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Justin Bakes: Justin Bakes, Forward Financing. Great to be here. Like I was
joking and probably should relocate this down by the bar bring the bar in

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here. Forward Financing, we started the company in 2012. Started it with 2
people in a shared office space downtown Boston with $2,000. Since then,

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we've grown to almost 200 people, we're about 190 people based in Boston.
This year, we'll fund over $300 million on balance sheet. And I'm

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passionate today to be here. And my purpose for being here, and really what
I'm excited about is we would not have gone from 2 people to 200 without

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having extremely high standards and standards for us is ethics and
integrity. And I'm excited to talk a little bit about that today.

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Christine Chang: Justin, delighted to be co presenting with you today. And
thanks to the folks over at deBanked. As well as you in the room. He did

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steal the joke about us being the only obstacle between you and the bar. So
we will try to, to get on with it. So I'm CEO of 6th Avenue Capital, we

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actually started about 2 years ago, our journey. And we what we do is we
actually offer a short term bridge financing product, merchant cash

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advance, which has gotten some questions about ethics in the industry,
which is why we're excited to talk to you about the way we think about

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things today. I thought it just might also be helpful to talk a little bit
about our backgrounds so that you have a context in which we're coming

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from. So I did actually previously serve as a COO and Chief Compliance
Officer at a fund to fund as well as a private bank, and have early

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experience with alternative credit when it back when I was at Credit
Suisse. And as Mark had mentioned that I'm pretty passionate about

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empowering and teaching about financial services to so good work there.
Okay, so along those lines, I thought it'd be interesting to hear about

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more about you guys. So who's in the room today? Funders? Brokers? Great.
Service providers? Other? Media. Thank you very much. So, you know, I think

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that this shapes our experiences, and you know, what we think about ethics,
and the example that I actually like to give that it's not such a

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straightforward experience. Is that the practical application of ethics can
be kind of tricky. The anecdote that I wanted to kick off with was, was a

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place called, happened at a place called Harvard Business School. The
Honorable John Schad, was an extraordinarily active and generous supporter

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of HBS. He was a respected investment banker, former chairman of the SEC.
He was ambassador to Netherlands, and he decided to endow the University

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with a $20 million endowment to focus specifically in building out a
business leadership and ethics program. So on the face of this seemed like

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a great idea. However, some people felt like by the time you got to
business school, especially places how it is at Harvard Business School,

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There shouldn't be a question of your ethics. So fast forward, after some
debate. Can anyone guess what Shad Hall is today? I don't know anyone from

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Boston here? Well, it's affectionately actually referred to as the ethics
gym. Now, the great urban folklore doesn't. I can't actually confirm

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exactly what the use of proceeds for but I will say that, knowing a couple
of alumni there, it's been suggested and rumored that that might be one of

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them. So you can see that even though there's a great idea behind ethics,
like the implementation and the application of itself, especially in a

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business context is not as straightforward as you think about. And so why
are we here today? As Justin had mentioned, one of the pillars for Forward

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Financing, of course, is on the ethics and integrity side. And similarly,
with 6th Avenue Capital, that's something we believe very deeply in. So

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we're here to make the business case that in fact, ethical business
practices and higher ethical standards, both results in a moral high ground

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and reaps financial benefits. So specifically, doing the right thing won't
only make you feel good, but actually makes your business more profitable

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in the long run. So questions to think about today, how we currently
prioritize ethics in your business.

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Justin Bakes: Thank you. So, we're gonna get into the presentation and have
some some data points to share. As we go through the presentation, I'd like

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everybody in this room to just keep in the back of their mind two key
questions. And the first one is, how do you currently prioritize ethics in

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your business? And that's you, whether it's an owner of the business and
employee of the business. How do you currently have that as a priority?

