Financing Archives

The Excel Interview With deBanked’s, Sean Murray

April 9, 2019February 25, 2016 by Maria Khatiashvili

Merchant Cash Advance industry veteran, founder of deBanked, Sean Murray has been an influential part in funding over $100 million to small businesses through sales and underwriting efforts. As a Senior Account Executive at Bizfi (part of the Merchant Cash and Capital family), he grew one of the largest residual portfolios in the history of the company and become a well-respected expert in the industry. After his time at Bizfi, Murray founded Raharney Capital, providing advertising and consulting within the alternative lending industry, and also deBanked – the most popular magazine and resource in the industry where Murray also serves as the Editor-in-Chief. Excel Capital Management recently sat down with Mr. Murray to explore his vast knowledge of the Merchant Cash Advance and alternative finance industry and discuss the future of the business.

Excel: Tell us a little more about your background and what made you get into the alternative finance industry.

Sean: I got into this industry almost immediately after college. That was 10 years ago. A friend of mine told me there was an opportunity to work at a fun financial startup. The job description entailed evaluating small businesses for working capital, ones that had mainly been declined already for a bank loan. Given that I double-majored in Accounting and Finance, I was definitely intrigued and took the job.

Excel: You’ve been in this niche industry for quite some time. Over the years, how have you seen the industry change and grow?

Sean: In the beginning, the worst part for the small business owners I spoke to was that approval terms were tied entirely to their average monthly credit card processing volume. That meant if cash sales were 90% of their business, we couldn’t consider that, even if that cash was showing up in their bank statements and being declared on their tax return. Over time, funding providers became more creative and flexible. They found ways to better service clients without making it impossibly hard to qualify.

Excel: Did you ever expect the industry to become as popular and as competitive as it is?

Sean: Yes and no. Given that I started before the Great Recession, there was already a big need for non-bank alternatives. The industry already existed and was growing. It wasn’t a byproduct of an economic downturn, it just became more visible during one. People think that when the economy fully heals, that banks will start lending again and the non-bank alternatives will disappear. The truth is that banks never serviced this segment of small businesses. It was and remains to be too expensive, risky, and time consuming for them to underwrite a $20,000 business loan. Sure, they’ll issue you a business credit card, but that’s based on your personal credit, is personally guaranteed, and more often than not the limit is too low. So no, I am not surprised that the industry has become so popular but I am surprised the product mix available to business owners has diversified as much as it has. It’s truly incredible.

Excel: In the latest issue of your publication, deBanked, you provide a few predictions on the future of the industry. You specifically mention the fact that it is an election year and touch base on the current state of the stock market. Can you elaborate on these topics and how they relate to the industry? Also, speaking of the election, Democratic candidate Bernie Sanders has stated that he will impose nationwide interest rate caps that would, in the long run, hurt marketplace lenders. What are your thoughts on this?

Sean: I think what I was trying to say was that a new President sets the regulatory and legislative “tone.” This year we have a colorful group of candidates, many of whom have big ideas on how to grow the economy. Bernie Sanders in particular has made some pretty controversial statements, one being that he is in favor of a 15% federal interest rate cap on consumer loans. I think many people when they hear that, assume that would mean that a lender that normally offered a borrower a 28% interest rate loan would instead offer a 15% interest rate loan to comply with the cap. That’s not what would happen at all. Instead the lender would just decline the application. In effect, a huge portion of the population would not be able to get a loan from anywhere, not even non-bank alternatives. You know the saying, “it takes money to make money?” That goes hand in hand with the “rich get richer while the poor get poorer.” Borrowing can be used as leverage to grow and in essence become richer. It takes money to make money. If you’re locked out from borrowing, supposedly for your own good, how do you become richer if your risk profile makes it legally impossible to take money and make money? That’s obviously a larger debate but it all feeds back into the upcoming election and who will be running the country. What will their economic views be? And will that “tone” positively or negatively affect small businesses? Nobody likes the uncertainty in the meantime.

