Small Business Loans with Lendio

The original publication of Small Business Loans with Lendio can be found at Preparing Business for Business.

Preparing business for business is on the air.  Join hosts Marcia Hawkins, president of the New York Shop Exchange and Kyle Clouse, vice president for insightful and creative strategies to prepare your business for business.  Listen in for great guests and great offers from our guests and sponsors, as well thought-provoking dialogue.  Preparing Business for Business offers usable content, insightful ideas and the resources to jumpstart your business in an effective, economical manner and to prepare your business for growth and challenges and now, your hosts for Preparing Business for Business, Marcia Hawkins and Kyle Clouse.

Marcia Hawkins:     Good evening everybody and welcome to the Business Preparing for Business radio program on the Preparedness Radio Network.  This is Marcia Hawkins along my co-host, Kyle Clouse.  Today is November 16, 2011 at 7 P.M. Eastern Standard Time on a rainy, cold night here in the northeast.

We do welcome you and thank you for joining us here every Wednesday evening to take an informative look at how we can help you prepare your business for business.  We have a platter of information for you along with exciting guests and informative commentary.

Our objective for this show is to provide you with the tools that you need to either start a business, grow your existing business or offer up solutions in challenging times which we all know a little bit about that, don’t we?

Now, tonight we’re excited to bring in an interesting guest on.  But first, I want to bring on my Kyle Clouse.  How are you Kyle?

Kyle Clouse:          Hey.  It’s great to be here, Marsha.  I’m very excited about the show that we have tonight with the content that we’re going to be offering.

Marcia Hawkins:     Yeah, me too.  We’ve got an exciting guest.  I’m going to give a little bit of information on him in a moment.  But boy, we have a little insight into what Brock Blake does and what he’s all about.  And it’s interesting because knowing the challenging times that small businesses are experiencing.

The banks are a little bit tight with the money right now and of course, it’s really hard to grow your business and hire employees hence, why we have such a high unemployment rate right now.  And our guest tonight is going to give us some information on how we can maybe help you with that and assist you with.

So, a little about Brock Blake, he is the co-founder and CEO of Lendio.  It’s a free online service that matches business owners with viable sources of financing.  Now while he was at Brigham Young University, Brock won a $50,000 entrepreneur contest.

And he used that money to start his first company and he hasn’t looked back since.

Now, since college, he started multiple companies.  And in six years, he has led Lendio to a rapid growth including Back-to-Back Years in the Inc.500 and being named the Fastest Growing Company in Utah in 2011 by Mountain West Capital Network.  And Brock has been named as one of Utah’s “Top 40 Executives Under 40” and as an emergent executive of the year of 2001.

So Kyle, do you want to talk a little bit about what Lendio does and then we’ll bring Brock on.

Kyle Clouse:          Oh absolutely yes!  So, Lendio makes business so simple by matching qualified small business owners with active things, credit unions and other lending sources.  The use of a proprietary matching technology and Lendio helps business owners identify the types of business loans and lenders that offer the highest probability for that business owner to prepare for and secure a business loan approval.

Lendio is a venture backed by Highway 12 Ventures and backed by Venture Partners.  And obviously for more information, send Lendio an email at press@lendio.com.

Marcia Hawkins:     Okay.  So, that’s press@lendio.com.  Well, welcome aboard, Brock.

Brock Blake:          Thanks Marsha, Kyle

Marcia Hawkins:     Thanks so much for being here.

Brock Blake:          I’m excited to be here with you tonight.

Marcia Hawkins:     Great!  Yeah, we’re happy to have you.  I have an arsenal of questions for you.  I’m very excited about this.

As a business owner, I certainly know what it’s like to raise a capital and I think you know.  And maybe you can a little about this.  It’s very intimidating for people to go after finance, would you not agree?

Brock Blake:          Yeah.  I mean you’ve kind of said it.  There are so many great businesses across the United States that are really good at being a business owner.  They might be a restaurant owner or a landscaper or a dry cleaner or whatever it might be.

But when it comes to getting financing small business loan or other types of financing, usually it’s a little bit intimidating.  They don’t understand or aware of all the underwriting criteria or all the various banks that are out there and the different loan products.  There’s so much information and so much to be aware of that — it’s hard to keep up and we’re in the business.  So yeah, for a business owner, we totally understand there’s tremendous pain that they are going through.

