71. $2 Billion Secured - Insider Secrets to Business Loans

0:00I always tell business owners, like, where is the money? It's like Jerry Maguire, like show me the money. Like where is the money, right? And where are you going to make the most money, the easiest and the fastest? And when you're borrowing money, that's where you want to put that money first, especially in the beginning. Entrepreneurs who need financing face a lot of challenges getting the funds they need. Joseph Camberato learned this working in the mortgage industry. Many of his clients were small business owners, and a lot of them had questions about how to get a loan. That's why Joseph started National Business Capital.

0:33His goal was to streamline the business loan process and make it easier for entrepreneurs to connect with lenders. They've secured$2 billion in business financing since the company started in 2007. That experience makes Joseph a leading expert in how to get financing as a small business owner, and he's sharing that expertise with our listeners in this interview. Welcome to the UpFlip Podcast. I'm your host, Alex Freeman. Joe, thanks for joining us. Hey, thanks for having me, Alex. Let's start from the very beginning, I guess. What is national business capital and what services do you offer? Yeah, great question.

1:05So National Business Capital is really a business lending platform for small business owners. So think of like the Rocket Mortgage meets Match.com of business lending. And what I mean by that is business owners can apply at my company, National Business Capital, in one place and access over 75 lenders. We offer SBA loans, term loans, lines of credit, equipment financing, inventory loans, receivable lines, asset-based loans. I mean, everything that you need for your business, you can apply for in one place. We've got great technology. So it's a digital app. You can do it from your phone or your desktop.

1:40You can securely upload your docs. But more importantly, besides great tech and making it fast and easy, we've got great people that work here, our business financing advisors that understand all the different lender guidelines, but also get business. And we work with all industries in all 50 states. So it's a lot of stuff, a lot of information. And we do that really well and really identify what your need is. You know, when you need funding in your business, you know, you have a challenge or an opportunity. And sometimes the opportunity is creating a cashflow challenge. So we'll talk through, understand what you're looking to get accomplished, explain which lending products may make sense.

2:13We can review everything internally and pretty confidently say, Hey, this is what we believe you'll get approved for. And then we'll go and we'll do all the work for you. So you do nothing. And we really, you know, help you from application funding and, you know, from following this streamlined, simplified process, and more importantly, pulling all the right lenders in and matching people to the right lender, because it's all about connecting to the right lender. We've helped secure over$2 billion now since we got started in 2007. And we've done over 27 ,000 transactions for all types of awesome entrepreneurs all across the country.

2:45Wow. Just an incredible amount of business in that amount of time. Congratulations. Yes. Thank you. Appreciate it. Now, I want to kind of go back to kind of early in the process for a business owner, right? What are some of those important factors that a business owner should consider when beginning the process of applying for a business loan? What should they be thinking about at the start of the process? It always makes sense to really prepare. Just think in life and in business, folks that are more prepared, you know, seem to always do much better. And I understand business moves fast and things happen or opportunity sometimes just smacks you in the face out of nowhere and you got to just move.

3:20But if you know you're going into a slow period or you're not confident about next quarter or you're not confident about what's going on in the economy right now, you really want to apply before there's a downturn in your business or a challenge. It's almost like you want to apply almost when you don't need the money. Now, we work with all types of business owners in all types of situations, excellent credit to challenge credit, great cashflow to having some cashflow hiccups. So we work in all situations and we'll pull the right lender in for that. But I think it's important that you prepare for it, get ahead of it, really map out like what are the next 12 and 24 months look like in your business?

3:54What are your plans? Do you need funding for that? Have a little bit of a plan together. And if you're going to go into getting financing, lenders, really all lenders, banks and non-bank lenders, we have all these different types of lenders on our platform. Some are banks, some are non-banks. And a lot of them are just big institutions that lend a lot of money to businesses. If you know that you're going to need money, really pay attention to your cashflow prior to, whether it's keeping some money in your bank, maybe really tightening up and managing expenses. The better that your cash flow looks, usually probably the more money you'll get, sometimes better approval that you get.