As for the stock market, the connections are easy. Declining stocks increases the allure of investing on peer-to-peer platforms where the returns are perceived as both steady and rather lucrative. It can be hard to stomach a 10% loss in your investment portfolio in a matter of weeks like the stock market did in the beginning of this year. Investors, even small retail investors are going to consider alternatives like this industry. A declining stock market also chips away at wealth and this can affect consumer buying behavior which would impact small businesses. It’s all related at the end of the day.

Excel: Along the same lines, what are your the thoughts on the alternative finance industry being regulated? Do you see this happening anytime soon? If so, how will these regulations affect business?

Sean: I think regulation, if any, will focus on disclosure and transparency. If this is indeed where it goes, I just hope the outcome is intelligent, well thought out and logical. It’s early days right now though so it’s hard to speculate. In business-to-business transactions such as the kind your company engages in, I’m a big believer in the invisible hand. It’s commercial finance, not consumer finance. Some of these businesses might be really small, but we’re still for the most part talking about corporations entering into contracts with other corporations. I think regulations should focus on consumer lending, where there is a much lower presumption of sophistication.

Excel: Moving forward, what impact do you believe the collaboration between OnDeck and Chase will have on the industry as whole?

Sean: From what I know about the partnership and from what I know about banks, I believe Chase is probably using this as an opportunity to fast track their online loan underwriting process while they figure out a longer term technological strategy. You have to remember, it’s not uncommon for banks to be using really old systems. I believe some are still using or have just moved away from Windows XP recently. That’s a 15 year old operating system. Between that, constant bank mergers where the acquired banks are using completely different systems, regulations, and the sheer size from a human resources perspective, all make it nearly impossible to catch up, let alone implement a modern underwriting platform that measures 10,000 data points with connections through all sorts of APIs. The easy solution for now is to use a company that can reliably provide that capability and I think it’s great that OnDeck’s platform instills a level of confidence that a famous bank like Chase would attach their brand to. I think OnDeck and others will score more of these partnerships and there is potentially a play for one to be ultimately acquired by a bank just for the technology.

Excel: As this industry continues to grow and more people are entering the market, what is one piece of advice you can share about the do’s and dont’s of our marketplace?

Sean: Do be responsible and act with integrity at all times. Don’t think you are too small or insignificant to make a difference. If you only help fund one small business and they hire new people as a result, there’s a chain reaction that occurs that affects the entire local economy. It’s a beautiful thing to play a role in that.

Why Contractors Have Hard Time Getting Business Funding

February 19, 2020September 14, 2015 by Maria Khatiashvili

Even in a favorable economic climate, where housing starts are up, contractors have a hard time getting loans in the traditional sense but Excel specializes in Construction business loans. Since no more so than ever banks view contractors as high-risk and they are subsequently far more selective when underwriting loans. The lack of financing options makes it difficult for many contractors to meet payroll obligations, purchase new equipment, and access capital when there is a lull between jobs or if payment from clients aren’t received in a timely fashion.

In most instances, the concern over the inherent risks of lending to contractors appears justified. In his book Analyzing Construction Contractors, Dev Strischek indicates that contractors have a higher failure rate than other small businesses and these failure rates only increase during economic downturns or recessions. It then becomes apparent, based on both the failure rate and the correlation with economic cycles, why contractors are considered high-risk.

Here are some of the additional reasons why small business owners and contractors might have a hard time securing financing through traditional channels:

Inconsistent Revenue or Cyclical Business – a business may depend on the weather, there might be downtime in between contracting jobs, or there could be a sustained recession that is having industry-wide impact
Home-based Business – lack of a traditional brick and mortar shop lends itself to the notion of a transitory or unstable business
Lack of Collateral – a contractor that works out of his or her home and leases the majority of their equipment may lack any assets that can be put up as collateral for loans
Bonding Obligations – contractors are often bonded. Banks recognize that these bonding agencies hold a legal claim on assets above any creditor should the business fail
Perceived Lack of Business Acumen – contractors may be highly skilled in their jobs, but the perception may be that they lack the marketing, bookkeeping, and business skills necessary to run a successful small business
Heavily Impacted by Downturns in the Market – as stated before, a contractors business is often directly tied to the state of the economy and, more precisely, the housing market

The lending practices of banks have left a definitive gap in the marketplace, but there have been third party institutions springing up to meet the needs of contractors and attempt to fill that gap. In her article “Online Banks Fill Funding Needs for Small Business,” author, and former SBA Chief, Karen Mills indicates that there is reason for optimism in the alternative financing realm. She states, “the outstanding portfolio balance of online lenders has grown about 175 percent a year.”