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Where does that stand on your day to day? The second is, how can you raise
the bar? So it's not just enough to think about it, but how can you

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actually assess it, and hold yourself to a higher standard and raise the
bar? So those are the two things we'd like you to keep in mind today. We're

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gonna make the case as well, is that not only and I gave the example of our
growth is operating with integrity, having standards ethics being top of

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mind, you will have significantly more profits, and you're gonna have a
much longer career and success with your company. These are facts. We've

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seen it. We do it every day. So as we get into it, we're going to talk
about what's the current state of the industry today. And there's four kind

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of chapters we'll go through. We're going to talk about increased
competition, we're going to talk about public perception, customer

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expectations. I don't know what you all in the room think today, but it's
there an all time high, and we'll give some data points on that. And then

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just talk about the large opportunity. So increased competition. And we saw
the raise of hands from a few brokers in the space and funders as well. The

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cost to acquire customers this year vs. last who in the room has seen that
go up? Customer acquisitions cost one year over raise of hands. I will say

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for us, for our partners, customers to acquire marketing costs have gone
up. There's more funders today. the example is there is 60% more people at

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the deBanked Broker Fair this year vs. last more funders. At Forward
Financing, last month, by a long-shot we signed up more ISO partners than

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ever before. So there's more entrance, there's more competition, the cost
to acquire customers higher. And frankly, the expectations that merchants

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are more educated, from starting as direct mail, outbound, they're all
going online, and they have a lot more resources to learn. So not just

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increased competition, but public perception, we all we all know about the
Bloomberg articles. We're getting our industry is getting scrutinized,

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we're under the microscope. and this is just starting. The FTC this week,
is holding a roundtable specifically focused on the small business

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financing. So everything we do, as a company, as an industry is getting
scrutinized in the public eye. Customer expectation. So Salesforce, who has

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a number of both consumer and small business customers. Salesforce did a
study, and the results of this study in one data point is that 80% of

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customers say the experience that they have working with any type of
product is just as important if not more than the actual product itself.

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And experience is how you interact, what kind of standards, what kind of
bar. 95% of customers and we've talked about the impact of renewals and

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long term, long term profit, 95% of customers say that they are going to be
more loyal, work with a company longer if they trust that company. And how

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do you generate trust? 95% that is increased profits. That's longer term
relationships, longer, longer relationship. What I'm so excited about is we

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have significantly more competition entrance. We're under the public eye,
educated merchants, but we have a tremendous opportunity in front of us.

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There's 30 million small businesses in the US. Two thirds of them this year
have said that they do not have access to the appropriate capital that they

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need. They can't get it. What I'm excited about what we should all be
excited about here is where that solution to being able to provide that for

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them. And that we've got to and we'll get into it as we've got to live by a
certain amount of standards so that we can see that successfully. I guess

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we'll get into the current threats on the industry.

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Christine Chang: Got it. Threats on the industry.

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Justin Bakes: So as Justin mentioned, there are definitely a few unethical
practices that have gotten a lot of headlines. Does anyone follow the

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Bloomberg series on confessions of judgment? Well, fortunately, I think
that there's a seminar right before this, so we don't have to talk at

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length about that. But really, the net result of that has real business
impact on all of us. Doing business with strategic partnerships, such as

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banks will become more difficult, because we'll shy away from this space.
And then actually, cost from service providers can actually go up. So

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insurance companies that are insuring funders, insuring brokers in this
space, as well. So even away from the obvious, you know, the obvious

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threats that are out there financially, that these types of abuses pose are
those, you know, sort of corollary effects. And so, we also have on the

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other side, in terms of unscrupulous behavior by certain brokers too. I
think that, you know, inevitably, these will also have a real financial

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impact. Ultimately, there's misrepresentation, the deals fall through, it
wastes everybody's time. If there's misrepresented deals that actually do

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fund, merchants often refuse to or can't actually afford to repay those
those loans or those advances. So what's the good news? The good news is

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that good experiences, conversely, also significantly affect the bottom
line. So as Justin had mentioned, we have some actual information from

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Salesforce and 60% of the customers say that they actually do share bad
experiences with other people. 57% of customers, in fact, stop buying from

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a company because of a bad experience. And because a competitor provided a
better experience. But the good news is that 72% of customers actually

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share their good experiences with other people. And that translates to the
fact that 67% of customers will actually pay more for a better customer

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experience. So I think that is actually incredibly important takeaway for
today, which is behaving ethically, actually has translates to real