4:27There's a lot of factors that get taken into consideration, but that type of planning prior to can be very helpful. Can you talk a little bit more about how revenue and cash flow impact approval odds and then also how early stage startups that maybe aren't yet earning revenue improve their own success rate in that kind of environment? A lot of lenders, especially in startup, a lot of factors that a lot of people don't understand and what underwriters are looking at. But more importantly, a lot of people don't get that how important it is to go to the right lender. And that's really the service that we bring to the table.

5:01We're really a time-saving machine and really like a debt advisor and can explain to you and look at what's going on in your business and then say, hey, this is going to be the right lender to pull in. But it's okay if you're not turning a profit, but you can still not be turning a profit and still have got your cash flow under control. Maybe you had some big one-time expenses that is showing a loss in your last month's financials, but you can talk about that. And maybe you've got some money that's in the company, some equity. So even though you might have had a loss or two a month or a down month, you're still looking in good shape.

5:34But it all just depends on the lender and the lending product. Some lenders don't focus on that at all. Like some companies that are selling products or services B2B can utilize a lender that will take those receivables and really focus into those and not necessarily focus what's going on with your business. They'll just want to understand what's like the plan, what are your growth plans. There's lenders that, again, will just, if you're buying equipment, they'll more focus on your credit, the type of equipment, and not always dive deep into the financials of the business. And then there's lenders that are really focused on your very, very recent cash flow in the last three to six months.

6:12And they're going to focus more on what's going on in your bank account. Can you manage it? They'll look at maybe your financials or your last year's tax return, but they're going to look at what's going on currently in your bank statement. And so there's a lot of different ways that different lenders will look at things. So it's important for a lot of lenders today, if it's just going to be something based off of cashflow, you're really going to want to see that you can manage those day-to-day things going on in your bank account. That's important. Some business owners are better at doing that than others.

6:37And I think a lot of people don't realize too, sometimes just having a talk with your vendors, if they can give you sometimes five to 15 more days on terms to pay them, if you pick up another five to 15 days in paying your vendor. So maybe you're buying product if you get 15 days there. And if you can get your customers to pay you faster, you pick up 15 days there, now you've just given yourself a 30-day window. And that can make a dramatic difference in your cash flow. It can make a very big difference in the approval that you get. So there are things that you can do and think about. Sometimes just take some conversations with how you're collecting your money and how you're paying your money to your vendors.

7:12How important is the business plan document in the loan process? And is it important at all phases of a business or just for startups? How does that factor in here? Yeah, most lenders don't look at a business plan if you're in business already. You know, for the most part, once you start to get the bigger dollar sizes with bigger lenders that are going to have better rates, you know, better cost of capital, a billion dollar plus approvals, they're more going to want to really look at projections and more just understand from you, like why you're borrowing the money, what your plans are, how you're going to use the money and how you plan to grow the business.

7:44They're more going to want to hear that from you. So you need to be prepared for it. You'll need to put a projection statement together for like those larger transactions. Most lenders aren't necessarily looking at a business plan. If it is a startup situation, like it's a pure type of startup and you're going to use like an SBA loan, yeah, they're going to want to see like a business plan. They're going to want to see some projections. They're going to want to understand how you can service the debt. They're going to want to understand how much money you can put into it. So that's really where a business plan will come into play.

8:10But if you're existing, you have revenues and there's plenty of lenders out there that will not require that. Is there anything that we haven't talked about yet that business owners should be aware of that they're going to need to prepare for the lending process? I don't think so. I really think the biggest thing is because, listen, it's easy to say, hey, pay attention to your cash flow and manage it, manage your expenses. But sometimes you don't have that luxury, like something happens and you have to move and you don't have the time to prepare. So again, I think if you know that there's going to be these periods throughout any year in your business that you need funding, you should really start to pay attention to that cash flow and maybe you can push certain things out that aren't necessary that make you look better on paper.