So it is not all doom and gloom for contractors. There are alternative options for securing loans. Here are just a few of the non-bank financing options available to contractors:

SBA – the Small Business Administration is not a direct lender. Instead, the SBA works with local banks to guarantee small business loans. Their guidelines are as restrictive as the banks, but a guarantee on a loan greatly increases the chances of contractors obtaining financing.
Online Banks – there are on-line banks that supplement the brick and mortar banks that offer additional opportunities to secure financing but typically have similarly restrictive lending practices.
Non-traditional Funding Sources – this is the greatest source of optimism for contractors. These online, non-traditional lending partners are changing the face of contractor financing. They include direct lending, peer-to-peer lending and even factoring companies.
Equipment Lease Options – if the proceeds of a loan are for the sole purpose of purchasing equipment, contractors should consider leasing as an option. Leasing requires less capital and can come in different term lengths to meet the specific needs of the contractor

Despite their relative small size, non-traditional and online funding sources have the potential to change completely the way contractors obtain financing. They focus on customer service, are more open regarding their requirements, and they ultimately foster greater competition for the contractors’ business. Some of these alternative lenders include Prosper, Lending Club, Excel Capital Management and Funding Circle.

To improve the chances of securing financing – whether it’s through traditional or non-traditional sources – contractors should focus on the following areas. Addressing each of the following will drastically increase the chances of success.

Be prepared to provide tax documentation and a well-maintained balance sheet
Define exactly how the money is to be used and how it will impact the business’ bottom-line going forward
Address a plan for market downturns by soliciting referrals, utilizing direct marketing, or focusing on a Social Media strategy. This approach will demonstrate a realization of the cyclical nature of the business and provide evidence that the owner is attempting to mitigate the impact.

Contractors and business owners need to recognize that, as with most present-day industries, the traditional lending model may no longer fit the market. Innovation has extended well beyond technology products to impact everything from taxi cabs to startup funding to grocery shopping. There has been innovation in small business lending as well, and contractors and business owners have begun to turn towards this burgeoning alternative funding market to finance their long-term success.

10 Reasons to Be Glad You’re a Woman Entrepreneur

August 17, 2015 by Debbie Dey

I’m glad I’m a woman.

Actually, I’m glad I’m a Woman entrepreneur, and you should be too.

I’ll tell you why in a minute.

For a moment I’m going to talk about all the things women in business already know:

We still live in a society where men are the typical, almost preferred, leaders in any type of industry.Surprisingly, women are often content to take a back seat rather than fight for position. We all know what it’s like to be labeled “THAT” type of woman! The one that charges over everyone to get to the top. The aggressive workaholic that would rather order people around than show compassion or a softer side for fear of being weak.

The glass ceiling is alive and well. While we’ve made some progress in this area, women still don’t get paid the same wage as men for doing the same job. Worse yet, often women aren’t even given the opportunity to fill those positions “reserved” for men. For years I’ve worked in the private sector – new home construction. As you might imagine, the construction industry is definitely very old school and very much still a “Good Old Boys Club.”