Marcia Hawkins:     Absolutely.  And you know what?  I know we’ve talked a little bit about that before the show about the state of small business and business financing and the struggles.  And I say, I don’t even think we need to even to touch upon that because I think everyone’s experiencing it first hand.

But I got to tell you, one thing I do want to touch on is kind of breaking the barriers for people that need to go after financing.  I’m concerned sometimes that the intimidation factor prevents people from even applying.  And you know what I say to that?  “Who cares if they say no?” You have to at least go out there and try.

Brock Blake:          Right.

Marcia Hawkins:     And what’s the worst thing that’s going to happen?  They get told no.  Well, we’ve all been told no before in our life.  And I say, when someone tells me “no”, it just makes me all that more determined.

So, for all of our listeners out there, one of the things I really want to instill in them is you’re not going to know unless you try.  And as capital, to grow your business or start your business is what you need, obviously Lendio would be a great place for you start.

So, I want to ask you a couple of quick questions and then we’ll of course let Kyle in here because I know he’s got some for you too.

Brock Blake:          Sure.

Marcia Hawkins:     But I really want to know because I know that given the economic downturn and again, I don’t want to focus so much on that because we’re on uplifting so.  But, I want to know you’ve mentioned that there was a pivot point for you with Lendio.  Can you talk a little bit about that?

Brock Blake:          Yeah it’s a great question.  Several years ago, our focus of our business was to connect entrepreneurs to angels and venture capitalists.  And that’s a very challenging space to be in because most angels in VC’s are looking for very specific types of businesses to fund.  Most of those businesses would be the next Facebook or Google or Twitter.  They’re very high growth technology type businesses that are going produce 50 or $100 million in annual sales.

So, we had a lot of business owners coming in through the platform and they were looking to get angel or VC financing.  And you know they didn’t necessarily meet those criteria.  And so essentially, what we are doing with turning away 98% of our customers and say, “Hey you’re not a good fit for an angel or VC.”

And the pivot point really came when we kind of looked at that and said, “You know you’re not going to be very successful.  You’re not going to build a very successful business if you turn away 98% of your customers.”

So, we really look and said, “Okay, how can we help the 98% of the business owners, the main street business owners is out in the U.S.  How do we help them get financing?”  And a lot of times, the amount of financing wasn’t even — that wasn’t really the question.  Sometimes they only needed $5,000 or $10,000 or whatever it might be to get their business off the ground.

And so at that point, we started to look at changing from equity financing or i.e.  Angel investors and venture capitalists to business loans and that means SBA loans, working capital loans, business credit cards, equipment loans.  There are about 20 different types of loan categories.

And so once we decided to focus on that customer segment and shift our model from equity financing to loans, that’s when our business really started to take off and kind of the most important pivot point up to our business lifetime this far.

Marcia Hawkins:     Oh, interesting.  You talked a little bit on your website about a near-death experience.  Can you tell us a little bit about that?

Brock Blake:          Yeah.  I’m actually on flashbacks — it was about this time of the year.  A few years ago, we had I think maybe eight employees on our team and we were kind of going through that, trying to figure out how to get this business owners angel or venture financing and it was just difficult.  And it came up on a day where I realized that maybe I was being a little bit naïve and that we were coming up on payroll and we weren’t going to be able to make payroll.  It was a very difficult time for me in my business career.

So, on a Friday afternoon — I’m going to shorten the story, there’s a longer story in this but on a Friday afternoon, I brought our team together and I was very candid with them and said, “Hey, we’re not going to be able to make payroll.”  But we have a plan, here is this three-month plan to be able to help us get back to where we want to be and this plan was part of this whole pivot.  And so I said –

Marcia Hawkins:     Can I just ask you a quick question Brock…

Brock Blake:          Yeah, yeah.

Marcia Hawkins:     …before I forget it.  So, can you just describe emotionally what that was like?  Because as I’m listening to you, I know there are other people out there.  They’re listening to this thinking, “Oh man, I am there.”

Brock Blake:          Yeah.

Marcia Hawkins:     And I think sometimes, just letting people understand that they’re not alone and other businesses are experiencing that, sometimes it’s what they need to get motivated to kick their way out.

Brock Blake:          Yeah, that’s a great question.  And maybe emotionally, like I said it was the most difficult time in my business career up into that point.  I mean, you’re pretty lonely at that scenario because you can’t really get solace from any of your employees because you’ve got to figure out the best plan.  And it’s hard to go to other people because they don’t quite understand.