8:50But, you know, I think what's really important is that you're using the right lending product for whatever it is that you're going to do. So I'll give you an example. We have clients all the time reach out to us. I need a line of credit. Everybody wants a line of credit and a line of credit is great. You should have one in your business. Everyone should have a line of credit. I'm like, oh, cool. You want a lot of credit? Great. We can absolutely help you with that. What are you looking to use the funds for? Like, oh, I've got this great deal on a piece of equipment. I've got this job. I need to buy this equipment.

9:16It's great. But how about if we could get you equipment financing specifically for that equipment? Did you know that we can do that over five years and usually like single digit type of interest rates? And a lot of times owners would be like, I didn't even know that. And so again, by using the right lender, a few things happen here. One, if it's equipment, construction equipment, so all the yellow and iron equipment, manufacturing equipment, automotive type of equipment, manufacturing, office equipment, restaurant equipment, any type of really piece of equipment, and even including office furniture and even restaurant furniture.

9:46You can finance all that stuff. So a lot of times people don't realize that. And those have great terms. You can usually finance over five years, monthly payments with very low interest rates. And the cool thing is when you finance equipment, you also can still take advantage of depreciation. Obviously talk to your accountant about this and the laws around this are always changing or the rules around this are always changing. But a lot of times you can still finance, I think now it's up to 80 % in year one. So you can really almost pick up a great tax credit and finance over five years monthly payments, really low rates.

10:14But what's really important is by using that product because you were buying equipment, by using a specific equipment lender, which we do these all the time, then what you've done is you've either left your cash flow available for a credit line or other types of financing, where you've left your receivables unencumbered or without having a lien against receivables. there'll be a UCC filing, but it'll be against that piece of equipment in this example where the rest of your business is still open for financing. So in that example, it's like, yeah, we got you the funding for the equipment. Do you need a credit line to maybe help with hiring or manage the job or materials or receivables where you're going to put that equipment to work?

10:53And now you've used financing in the right way as a tool and you can really maximize leveraging your company in the most efficient way. And it's very powerful. When we have someone come in and we do$250 ,000 or half a million dollars of equipment financing and get them a$250 ,000 line of credit, now you're in a really great position with your business. And a lot of times the lines of credit are revolving, but they have different repayment structures that usually repay faster than financing that piece of equipment out for five years. So you actually wind up really conserving your cashflow in a really good way too, which is really important.

11:30you can wind up with like double the amount of money and still paying possibly the same amount per month because of the longer term on the equipment. A quick reminder for our listeners that another key way entrepreneurs can prepare is to get the right mindset for business ownership. Listen to our interview with mindset answer man, Cliff Ravenscroft in podcast episode 39 for tips on how to accomplish that. Joe, are there types of loans that are easier to get for businesses? And are there some that are like particularly challenging to actually get approval on? Yeah. Again, if you're not going to the right lender, right, it can be really challenging.

12:05Certain lenders love certain industries and certain lenders don't love certain industries. Certain lenders have certain minimum credit score requirements. Certain have certain revenue requirements. Some have certain time in business requirements. So again, getting to that right lender will make it a lot easier. And that's what we really do best and save a lot of time there. You know, typically an SBA loan, it's a longer process. We've got it down to about 45 to 60 days, which is very fast. If you're not working with someone that's really skilled in it or typically just through a branch in a bank, it's more like a 90 day plus process.

12:40So that's a little bit of a longer process. Getting, you know, a regular type of bank line of credit is usually like a three to six month type of process when working with the bank. There's other non-bank type of financing, whether a line of credit term loan or revenue-based financing that just moves a lot faster days versus months. So again, it's just all about going to that right lender and understanding the different options that are out there. But a lot of the bank and SBA stuff is just a longer process. And then obviously once you get into the bigger loans, you know, a million, two million, five million plus, it's just more financials, more tax returns, debt schedules.