When I started there over 28 years ago, I had high aspirations of becoming an officer of the company and made my plans known all the way to the top. There was one woman in that position which gave me confidence it was possible to achieve with dedication and hard work. So, I put in my time, became an expert in almost every facet of the organization, earned the respect of my co-workers and management, and even made some money for the company through innovative suggestions. Watching promotions go to men within the organization over the years was disheartening, but there was still that one woman in a leadership position. The only problem – she never seemed to do anything remotely involved in decision-making for the company. She, too, did her job well but never embraced the role of leader. Well, she retired this year. What surprised me the most while attending the going away lunches and parties in her honor, was that never once was it mentioned that she was Corporate Secretary for almost 40 years. Then it struck me, the officer position she held was merely an attempt at political correctness; to, at least on the surface, appear to be a forward-thinking company. Last week the president sent out a call to action to his all-male management team. In it, he listed eight employee names in consideration for the vacant officer’s seat. My heart skipped a beat. Surely, now was my chance. Of course, you guessed it, my name wasn’t on the list. Among the eight names were six men and two women. Another skipped heartbeat with the possibility that some other woman might make it to that honored status. The candidates? A woman who has been with the company for four months and the other in poor health and close to retirement. The all-male management team will vote next week. What do you think will happen?

Women don’t ask…for help, for money, for anything that is going to make them appear less independent. There have been a number of studies to substantiate this point. Linda Babcock of Carnegie Mellon University indicates the main reason women still earn approximately 78 cents to every dollar men earn, is their unwillingness to negotiate for higher pay. Data shows that men are also four times more likely to ask for a salary raise than women, leaving thousands of dollars in unearned income on the table.

A brave and talented childhood friend shared a story about her very slow rise to success. She’s a buyer at a prominent fashion retailer in New York City today, but it was a hard-fought battle that brought her there. Molly was always considered the “fashionista” of our tight-knit group of BFFs. You know the type, the pretty little thing that could pull off mismatched knee socks (before it was popular), layer-upon-layer of everything in her closet, top it off with her favorite scarf and call it her “style.” Somehow, she made it work every time. When she grew up, no one was surprised that she pursued a career in fashion. She put in the work, got her degrees, and finally felt ready to tackle the world. The only problem…she was a large talent in a small town. After years of searching for the perfect job and making minimum wage in her comfortable home town, she realized that her opportunities were limited. She jumped from one boutique to the next with little chance for growth. She told me that the male-dominated retail industry in our cozy community left little room for her fashion-forward ideas. To them, she had amazing potential as their head sales clerk, because she was cute and friendly.

Molly finally had enough. She took a leap of faith and headed to the Big City. With no job, no place to live and just a little bit of savings, she got on a bus and headed east. Can you imagine? Molly found out the hard way that if she wanted fame and fortune, she had to reach for it. It was risky, but worth it in the end. Her only regret? That she waited so many years before making the move.

You might be thinking that these are isolated instances or limited to certain industries, but that’s not the case. Consider the female-dominated nursing profession – in a field where women outnumber men 10:1, you’d think the women would have an overall advantage, especially in earnings. Nope. According to the latest Census data available from 2011, female nurses earned 7 percent less than male nurses. The phenomenon where men earn higher wages, obtain faster promotions and concentrate on achieving positions in the highest-earning segments of their field even encroaches into the healthcare industry.

Does any of this sound familiar? While I don’t really consider myself much of a feminist, I am convinced that in order to break stereotypes that still exist in business today, real change has to start young. And there are initiatives that are working toward this goal. For example, the Girl Scouts have adopted a “Win-Win” badge where girls are required to accomplish a series of negotiation skills to earn it. In addition, researchers at the Greater Good Science Center at the University of California, Berkeley have identified empathy as a critical skill needed to reinforce stronger interpersonal connections, better collaboration and team building from childhood through adulthood. Preschool and other childhood educational programs are being geared toward early adoption of these skills for both boys and girls.

It’s a start; and hopefully future women entrepreneurs will find a more balanced playing field. Already statistics are showing improvement with an increase in the number of women-operated businesses and financing options available for all small business ventures.

Okay, now I’ll tell you why I’m glad I’m a Woman entrepreneur.

While I’m always going to root for the underdog, being considered one just makes me mad. It would be nice to have a fair playing field in business, but life’s not fair. Being an entrepreneur has taught me to be a problem-solver when faced with obstacles. Being a woman entrepreneur has given me practice.

And I’m not alone. Statistics from a 2014 Womenable-authored report published by American Express OPEN confirmed there were close to 9.1 million women-owned firms, generating over $1.4 trillion in revenues in the United States. Between 1997 and 2014, the number of women-owned enterprises increased by 68 percent – the fastest growing segment among all others over that period. Think about that for a minute. Are you surprised? I was.

