunities i mean you need to make sure that you are reviewing your credit reports for inaccuracies dispute them get some credit cards so you can get that credit history you gotta pay your bills on time and just that process that brett just shared i wasn't even aware of and just overall decrease your overall debt and credit usage like that percentage that you have so that you look more appealing.

17:15So is there anything you want to chat about when it comes to business credit and different questions we need to be able to answer before seeking business financing before we move on to alternative business financing options? Yeah, let's knock out business credit real quick because a lot of people are not familiar with business credit like they are personal credit. And business credit is important for a few reasons. So So the NAV American Dream Gap Survey, which was a survey of business owners, found that business owners who understand their business credit are 41 % more likely to get approved for a business loan.

17:45Now, this is likely because they're doing all the right things, right? Commercial credit reporting agencies like – so these are a little bit different. You got Dunn and Bradstreet. You got Equifax. You got Experian, and it's a separate department for them. Some do personal. Some do personal and business, but it's a separate department. And so what they do is they're going to collect your information about how you pay your bills. And then they're going to package that into a credit report. And then they use that to create the credit scores. So there's two major benefits of a strong business credit.

18:17The first one is you have a higher likelihood of qualifying for funding. And then the second is lenders trust you to pay and thus often give you better terms. So you mentioned knowing this stuff is important. And you may be able to get funded without knowing some of this. But the important is how much are you paying for that capital, right? We want to pay as little as we can for as much capital as we can get. And so getting these credit scores, both business and personal, where we want them is going to be the key to getting that done, right? Now, how to improve your business credit score. Number one, again, we talked about business structure and making sure it looks legitimate.

18:52Preferably, we have an LLC, an S corp or a C corp. Now, a side note is they're particular. So a side note, when you're naming your business, if your business ends in holdings, mortgage, properties, or real estate, it's going to be considered high risk. Those are high risk industries. And so what that means is either you're going to get higher rates or you're not going to get funded at all. So just be careful with those ones. Okay, first step. Second step, we're going to go and get ourselves a DUNS number, D-U-N-S. And again, all you need to do there is go to dnb.com. That's Delta November Bravo, dnb.com.

19:24Get a DUNS number. That's free. Third, we're going to open accounts with suppliers and vendors that report to business credit bureaus. Okay. Now, one way to do that is just simply ask your vendors if they do it. Another way is, again, I can help you find some that will then start reporting to those credit bureaus. Okay. We want to get a business credit card. Okay. That does not, again, repeat, does not report to your personal credit agencies. Again, you're going to need to find somebody who knows which credit cards do that and do not do that. Number five, just like with our personal, we have to pay on time.

19:55Okay. Now, at least half of your business credit score is based on paying on time. Unlike personal. So on your personal credit card, you have a little bit of a grace period to pay. Nothing happens negatively to your credit report. With business credit cards, one day late is reported as late. So you have to pay those on time. And then, of course, as we discussed earlier, you got to monitor that business credit for fraud with, again, a credit monitoring company. And again, I'm happy to help with all this. All you got to do is shoot me a text, 208-991-6537. So let's say that we do need to seek alternative business financing options when all the banks have denied us.

20:32Everybody said no. What are those alt options? There's kind of a smorgasbord of options out there. And it really comes back to, let's ask these questions first so we know exactly what kind of funding we're going to go after. And then I'll tell you three kind of options that are good for people who don't qualify for bank funding. So there's just a few questions. So how much money do you need? Right. Time after time, we have people come to me and they just say, well, I just need money. Okay, well, how much do you need? Because that's going to determine the type of funding we go after. The second question you want to answer is, what are the revenues in your business bank account?

21:0570 % of businesses that don't have a business bank account, again, get rejected. And those that carry low balances also get rejected. They want to see good cash flow, good money coming in. And again, a holding of a decent amount of capital in there. Number three, what are your credit scores? We've covered that already. Do you have collateral? So is there something that you can collateralize for the loan, which again makes that lender feel safer and more comfortable? Because if they have to, they can use that collateral to get their money back. And then lastly, are your books up to date? Are you keeping good income statements, balance sheets, and cash flows?

21:39Okay, so now let's get to the funding, right? The fun part here, the funding. So the Merchant Cash Advance is probably the newest and most popular version of this. And there's a few good things about this. Number one, if you don't qualify for bank financing and you have cash flow, positive cash flow, you're probably going to be able to qualify. Number two, it's very fast. So we can get you pre-approved in 24 hours and funded in two to three days. So this is for people who either are seasonal, you're going to flip that cash fast, or you need money right away, and or you can't qualify for bank funding.

22:14There's no physical collateral needed. And then it's only a soft credit pull, or a lot of times there's no pull at all, because again, it's based on your cash flow. Now, there's two negatives to this type of funding. The rates are generally more expensive because it's a shorter term. You need the money faster. And again, they're not kind of digging clear through your dirty closet there. They're just going off of your cash flow. So there's more of a risk to them. Second, it is a daily or weekly payment. So instead of monthly, you're paying it more frequently. OK, so that's that's the first kind that I recommend for people who can't get big fancy.

22:44The second kind, unsecured lines of credit or credit card stacking, what it's called. So basically what this means is you're taking smaller lines of credit instead of just getting one big one. You're taking a bunch of smaller ones and then that obviously equals a bigger one. Now the goal here is to get 0 % credit for up to 6 to 18 months. So again, we want to flip this cash fast. This isn't our long-term approach, but this is going to get you cash fast and immediately. A few pros here, cheapest capital available. You can't get better than 0%. Okay. Pre-approval is less than 24 hours. You got monthly payments with this one, which is better than the merchant, uh, merchant cash.

23:19And then this one is, we talked about startups. This is a good one for startups because you don't need any history. You don't need to have your business in business for two years plus, and then there's no collateral needed. The only con really on this one is you have to have a personal guarantee with it. And then the last kind, um, that I recommend for people's equipment financing. So if you need any kind of equipment at all, be it, uh, even software, um, office furniture, cars, solar I mean, almost anything that you can consider equipment for your business or the functioning and operation of your business, financing is an option.

23:52It's a very quick application process and it's an easy approval process. A few cons, the rates can vary widely and the lenders may place like a blanket lien on all of your equipment just to make sure they can get paid back. Those are the three kind of top options that I recommend for people who can't get that traditional funding. So much value here, Fire Nation. So please just remember, before seeking business financing, you must be able to answer, how much do you need? Seems like an easy question. A lot of people don't have the answer. What's your revenue, your cash flow, your capital? Do you have collateral?