13:13There's just more things that you're going to need to apply. And I think you just have to understand that once you start looking to break half a million to a million bucks. The lender's going to ask for more documentations and especially in this wild environment that we're in today. So be prepared and provide what they're asking for. If they're asking for more things, that's actually a good sign. It means they're still interested. If they weren't interested, they would just decline you. Now, you brought up a few different things that I have follow-up questions on, but the first one being, you mentioned that some lenders like some industries better.

13:41Are there certain industries that overall have higher approval odds? And for somebody that may find themselves working in one of the industries with lower approval odds, what advice might you have for them on securing financing? Yeah. So great question. Like medical industries, typically like doctors, dentists have a higher approval rate and there's a lot of different specialized programs out there. It's a professional type of business, accounted medical lawyers. There's a lot of specialized programs focused on them, but there's also a lot of school involved. There's a lot of commitment, licensing and things like that.

14:13So there's a lot of different options, a little bit easier. Some of the industries that are challenging, you know, right now, trucking can be really challenging to get approved in place. We do it really well, but you have to really bring it to the right lender. And those lenders are changing their guidelines. It almost feels like weekly right now. There's just been a lot of things happening in that industry between some of the big companies getting really big, a lot of smaller individuals out there and fuel and things like that are going up and down constantly. So it's a really challenging industry.

14:41So those get a little bit more looked at and especially in a lot of the supply chain stuff that we just went through, they're really getting reviewed. And if you don't go to the right lender, you won't get approved or you just won't get approval. One of the other things I wanted to follow up on is you were talking about the different timelines that it can take to get loan approval. So the first question there is what factors into how long it might take to get approval on a loan? Usually the size definitely is a factor and then how clean or not clean the situation is. So if you have a little more challenge credits, some challenge cash flow, we might have to work with a few different lenders and have some more conversations and really figure out how to get a deal done and structured.

15:21Listen, I mean, we're able to get small business loans, term loans, probably up to about half a million dollars done in one to three business days, which is pretty fast. Half a million to a million is probably more of like a three to five day process. And a million plus million to five million realistically is probably like a five to 10 day type of a process, which all of those timelines I gave you are fast. And that's obviously if you apply, you have all your paperwork together and you send us a full package immediately. But with all those different loan sizes that I just gave you, we've gotten in all those different categories of sizes that I gave you, we've gotten many deals done per month in those timeframes.

16:01Now, in the situation where a business does find that they need funding relatively quickly, what should they be preparing when they don't need the money quickly? Besides maybe, as you mentioned earlier, applying almost before you need the money, what should they be doing to make sure that if they do find themselves in a cash crunch kind of situation, they can get approved quickly? We'll be ready to fill out, usually for us, fill out an application. Up to$250 ,000, we can look at the last six months of your bank statements and move really fast. We may need last year's tax return, but once you break$250 ,000, we usually need last year's tax return, a copy of last year's financials, profit loss and balance sheet, and a year-to-date profit loss and balance sheet.

16:44And that's pretty much up to$250 ,000 to a million. A million plus, we'll pretty much need those same things, tax return, last year, year-to-date financials, six months of bank statements. Sometimes certain lenders want to look at a debt schedule, and sometimes we may want to look at a personal financial statement, but up to about five million bucks, last year's tax return, last year's financials, year-to-date financials, and probably over a million like AR, AP aging report. And from there, we should be able to pretty much move through a process. And that's why too, a lot of owners, you'd be surprised, and decent-sized companies, companies doing 2 million, 5 million, 10 million, even 20 million a year sometimes, won't have their financials up to date.

17:23And I just can't tell you how important that is. We take it so seriously. We invested in a company called Bookkeeper 360, and that's like an outsourced bookkeeping service and has a great online platform. And you really need to keep your financials up to date. Because if you look for something over$250 ,000, you're going to need those and you're going to need them on demand. And a lot of times some owners do them on a quarterly basis, some half a year, don't keep up to date with them. And some are great at doing it, right? But it's always like, oh my God, I've got an opportunity and it's March 30th right now and I don't have my financials done for January and February.