There are a number of areas in which women excel, and that, if used properly in business, should give them an edge over their male competitors. I’ll list the top 10 reasons I’m happy to belong to this group, but feel free to add your own.

Key demographic. As part of a growing market niche, my company will receive targeted incentives, discounts and offers in an effort to capture my business. Marketing 101 teaches students to focus advertising dollars on growing segments of a particular demographic to achieve maximum return on investment. I love all the extra attention, and it’s a great opportunity to test out my negotiation skills.
Someone to ask. At the risk of being a little stereotypical myself, I always laugh when I hear jokes about men never asking for directions – because it’s true. While I understand there are tools and equipment out there to get you where you need to go, I’m happy that I don’t have to take this entrepreneurial journey alone anymore. With the growing numbers of women in business, my ability to ask for advice, and a willingness of many who have gone before me to share their experiences, the road to success will be a lot smoother.
Excellent multi-taskers. While the term may be passé, the ability to juggle many things at once is not. Let’s admit it, women often overextend themselves because they can. While I would like to focus my efforts on just one thing occasionally, I really am proud that I’m capable of managing multiple tasks simultaneously. Besides, I never get bored.
Great communicators. Being a woman entrepreneur opens up many opportunities where my voice can finally be heard. Remember, I’m part of a growing demographic, so I can talk or write all day and everyone will listen.
Passionate. I’ve often heard people say that women are too emotional to be successful business owners. What? The reason I started my business in the first place was because I was passionate about it. I’m excited to belong to a group that cares deeply about making a difference in the world, even if it means shedding a tear every once in awhile.
Embrace the gray area. I know there are women business owners that do everything “by the book” and follow a straight path toward reaching their goals. The difference between men and women, though, is the gray area. Most of the men I’ve worked with in leadership positions like black and white answers. In other words, they want a yes or a no. They don’t want to hear the details or an explanation – the gray area. Luckily, I know that some of the best solutions are lurking in the shadows.
Innovative. Obviously, this reason isn’t only reserved for women entrepreneurs; there are many innovative men. Women have a unique perspective on life and how the world works. Creative ideas are often borne from empathy or a desire to improve the world around us. The nurturing component of a woman’s DNA may often lead to new ideas.
Problem-solvers. Think quick! Your alarm didn’t go off this morning, you’re running late for a meeting, your car’s gas gauge is on empty and you only have $2 in your wallet. What would you do? The answer doesn’t really matter. The fact that you figured out a solution has proven my point.
Perseverance. While many women-owned businesses may struggle or even fail, I’m always impressed by the stamina and the ability of most to try again. The path to running a successful enterprise is rarely without obstacles. Learning from the challenges we encounter and continuing to push forward are powerful tools I’m proud to possess.
Alternative financing options. With the number of women-owned businesses increasing every day, funding opportunities to keep those businesses running and growing are changing and expanding. Women entrepreneurs are no longer limited to traditional resources and may find better choices through alternative financing to fit their immediate and long-term needs. The top funding options for women with established businesses now include: Traditional bank loans, secure Small Business Administration-guaranteed loans, financing assistance from family and friends, home equity loans, trading future earnings, crowdfunding, angel investors and venture capitalists. In addition, there are more alternative financing options available such as Merchant Cash Advance, Revenue-Based Factoring and Asset-Based Lending that offer easy application and approval processes, no credit or collateral requirements and fast disbursement options.

Of course, I haven’t listed all the financing options available to small business owners – male or female. It’s possible you could win the lottery or find a bag of money on your front porch. More than likely, you’ll need to be resourceful, tenacious and a problem-solver. In other words, be yourself. There are always going to be challenges in business. Just understand that you’re not alone, and there will always be an answer. With alternative funding solutions available from Excel Capital Management, you’ll never have to worry about accessing the cash you need for upcoming expenses, and instead, you can focus on your success.

See, now aren’t you glad you’re a Woman entrepreneur too?

Ready to Fund Your Business?