And so certainly, I’m sure there are a lot of business owners that have gone or will go or are going through similar type of situation and I just say it’s lonely, it’s challenging, it’s painful, you really care about your employees.  And so you’re kind of in the situation, “I need to do whatever I can to get out of this situation that I’m in and make it better.”

So, it was definitely a difficult time for me personally as I kind of went through that.  And what really got me through it was that I’d already had an established network of strong mentors who I could go to, that have kind of been through it and been there and done that and they kind of said, “Okay, let’s take a deep breath.  Let’s put together a plan that you can present to your employees and what would that look like.”  So emotionally, that’s kind of what it was like.

Marcia Hawkins:     Wow.  So, I’m guessing though we could almost re-categorize that experience as a near-birth experience because you did survive it.

Brock Blake:          Yeah.  And I guess that’s the fun part about the story, is that we kind of put together this plan and it’s easier to talk about it now a few years later but we put together a plan and part of the plan was, “All right, instead of K for the next three months, we will give anyone that is willing to stay.  We’re going to give him ownership or options in the company.”  And I said, “You know, it is Friday afternoon remember and it’s before Christmas.  We’ve got all these families.”

And I said, “You know, go home.  Talk to your family.  Talk to your spouse and decide if you’re in or not.  And if you’re not in, I totally understand.  You probably hate my gut and you probably — you need a paycheck.  I totally understand it.  I get it, right?  But if you are in then come back to work on Monday and if you come back to work on Monday, I’m going to assume you’re in and we’ll pay you an option and equity versus basically a paycheck.”

And so, it was a pretty stressful weekend.  Come back Monday morning all eight employees, not a single one that we lose them.  They are all back, ready to go and it was kind of like — during those three months, it was just crunch time.  Everyone was working their tails off.  We kind of came together and it was a story.  It feels good now, but it really helped us to pivot to where we are today.

Marcia Hawkins:     Oh my gosh!

Kyle Clouse:          Very cool.  Now Brock, the way that I see it — and this actually tightened to the story that you’re just talking about.  There are two types of businesses.  Those are the — they’re a start up or having just started up that are looking to go from concept into product but then you also have businesses who are bootstrapping.  And it sounds like for those three months, you guys were absolutely bootstrapping and looking to take it to the next level and needed some money to increase your growth.  So for a small business owner, why is securing financing so crucial?

Brock Blake:          Well, it’s so crucial.  It really depends on the small business owner.  Every single business owner is going through a different scenario.  And sometimes getting financing is about getting the idea off the ground.  And it’s opening the doors.  For other businesses, it’s keeping the doors open.  Other businesses, it is growth.  It means hiring new employees or maybe it’s purchasing that equipment that will allow you to increase your revenues by X percentage.

It’s fascinating because we see nearly 8,000 to 10,000 business owners from across the U.S. a month and every single one of them has their own story that they tell and why they need financing.  And some of them are looking for a lot of money.  Like I said, some of them are saying, “Hey, if I just had $5,000 to buy this inventory that would make a huge — Christmas is coming and I need $5,000 for inventory and it will make a huge impact on my business.”  But every single business has their own unique story on why the financing is important to them.

Kyle Clouse:          Very cool.  Let’s take that and go into the next step.  And let’s go over some tips the small businesses can use in order to secure financing and more specifically, also what Lendio is able to do for those businesses.

Brock Blake:          Yeah.  So, we traditionally — I think this is important to understand why we make such a difference.  Traditionally if you’re a business owner, the process is, “Okay, I need a business loan.  I’m going to go to the bank ABC on the corner that I banked with for 50 years and I’m going to walk into the branch, I’m going to fill out their loan form application and I’m going to submit it and I’m going to hope I get approved for loan.”

And unfortunately, nine times out of 10 I think are the statistics.  Ninety percent of the time that business owners is getting declined.  And so then they’re thinking, “Well–.”  And a lot of times, they’re getting declined for reasons that they — it’s not that they’re not bankable.  If they’re getting declined because that bank doesn’t have the loan product that they could actually get approved for, or that bank has a different underwriting criteria, or whatever the reason might be, then they may go to three or four other banks walking, fill out a bunch of loan from applications.  And every single time they do that, they’re getting their personal credit deemed.  It’s negatively affecting their personal credits.  Their credit score is going down which is hurting their chances of getting a loan.  So, I mean it’s this process over and over again.