18:00And if you want to get the best approval and you want to move quickly, you want to have those at your disposal. So I can't tell you how important that is. And, you know, if you're having like your accountant do it, you should pull in a bookkeeping service. And it's not even expensive. You could have that stuff up to date and in a time of need. It's a game changer. You mentioned SBA loans a little bit earlier. Can we dive into kind of what the world of SBA loans are? So can you talk about first, I guess, just the difference between a traditional loan and an SBA loan? An SBA loan is meant for businesses.

18:29It's backed by the government. A bank or an SBA lender will actually fund the deal. They underwrite it according to the SBA guidelines. If you were to default on the loan, the SBA basically ensures a decent percentage of the loan. But there's two SBA type of products. There's a 7A loan product, which you can get approved all the way up to$5 million without real estate. Your business needs to be profitable. You need to have typically a 640, 650, 660 plus FICO score. You need to be profitable recently. And the loan will basically get approved based on the amount of profit and how much that profit can support X amount of debt.

19:10So if you're looking for half a million bucks, your profitability will have to be able to support a half a million dollar payment. When you apply for an SBA loan, you have to be in business for at least two years. If you're in business already, you have to be in business for two years. If you're in business for more than that, then you'll need to provide three years of your business tax returns, personal tax returns, and then the last three years of your financial statements and a year-to-date financial statement, along with a debt schedule and a personal financial statement. And a personal financial statement is just a list of all your personal assets and liabilities.

19:39You also, which is cool, a lot of people don't know this, you can buy a business if you don't own a business. You'd have some sort of a resume that would make the lender feel confident that you can run this business. So maybe you were an employee at a business and the owner's looking to age and sell out, or you've been a manager at ABC Inc. and you want to go buy ABC Inc. like company, but you can buy a business without owning one. You have to put down typically 10 to 15%. And as long as that business is profitable and can support the debt, you can actually go and buy a business without owning one.

20:14Most people don't know that. And then the other type of SBA loan is a 504. SBA loan that's meant to purchase real estate, you only have to put down typically 10 to 15 % and you can go and purchase real estate. And also if you found a business with real estate, you can use that to combine and buy both the business and the actual real estate. So another really great product. If you're going to buy a building, so just like SBA versus like a non-SBA loan through a bank, or if you're going to go buy a piece of real estate with most commercial lenders or banks, you typically have to put down 20 to 25%.

20:47That's pretty standard, sometimes even more in this market. And then just getting like a bank deal over an SBA deal, you're still going to have to apply with probably the same type of documentation. Every bank's just got their own criteria and guidelines that they'll follow. And it's usually going to be a lot tougher than the SBA because the bank's lending it and it's not guaranteed by the SBA. Now, is there any reason why you would need to apply for a traditional loan before an SBA loan or can you do an SBA loan and then later get a traditional loan? How does that kind of like timeline work and or what do you recommend?

21:17Well, if you got an SBA loan, then if you want to get a bank loan, you'd have to refinance it. I think what's really important here is like, what are you using the money for? So people assume that an SBA loan is the best loan for their business because typically 7A is a 10-year repayment term. The rates are typically lower. right now prime rates are up. So as we're doing this podcast, prime rate is at 7.75%. An SBA loan, you can be approved for like prime plus two or even 2.75%. Let's just for simple math, prime plus 2 % right now, an SBA loan is like 9.75%. It could even be a little bit higher.

21:53As the prime rate goes down, the rate will go down. But that's still in compared to still, that's just what the rates are right now. But what is important is when you do take out an SBA loan or a bank loan, right? Is the bank's going to file a UCC typically against all of your receivables if you own your real estate against your real estate and any equipment and everything. So if you're looking like you're a business and you're in high growth and you need constant access to capital, you really want to explore and understand the different options because an SBA loan is great. It's over 10 years.