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financial positive impact. So what does that mean? How can we create a more
ethical business model? You know this starts, what do we do? How do we

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prioritize that? How do we implement that? And then how do we actually
maintain that? So where do we start? We start by really defining our brand

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with ethics, and a value of the brand. As Justin just mentioned, if you
weave ethical principles into the fabric of your business, what does that

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mean? So back when I served as a Chief Compliance Officer, the focuses of
SEC regulations was creating this and examining whether or not there was

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actually a culture of compliance and a tone from the top. And basically,
the SEC would give you a lot of leeway if you're really trying to establish

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a behavior in your business in order to make that happen. So for example,
for 6th Avenue Capital, if you ask our chairman, why he does this business

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is fundamentally he wants to see us small businesses grow. So our goals and
reasons for financing is for growth and expansion. And that's how we try to

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avoid getting into predatory lending practices, because we come from that
place. So along those lines, we also try to offer high touch services to

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our merchants to have this better client experience. And so that translates
to how we service our portfolios as well. So if we establish ourselves as

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our small businesses value added partner, they're more apt to come back to
us for more business. So creating a culture of ethics in your company is

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just as important. So set your employees up for success. And that means
that in our business, the way that we work it is we want our underwriters

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to be underwrite objectively, so we don't pay them on commissions to avoid
conflicts of interest. We also don't pay our collections team on

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commissions as well. So if you offer actually ethical choices, both to your
employees, to your customers and your partners and reward them for those

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ethical choices, this will result in long term relationships and financial
benefits. So along those lines, what do we prioritize? Industry best

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practices, there's a couple associations out there. Those that are members,
the ILPA and SBFA. Know that they're not always on the same page when i

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comes to everything, but we do know that they lobby for industry bes
practices and that what that means As elements of transparency. To mak

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sure that small businesses actually understand the products that we'r
offering out there, the benefits and the risks, and this ensures that the

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actually have the ability to pay us back. The more they understand th
terms that we agree upon, the lower the default risk is actually for us

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And along those lines, as we just had mentioned, to you hire, retain th
employees that represent the best interests of both your brand an

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merchants, success will follow. And finally, partner with other ethica
strategic partners who aspire to an ethical culture, like Justin

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So how do we implement? First thing you have to do is set standards.
There's no way that you're going to increase performance, you're going to

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set expectations, unless you set proper standards. While you go through
that, you're going to have to identify changes. So you're going to have to

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as you set the standards, you're going to have to constantly review them
put resources to continuously go through, identify changes and implement

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those changes. Third, is that you frankly, have to adhere to those
standards. And so it's this sounds simple, right? It's set standards,

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identify, adhere. Very simple. Think through how you can do that, both
individually and as a company. And you will see, we will see great rewards

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in terms of maintaining it, which I think is probably the most important,
you've got to constantly measure. The way Forward Financing we measure, we

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have two ways primarily we measure. First is customer feedback. We are
crazy about looking and reading and seeing what our customers say. You can

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go online, you will see reviews, I learned the most from poor reviews. So
if something happens, that doesn't go well. The other day, we had a

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customer apply a small business apply. We approved them, we said that they
were going to fund them, they submitted all their paperwork, and then we

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decline them. That doesn't happen often. But this happened and the merchant
went online and talked about us. So doing that is something we're going to

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learn from that we don't want to act that way. We've got to measure we've
got to maintain. Taking action. When something like that happens. I will be

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the first one trying to figure out what's going on in our whole company
throughout? Well, I would say in addition to listening to customers, I

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didn't mention I would say listening to employees. So the employees, our
team is the face of our business. They're interacting with our customers,

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which are merchants, which are ISOs. And so we also use in addition to just
online review sites, like Better Business Bureau, Google, Trustpilot,

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others, we spend a lot of time on Glassdoor. And so what are your
employees, both previous and current employees saying, and what are they

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thinking about the business. It's a great way to learn what's going well
and not well, and be able to react and take responsibility. The last way,

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and really the way to keep maintaining, in addition, obviously, taking
action is you have to reward good behavior. And so make sure that you've

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got programs together for your employees, for your merchants to reward the
end result, right. So don't just have compensation plans be focused on