And so, what we do is we’ve gone out and we’ve consolidated, we’ve added banks to our network.  And we first of all, talk to each bank and we say, “What’s your geographic footprint that you lend in?  What are the loan products you have?  What are the underwriting criteria?”  And we gathered all that information into our platform.

Then, when the business owner comes in, we say, “Okay, Mr.  Business Owner, you’re going to give us some information about your business.  We’re going to use that data to then match you up to all these lenders and we’re going to do it without hurting your personal credit score so that we narrow down 3,000 different loan products and options for you and we turn it in to four or five.  It could be four or five things you’ve never heard of, they’re not even in your state but they have a loan product that is going to be more likely to improve you for that loan then the banks that you’d go on the corner.”

So in essence, we’re just making that process easy and efficient for the business owner and with the ultimate goals, improving their chances of getting a loan.

Kyle Clouse:          So, I’ll just break this down.  Lendio has basically already taken cared of the heavy listing of the loan process which is finding a bank that’s just — has the loan program sort of business A or business B.  So, you guys have gone out and I’m assuming you’ve interviewed different banks and then categorize them within your proprietary software.  So then when a potential client of yours comes in, you’re going to be able to match them up with a specific bank.

Brock Blake:          Right.  That’s exactly right.

Kyle Clouse:          Very cool.  What are some — let’s talk about some alternative types of financing that a business owner is able to also look at that they might not — typically when people think of financing, they’re thinking of, “Okay, I’m going to walk into Bank of America.” or “I’m going to walk into Wells Fargo.”

Brock Blake:          Yeah.

Kyle Clouse:          What are some alternative types of financing that a business owner can also look at?

Brock Blake:          Yeah, great question.  So as I mentioned before, we kind of look at the broad spectrum of business loans.  There is literally probably — I think there is 20 different loan categories.  So, I’m going to name the loan categories and then I can talk specifically about each of them but you’ve got — you know most people know of SBA loans.  But within SBA, there is about six or seven different types of SBA loans.  There are smaller ones that are community express loans or 7(a) express loans and then there are larger ones.  There are like five or four and other things like that.

So, SBA is one category.  You’ve got equipment loans.  You have merchant cash advance loans, peer-to-peer lending, franchise loans, professional loans.  So, there are a lot of different categories.

So if I were to kind of highlight maybe a few types of loans that maybe some people aren’t as familiar with, one would be a peer-to-peer loan.  So, this is a loan that you could get up to about I believe it’s $35,000 and it’s really dependent upon the business owner’s personal credit score.  So, the nice thing about this loan is that — most business loans, you need to be in business for a couple of years.  They don’t really lend to start out.  This loan program will allow you to be a start up.  They’re going to look at your personal credit score.  The credit score needs to probably be north of the 650 about and you can get like I said up to $35,000.

And where that loan comes from is it’s coming from a platform of a bunch of different individuals out there who each pitch in a little bit to — and they consolidate all of that into one loan of $35,000 that you pay back overtime.  So, that’s an interesting loan program that’s getting a lot of attraction.  We’ve seen a lot of customers that way.

Another one that I think is pretty interesting, that most people aren’t aware of is it’s a mix between a business performance loan and of kind of a merged cash advance loan.  And essentially what this is, is it’s a new loan program where you can get up to about, I think it’s 150 on the very high end.  And what they do, they’re looking at the health of the business more and less about your credit score.  So, you can actually have a credit score of all way down into the 550s I believe but they’re going to want to make sure you’ve been in business for one year and they’re going to want to see that you’ve got — the business is healthy.

In other words, they’re going to look at your merchant account.  Like how many transactions are you doing a month?  What’s your monthly revenue?  How much cash do you have in the bank?  And they kind of look at some other factors besides just maybe your credit score and the traditional financial metrics that a banker credit would look at.

These loans are super interesting for a lot of our main street business owners.  Restaurants, they have pretty predictable income.  It’s all done through their — most people pay through credit cards and so they can kind of engage the predictability or success of that restaurant based on some of those factors.  So, those might be two of the alternative loan programs that maybe some people may not know about or hear right away.

Kyle Clouse:          Perfect.  So, the difference between — let’s talk a little bit about the difference between a peer-to-peer business performance loan.  And then just in contrast with the venture capitalist or a seeding loan or something within that area.

Now as far as I understand, venture capitalist, once they loan the money, they have a stake in the business or in the company.

Brock Blake:          Right.

Kyle Clouse:          And it’s different with bank loans.  How are the two different?

Brock Blake:          Yeah, that’s a good question.

So, the major distinction is between — there’s debt and then there’s equity.  So equity means that you’ve got — it’s not a loan.  They’re actually buying ownership into your business and that’s usually — we’ve kind of talked about it before.  It’s an angel investor which is usually an individual who’s been very successful and is wealthy and they’re looking to invest a certain amount of money into your business in exchange for ownership in your business.  Usually, they’ll take 15% to 40% of the business.

Kyle Clouse:          That was right.  Then we have to run through a break really quick and pay the bills and highlight our sponsors, but this is Kyle Clouse and Marcia Hawkins along with Brock Blake.  We’ll be back in just a second and we’ll run right now to our sponsors.

Marcia Hawkins:     All right everybody.  Welcome back.  Again, this is Marcia Hawkins along with Kyle Clouse in the Preparing for Business Radio Network.  And our guest tonight is Brock Blake of Lendio.  And I do want to just take a moment to thank our sponsors Lehmans.com, Humless Solar Kit, Tomorrow’s Harvest and Freeze Dry Guy.

Now make sure you check out those sponsors for us.  We would be happy if you do that.

Welcome back Brock.  I was really taking in and listening to all the information that you’ve given us this far and it kind of hits my curiosity on a couple of points that I wanted to get into.  And I just want to — what would be — if you had your 30 second elevator speech to give advice to somebody, what would be the key to actually being able to secure an angel investor coming in to help them with your business?

Brock Blake:          So on the angel side, the major component is first of all you got to build a business that is scalable.  What I mean by that is it’s got to be a business that can hit, $10, $20, $50 $100 million in annual sales.  And most people, they think they can go raise money from an angel or receive just by having a fancy business plan and financial forecast and stuff like that.

The key is first build a good business then, prepare yourself well.  And so the second part of that is are you prepared?  Do you know how to pitch your business to angels or venture capitalist?  Do you know when you pitch him do you have Power Point ready, do you have an executive summary ready, do you have a financial model ready?  And so you got to be really prepared.  And then I think the third aspect is that is just you got a network like crazy, you go to pitch everyone you can, try and get in front of as many people you can.

It’s like a sales process.  I mean you’re pitching a hundred people hoping that 50 of them give you a lunch meeting and 20 of them will give you a do or die beeper in that and you just kind of narrow it down hoping you can that one individual or one venture capitalist that will put money or invest money in your business.

Marcia Hawkins:     Now, I sold real estate for several years and one of the things that I used to do is I would really prepare my clients prior to sending them to the bank.  I had quite a five-page outline of what they needed you to do prior to going in front of that loan officer and applying for the loan.  Is this something that you offer with Lendio?

Brock Blake:          You know we have quite a few partners.  So now we’re kind of switching focus back to the bank side out for taking a loan.

We obviously as a business owner needs to be prepared as well as they’re approaching a banker credit union.  And we have — during our process, we help them understand that the items that they need, they need to have a good business plan, a good marketing plan, a good financial model and some other items.  We don’t actually do that prep work.  We have some really strong partners that do what that we were referred over to, to help them kind of get package and stuff like that if they need that but we really just focus on the match making piece of the business.

Marcia Hawkins:     So you do have that available for your clients just to make sure that when they go into pitch their business, you know, they’re putting their bench space forward?

Brock Blake:          Right.  Yup, through some partners.

Marcia Hawkins:     Perfect.

Kyle Clouse:          So it sounds like from one you’ve been talking about Brock, it sounds like you’re geared towards traditional loans versus venture capitalist, is that right?

Brock Blake:          Right.  Yup.  And you know like I said, early on we — a lot — most of our focus was on venture capitalist and angel investors but now it’s set for — we’re very familiar with that space and we helped a lot of business owners going through that but our business today is 100% focused on small business loans.  And we don’t do a lot of helping people connect to venture capitalist.

Marcia Hawkins:     I just wanted to touch on something that you — we opened the show with, and when we were talking about going after that 98% of the consumer basic that needs funding.  And a lot like our business newyorkshopexchange.com, our business model is on and is well.