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dollars, commission sales, but do something in terms of customer
relationship for us at Forward Financing. If customers talk about having a

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good experience and relate that we actually have a multiplier on our
bonuses for our teams that touched that they will actually because of the

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experience that they were able to give the customer they can actually make
more money that way. And that just has them. And it's not it doesn't have

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to be a material amount, but it's just a way that you can identify and say
it's a priority for you in the company. We'll talk about again, today is

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ethics integrity really is and I think we're both case studies for it, is
you're going to be able because of the experience with a small business

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you're not going to have your and operating with certain standards you're
going to be able to you don't have to be the lowest cost provider. And

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you're going to have better retention and that's also has to do with
employees and not not just merchants.

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Christine Chang: Well, the good news is you're here already today and are
interested in ethics. So you're already way ahead of the whole crowd. And

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no matter what the role you do play whether or not it's as a funder, if
it's as a broker As a service provider, as a media partner, just think that

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you can really affect change. Just the examples that Justin was talking
about, even from if you're a junior service or on service representative,

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all the small things that you do actually make an impact on how you treat
your customers to the bottom line. And so no matter who you are, if you

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guys have any Game of Thrones, people out there, if you're Arya Stark, or
the Kight King, you can do something. So it's a good thing. So what we're

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saying here in terms of, you know, there's this triangle of if we have
ethical funding practices, and this impacts our behavior with brokers as

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well. And the bottom line really trickles down to our experiences with
merchants. And if everybody actually behaves in an ethical manner, long

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term, everybody wins.

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Justin Bakes: Great.

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Christine Chang: Any questions?

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Attendee: You guys have put this up on the internet

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Like out of those multiple ISOs, how many of them have probably had the
bar, there's like I looked here, there's probably maybe 10 or 15%, full,

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the people that need to hear this are not hearing it, and this industry
will get shut down if it's not regulated within. Because most people cross

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their fingers and wait 30 days. I mean, when I look at a deal, if I will
not put my money in it, I will not fund it, because I've worked for direct

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lenders and defaulter. But you got provers out there that do not care that
will kill this industry, because like you said, you just sign up 50 of them

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60, and they're all at the bar, this is probably the most important things
that people need to hear. And it's meaning.

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Justin Bakes: And I think that's frankly, why we're both up here is we're
just starting the conversation. Here's the 20 slides to go through talking

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points. But this is something that frankly, we all have to talk about. And
we all have to hold ourselves accountable to because to your point, if we

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don't, and you do have bad actors, it's going to impact of small
businesses, because we're not going to be able to provide capital to them.

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And so we've all got to work together, hold ourselves accountable and hold
ourselves to a certain standard and continuously raise that bar, so that we

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have longevity in the space,

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Attendee: I 100% agree Well, we also have to keep in mind on what we grew
out of, You know what I mean? Like we grew out of massive amounts of

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defaults, and we're able to lend to the subprime market that the banks can
no longer lend to, they want that back bad. So if regulation comes, that's

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bad for us.

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Christine Chang: I would actually argue the regulation is a good thing,
because those bad actors we're talking about won't be able to function in

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this type of environment. If you're behaving or if you're, if you're
running your business in an ethical manner, ultimately, you're going to be

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able to affect the bottom line much better than the guys that are at the
bar right now. That that don't care as much. And so I do think that

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ultimately, when regulation comes down, if you're if you're adhering to
these principles, then it's actually going to be a good thing for the

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industry. And those bad actors will actually be eliminated won't be able to
compete in it.

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Attendee: Yeah. But I think it's our responsibility as an industry to take
care of it ourselves. I don't want the government coming in to regulate us.

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I think we can do it ourselves from within.

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Christine Chang: Absolutely. And just as an aside in terms of some of the
so the ILPA and the SBFA that were active members there. And we actually

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sit alongside with the regulators to draft legislation that makes sense for
us as funders. To represent the brokers as well as the small businesses.