Certainly with the search engines and what not Google for example completely is dominated with larger businesses and of course you have everything in here from medical records to term papers to obituaries.  And for us, we really felt like the small business owner was really being squeezed out of the search engines and nobody could find their business.

Brock Blake:          Yeah.

Marcia Hawkins:     And so we really took that niche and kind of made our own and hence, we’ve created this video search engine for small business and online sellers.

So, I understand that.  Is that really where your passion lies?  Is it really helping someone who was in your shoes of that Friday when you couldn’t make payroll?

Brock Blake:          Yeah certainly.  I mean, you can read it almost everyday in the Wall Street Journal or New York Times, you know.  I mean even President Obama addresses it so often and that is getting credit in the hands of small business owners.  And not the high growth big businesses, we’re talking Main Street businesses, the one that I’ve talked about before, the people on the corner, they’re are selling shoes or that are consulting businesses or manufacturing shops or just through Main Street business.  And that’s really the area that we are focused on, of helping that business who is in a little a town or wherever, Arkansas.  Say “Okay Mr.  Business owner or Mrs.  Business owner, how do we help you get a loan?”  So yeah we’re very passionate about you know, like you describe what you’ve done with New York Shop Exchange.

Marcia Hawkins:     Yeah.  And I wanted to ask you also, in looking at business and you’ve done a business in person and still are what do you think trips up a small business owner?  I mean what do you think is one of the dominating things that just trips a business on erupt that just causes that kind of downward spiral?  And how can people prepare for these pitfalls and how can they identify these issues and starts to take action to remediate them?

Brock Blake:          I think that one of the recommendations that I have is just to really focus on marketing and sales.  If you focus on bringing new customers, if you have a process in place and a plan to be able to acquire new customers, that alone will help your business suffer through a lot of mistakes that you make.

I kind of like to use the saying that “Revenue will cure most ills.”  And so sometimes business owners are kind of just open the door and hope that people would just walk in and that’s not the case and so creating a plan around, “Who is my target customer?  How am I going to acquire that customer?  How am I getting improve or increase sales?”  I think it’s an important aspect for any business no matter how large or small.

Marcia Hawkins:     Yeah, definitely.

Kyle Clouse:          If you can tell us Brock, what percentage or what is the increase percentage that a business owner has if they use your services versus just trying to find a bank?  And with that, what are some of the things that business owners need to come to Lendio and prepare with in order to increase their chances of obtaining funding.

Brock Blake:          Yeah that — so historically, business owners, they’re only getting approved between 5% and 10% of the time.  And business owners that come through our platform, we’re going to increase those chances about 68 folds.  So, 60% at a time, a business owner comes through our platform, we’re going to help them get approved for a loan.

Marcia Hawkins:     Wow.

Brock Blake:          Now, let me tell what a business owner needs to do to be one of those individuals.

First of all I think it’s super important that they do their best to take care of their credit.  As much as people don’t like the fact that banks and credit unions use credit of the business owner instead of the business to determine whether they should give a loan, it’s still the case.  So, it’s just part of the system and so you need to embrace it.

And so most business owners, what we recommend is anyone with the $6.50 and above credit score is really going to put themselves in a good situation.  And if it’s above 700 obviously the higher it gets, the better opportunity that you have.

Secondly, I would say those businesses that have stable or predictable revenue, it’s a lot easier if you got a business that’s been in business for a year or to and you can look and see some history of incoming revenue and the profits even better because they want to be able to see that your business is stable, that you’ve got income to build or repay that loan.

The other factors — I mean those are kind of the two main kind of qualifying criteria.  There are other factors that are really depending upon which type of loan you’re trying to get.  Sometimes you’re going to need some collateral that you may want to leverage.  Other times they may require that you’ve been in business two years.  So, it really depends on the type of loan that you’re looking for.

But just generally, having good credit, having a business that can show some solid revenues, those things are going to put you in a much better situation than to be able to get approved for a loan.

Kyle Clouse:          Let’s talk about like a couple — I mean usually we talked about the two types of loans.  We have the peer-to-peer loans from someone who has a start up to $35,000, 650 or greater in their cycle score or the business performance which is for someone who has a lower cycle score but has a great track record of the business that is moving and being successful.  So what about someone coming in with a double negative if they are in the start up and the lower cycle score?  What are some things that they can give to you, secure funding for their business?

Brock Blake:          Yeah.  So, that’s the segment of customers that it is a most difficult for them to be able to get financing.  If you start up and you got low credit, it’s definitely a challenge.  But let me give you a few different suggestions that we might have.  One would be friends and family, to be able to go out, talk to your friends or family.  Talk to them about what you’re trying to do.  Help them kind of get off the ground and other things like that.  That’s one option.

The second option which is coming available, I’m pretty excited about this idea of crowd funding.  So, right now crowd funding is illegal.  It’s regulated by the Security and Exchange Commission, the SEC that a business owner can’t just go out and get a thousand dollars here and a thousand dollars there from anyone and from the crowd.  Fortunately, this bill has been going through congress and actually just passes with flying colors through the house representatives.

President Obama is supporting it and it just needs to go now through the senate.  It looks like it will pass in the senate and will be made available on cue on of 2012.  So, crowd funding essentially — it’s like I’m like to go, I’m going to post my idea on the website, I’m going to spread my idea to many people as I can.  And whoever is interested, he’s going to come and give me a thousand dollars for a piece of my business and it’s not dependent upon your credit score.  It’s depending on whatever — you can make whatever case you want whether it be because you’ve got a great business or because whatever reason and you’ll be able to that.

And so the SEC is looking at making that available so individuals can be able to invest up to a thousand dollars.  I think it is — if they’re not accredited which means — well, it’s a long story there.  But they can invest up to a thousand dollars in the business through kind of a crowd plan funding platform.

So those are kind of the other options for an individual that the startup low credit individuals.

Marcia Hawkins:     Wow, interesting.  When you say crowd funding, I think — I guess it’s vision of mosh pit somewhere and they’re bouncing people around, funny around.

Brock Blake:          Yeah.

Marcia Hawkins:     And I know that’s not what it is but that’s what it reminds me of.  I just want to touch briefly back what we started to show within and talking about that, that Friday where you’re unable to make payroll.  And I know I keep going back to that.  But the reason I do is because we are in a downturn economy and a lot of small business owners and some big business owners are really struggling to try to figure out what that magic bullet is going to be to pull their business and turn it around and be able to hire people.

And a lot of people don’t understand that the economy is driven by small business which makes up 2/3 of the workforce.  And unfortunately, there are some different types of businesses out there, organizations that will kind of act as a support group, the chamber of commerce, the Small Business Administration, those types of things.

But I think, I’ve always said that the definition of an entrepreneur is somebody and — you can dispute this or agree with it.  It’s entirely up to you.  But the definition of an entrepreneur is someone who has the ability to fight through the challenges, would you not agree with that?

Brock Blake:          Yeah.  I’m 100% agreeing with that.  I think so much of entrepreneurship is persistence and it’s about the journey.  So, there’s going to be of the highest of highs and then lowest of the lows and you need to be able to enjoy and endure through it all.  And if you’re kind of left standing at the end of the day, then it’s a win and then you stand another day and you just kind of figure out how to fight through that.  So, I really, truly, I 100% agree with you that so much is just about, “I’ve got to make it through this challenge.  And if I get through this challenge then it’ll be okay.  There’ll be another challenge but I’ll be okay.”

Marcia Hawkins:     Yeah, I think that what really starts to kind of chew at people’s brains when they’re trying to problem solve is their inability to look that they do have solutions.  I think sometimes, they got so caught up in what the problem is.  And Kyle and I had a conversation earlier that the tone of our show is, we are touching upon it but we don’t want to dwell on it.  We know the economy is not doing so great right now but what we want to do for our listeners is to give them the tool that they need to really find their solutions because I always say, no matter what it is you can sit there.  You digest it.  You understand.  You know what the problem is people get so lazy or focused on what the problem is.  They fail to recognize they have solutions and that’s where I think people can really kick their way out of those and they just for some reason, for whatever reason they seem to focus on that.  Do you have any strategies for that?

Brock Blake:          Well, I mean, it’s a — I was just kind of go on a quick other direction and that just kind of give some hope and I hope that’s okay.

Marcia Hawkins:     Sure.

Brock Blake:          What I was going to say was now is a good time to be able — everyone has this perception that thinks aren’t lending.  And there’s no doubt that during the recession over the last couple of years that banks pulled back significantly and they weren’t lending.  And if they were, they were lending a lot less than what they were doing before.