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Attendee: 100%. I mean, at the end of the day, the merchant, this is a
tool, you know what I mean? It's an asset for them. But when you people

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stack them 15 positions, that hurts every funder in the deal. I mean, I
keep my merchants at one, maybe two positions. That's it, because otherwise

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I will go out of business. Merchant cash advance is a great asset. But like
you said, most people don't give it to them. But at least I really enjoyed

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everything you guys had to say. I think it was great. And more people need
to hear it

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Justin Bakes: Appreciate that. To your to your question, I've been told
that the slides will be online through the app or on the website.

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Attendee: 100%.  I'll make sure to share

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Justin Bakes: Something we're passionate about. And so feel free to reach
out to us as well. If you want to have further conversation.

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Attendee: I'm going to sign up with you guys. Probably tomorrow, because I
agree with everything you said. But the people that need to hear it.

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They're not here.

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Christine Chang: Thank you.

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Justin Bakes: Questions back to the room.

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Attendee: Yeah, I had a Question but also maybe a suggestion. Does either
Forward or 6th Avenue have a blog of sorts, that explains to the layman,

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the people who are taking this kind of funding? What is legitimate cash
advance? What isn't? Why is it cost so much? Because of the risk? Is there

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any such a thing that's, that's clear online.

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Christine Chang: So for us, we don't actually have a blog, but what we do
is we actually do a number of different educationals. And so that means

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that employees actually of 6th Avenue Capital. And as well as myself, we
actually, we actually provide financial seminars, spanning the entire sort

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of spectrum of alternative credi. We're obviously big believers of it. And
for us, MCA, merchant, cash advance is a very specific usage. And to our

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mind, it should be short term, it's immediate, it's collateralized, it's
completely uncollateralized. So we want to make sure that anyone who is

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using this and considering it as a product, really, it meets their needs,
because there's a really broad product set. And so we're not here to to

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force one product on someone that doesn't need it. We are here to try to
help them structure and structure with strategic partners as well, if it

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doesn't fit our box. It could fit somewhere else. Like let's just say
equipment based financing or something like that. So we spend a lot of time

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actually providing educational seminars, to those people to small
businesses explaining this is merchant cash advance, but this is equipment

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based financing. This is friends and family seed money that you might get.
And they're all for different purposes.

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Justin Bakes: Yeah, I think you raise a great point. That the, the
importance of us describing the benefits, in layman's terms, for a merchant

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to understand for the industry to understand is so important. I think it's
just the natural evolution of a growing maturing industry. As we continue

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to do that. We're working on that right now. So as your question to a blog,
we're redoing our website, we're launching a new one and has a merchant

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Resource Center as part of that. Which talks about the product, as well as
case studies, real legit case studies of where it's worked before and how

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to think about it. But I think we're just starting to scratch the surface,
it goes back to the slide. There is a huge opportunity in front of us,

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we're there, there's been a tremendous amount of growth, they talked about
it earlier in one of the panels, but there still remains millions of

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businesses out there. And I think we're just we're just getting started at
that. And I think investing in more education, more resources for

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merchants, is is hugely important.

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Attendee: So I'm I generally don't like to tell people what to do, since I
don't like people telling me what to do. So what I'm going to say is not

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something directed at you really anybody who hears this really, it can
apply and multiple people. Is that it's possible that the counter for this

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industry getting hit from unscrupulous people and such, may be a response
to the articles on Bloomberg, for example, which I read only one of them, I

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don't usually read these things, it sounded very vengeful, someone was
angry at someone, it wasn't an educated one. So basically, if there was a

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counter to that, even if it's not addressing that, so different people
could probably, you know, answer to those articles. And other people could

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just write this is how cash advance works. This is why banks can lend up
5%. And nobody else can and nobody else does. And so on and so forth. just

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educate people it should just be around should become normal. Instead of it
being regulated by the government, which doesn't have such a good track

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record. It'll be regulated by people, you won't take it because you know
what's going to screw you over and you will take it because you know it's

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worth it in your case. So just a suggestion.

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Justin Bakes: I definitely agree with you on that. Thank you.

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Other questions, points, topics?

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Attendee: Hi, how are you? I just had a quick question for you. I wanted to
touch up on that ethics thing you said you generally don't compensate your

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legal team per file, how do you pay them? Because as a broker, I'm curious
as to how you do that.

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Christine Chang: So I'm sorry, I'm having trouble seeing

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Attendee: Right here, the big guy

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Christine Chang: Probably should not be facing Justin. So specifically,
what I mean is we actually have an internal servicing department. So

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oftentimes for us when I mean we take a collaborative approach with our
customers, it means that it means that the first call is actually not from

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a legal team. The first call is we genuinely want to know and this is one
of the unique things with merchant cash advance is your payment stream

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could actually fluctuate because it's based on futures receivables and that
forecast so as an example, we have exposure and in Florida and in Texas,

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and what we did was when the Hurricanes came through, we actually proactive
y called them Small businesses, and were able to renegotiate all of

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Their payment plans and all but one that, actually, you know, there's it was
actually a case of fraud, but the rest of them actually paid us back

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on the schedule that we had agreed upon. So that's what I mean, in terms
and we want philosophically our internal servicing team to take that

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customer friendly approach. So you know, which is great from all angles,
because we genuinely do care about our small businesses, and we care about

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their ability to repay us.

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Attendee: Okay, thank you.

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Christine Chang: We're responding through industry groups to suggestions
and registration. And to your point in the in the room that often

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regulators are not the ones that are subject matter experts. So it's better
to have a collaborative conversation with them as to what actually might

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work for the industry then versus wait to see what they come up with.

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Attendee: Bed press. I mean, we're talking about a guy that was vengeful
met, say, all right, in an article that somebody had it out for somebody

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because that article was, I agree 100%, with the man in the back, like we
need to respond to the article. We don't need to go to Congress, we could

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regulate ourselves. Look, what am I don't regulate any people lose money?
We will lose money if they regulate.

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Justin Bakes: I don't I don't think it's an either or I think it's a
combined I think there's a positive PR and doing the right thing. And

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having your story told out there is one part but there's no that I just
gave the example this week, the FTC is holding a roundtable on small

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business lending.

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Attendee: Yeah. So what's this lending gonna be there?

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Justin Bakes: Yes, there's there's a whole group going in there. They're
the ones that are educating and making sure that we

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Attendee: don't get regulated.

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Justin Bakes: I don't think that's necessarily the the the purpose, but
it's to educate them.

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Attendee: Yeah, I think we're gonna let the Federal Trade Commission so you
guys have a roundtable meeting with them? Will there be talk regulating us?

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Justin Bakes: I think there's talk not just federally, but in each, each
state, there's four different states that we're talking about today that's

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talking about regulation.

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Christine Chang: And I think it's it's more difficult to see, because the
reality is that fake news sells. So they say that actually, fake news is

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85% more likely to be read than real news, because it's sensationalist. So
there actually have been a number of articles that have been put out by

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various different industry groups, essentially, not defending because this
was a clear case of, I think, the abuse of confessions of judgment, but

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specifically talking about the different products that funders actually
have to offer. So there is actually content out there, you just haven't

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seen it as much, because, as I said, fake news is actually just more
interesting for people to read.

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Attendee: No, I mean, I've seen it all. But I'm saying like at the
roundtable, we should be telling the FTC, we offer an asset that's

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available for growth. I don't believe in stacking people up, merchants will
take one events, it's they choose to take a second. So if somebody's going

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to be there saying I think from a ISO working for a funder, I don't think
we want regulation. So are we going to be going in there saying, look, this

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is what we offer? This is all you know, we don't need you guys to come in
and regulate us. We could do it ourselves, like you said in the slides.

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Regulate with from within. I don't think we should be going to talk to the
FTC about, you know, we need to regulate us. Send it in a message.

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Christine Chang: I don't think that is the takeaway. The takeaway is we
need to have a conversation with the regulators in order to educate them as

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well.

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Attendee: No, 100% I agree with you. I mean, risk is everything from a
funding standpoint, but I don't think we should be going to the FTC to talk

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about regulation.

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Justin Bakes: Great.

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Christine Chang: Thanks for your comment.

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Justin Bakes: Yeah, thank you, everybody. I appreciate people taking the
time and spend the time with us today.