But what happened during that time was that banks ended up getting a lot of deposits.  They got a lot of people that were depositing money and there’s been some regulation that basically comes out to the banks and say, “Hey banks, you can’t make as much money on fees like you used to.”  They would make money through a fee here and a fee there and so they kind of regulated that.

And what’s forcing them to do is to get back to traditional lending.  And in fact, the federal government is encouraging through all this various incentives for banks and credit unions to lend more to small business.

And so, I would say over the last six months to a year, the banks — we are talking to banks all day long and the message that they’re trying to communicate is that they are lending.  They’ve got all these deposits on their books.  And to be able to make money, they need to be able to lend that out.  And now, they’re going to still use their underwriting, they’re not going to just throw money away but they do want to lend their very aggressively looking to grow the number people they’re able to lend to and stuff like that.

So regardless of what you hear I know that the banks want the message out that they are lending.  And in fact over the last — I think it was this last quarter, the SBA came out with — I think, it was a record quarter for cents like hasn’t been — since like 2008 or 2007 or something like that, this was a record of a quarter for the amount of loans that are done.  So, there are some really positive signs showing that banks and credit unions are getting back to traditional lending to small business loans.

Marcia Hawkins:     I’m really glad you clarified that because that really goes back to what I was talking about, and people understanding they have solutions and you’re basically describing that effect.  If they’re sitting there wondering how they’re going to make payroll on Friday, I mean obviously it’s going to take a lot longer than that.  But the point is I do think that there’s a misconception out there that the banks are absolutely positively not lending and you clearly have changed my thinking on that for sure.

Kyle, do you want to add anything to that?

Kyle Clouse:          Yeah, I’m curious and I’m sure that there are a lot of other people on this call but are also curious.  They come to Lendio — when they’ve been listening to the call — you know, we’ve talking about how banks are opening up for their wallets per say, base our lending.  There are all the programs for all types of different businesses, credit scores, financial statements.  And so what are the first steps — if somebody is coming to Lendio, what are the first steps that they take once they come to you website?

Brock Blake:          So, it’s really easy.  They come.  They sign up to our website.  We’re going to ask them a few pieces of information.  We’re going to ask them about how much financing they’re looking for.  We want to know how long they have they been in business.  We want to know what the revenues are.

We partnered with Equifax so that we can do a soft poll on their personal credit or look at their credit without actually negatively affecting credit score.  And then in a matter of minutes, they can take that — we will take that information and then match it up to all of our lenders and they’ll also get a call from one of our customer service reps to make sure that we’re answering any questions that they have and helping them walk — basically walking them to the right bank or credit union to give them the best chance of getting approved for a loan.  It’s really pretty easy.  Just come, sign up and hopefully we will take care of the rest.

Kyle Clouse:          Are there any — I’m sure that there has to be cost involved with that.  Are there any costs for someone coming to do that at Lendio?

Brock Blake:          You know it used to be — we used to charge for it but we just made it free.  We came out of some press a couple of weeks ago and the one thing that there is a cost for is if you want a case manager to work individually with you one-on-one to walk you through that process, then that’s $99 a month to do that.  Otherwise, we make money on the backside.  The banks and credit unions pay us for us to be able to send them customers.  So, it sounds too good to be true but it’s free for the business owner.

Marcia Hawkins:     Oh, that’s great.  A little bit of hand holding for them.  That’s wonderful.  Brock, I can’t thank you enough for being here with us.  We got to wrap up unfortunately and pay some bills here.

Okay everybody, we want to thank you so much for listening and we also want to of course thank our sponsors, the Lehmans.com, the Humless Solar Kit, Tomorrow’s Harvest and The Freeze Dry Guy and of course our guest Brock Blake, CEO of Lendio, Lendio funding for small business.

It sure was informative and preparative show.  We sure hope you’ll visit us at our site newyorkshopexchange.com and get your business moving with video on your very own Video Business Channel.  We look forward to chatting with you next Wednesday at 7 p.m.  And again, thank you so much.  I’m Marcia Hawkins along with Kyle Clouse.  Enjoy the rest of your evening.

Male:                   You’ve been listening to Preparing Business for Business with your hosts Marcia Hawkins and Kyle Clouse.  Questions or comments?  Email the show at info@newyorkshopexchage.com.  Also, find them on the web at newyorkshopexchange.com.  Until next time with the best tips on how to manage and grow your business tune in again for Preparing Business for Business with hosts Marcia Hawkins and Kyle Clouse.