Sean Murray: Okay, hello, everybody, I'm back here. My
name is Sean Murray with deBanked News and today I have
Jared Weitz, who is the CEO of United Capital Source. Thank you
for being here Jared.
Jared Weitz: Thanks for having me, Sean.
Sean Murray: No problem. So I want to get right to it. You've
spoken at several of our events before, and you've even graced
the cover of our magazine, as you might see in the background.
And for those who don't know you, could you give us a little
bit of a brief background of yourself and your work in the
industry?
Jared Weitz: Yeah, absolutely. I've been involved in the MCA
and alternative lending space since 2006, at positions and
underwriting and business development. But most notably,
the start of United capital source in 2011, is I think,
where I've made the most history in the space. We operate a very
small sales team of 10 to 12 people, I've never really had
more than that at any one time. However, we've always been able
to hit fairly large numbers through really good marketing
and technology. And I think, aside from really being a
broker, we're most notably a marketing company that happens
to be able to broker these deals as well. We've so far done close
to a billion dollars in brokerage.
Sean Murray: Wow. Okay. So as a broker, this is my first
question to you. Um, it sounds like you work with merchants
directly. Right? So you're on the front lines of it all. And
I'm curious, have you seen any changes in in borrower behavior
and merchant behavior? This is obviously an interesting year.
And have you noticed the, the way that they operate or act?
Has it changed at all?
Jared Weitz: You know, I think that there's been a heavy amount
of caution in the very beginning of the COVID months of March,
April and May, we've seen that continued caution through June.
And it started to lighten up a little bit in July, where
businesses were really understanding and getting used
to what their actual revenues were looking like for the year,
there was hyper caution from business owners with just not
understanding what their revenue would look like. And it's really
difficult to make a decision on what type of financing to take
when you don't know that. And so in the beginning months, we were
really just focused on PPP and EIDL loans. We had our whole
sales team really just focused on holding down our existing
book of business, and then we automated our PPP side. So we
processed about 3,500 PPP loans. The average loan was about
$67,000. And we did that through our fintech partners, kabbage,
veem, and bluevine. We're really thankful for those
relationships, we worked directly with the SBA on the
EIDL side, we've probably done about 100 or 150 of those now,
they've been really helpful to the clients that we've been able
to connect them with. And we've also been able to use that as an
acquisition tool to just further chat with them about what their
further needs might be. Because there's been more caution on the
business owner side, what we've seen is business owners taking a
little bit less than they qualify for, and really, really
making sure that they're putting the funding to good use. Not
that they weren't before, but because revenue was so
predictable before, someone could say, Hey, I can take an
extra 10. And I can do this or this with it. Now what we're
seeing is someone that's approved for 50, taking 20 right
now, really having that need for it, and then coming back and and
you know, pulling the rest of it in this example, it would be
like a line of credit that we're connecting them with. So we're
really just seeing some cautious behavior. But I think that's, I
think it's a good sign for the lenders, because I think that it
means that the business owner will really, really focus on
what that payback looks like.
Sean Murray: So you know, I'm curious about your experience
with PPP, you say that you automated it, but I imagine you
must have had customers call you to talk to someone about it.
Jared Weitz: Yeah.
Sean Murray: has that happened, right?
Jared Weitz: So yeah, we had all of our new sales reps, fielding
those customer service calls in between, you know, working
whatever funding they had, as well as their just customer book
of business. And, and we had to do some quick tutorials and in
around what the program looks like, and continue those on in
early morning sales calls, as they were different program
guidelines changing. So we had an 8:30am call and then we had a
12pm call twice a day while everyone was working at home.
And it was just a recalibration of just what the day is looking
like what the questions are looking like and if there are
any new PPP rules or EIDL rules that we should be letting our
customer base know or that we can be letting them take
advantage of.
Sean Murray: Okay, and how do these customers, how did these
merchants, how did they seem when it came to PPP, were they
confused? where they...
Jared Weitz: A lot of clients were confused at first because
it was just this new program and their depository bank was either
not offering it or just not taking any calls about it. So
there was real confusion and a lot of panic. We spoke to a lot
of people that were super thankful to be able to just put
the application in through us see what their approval amount
looks like. I mean fintech really rang true here into what
we do, it was super beneficial to hear these merchants like oh,
my God, I've been with, you know, my depository bank for 10
years, I can't even get my banker on the phone. And you
guys connected me with this guy. I saw my approval amount, I
uploaded my documents, it was super easy. So it was it was
rewarding, during a really choppy time to be able to help
people that way. And I think it's also what our employees and
staff needed to feel during that time as well, because everything
is so up and down. And they were really getting to feel that
satisfaction from helping people every day. So it was important
for me to not furlough anyone, and to keep everyone working and
keep everyone sane while they were home.
Sean Murray: Right. Wow. So you know, there's going to be post
PPP world. They're talking about, I mean, it's ended
currently, but they're talking about potentially extending it.
And so that obviously bring this back to the regular world of
financial options outside of whatever the government can come
up with. And so I'm curious, since you work, not only with
merchants, customers, borrowers, you work with lender and funder
partners, kind of what you're seeing from that. Have you seen
any? I'm sure you've seen some changes, but have you seen some
not come back? Have you seen some kind of operate at a at a
lower capacity than than before? And are there some that have
returned to somewhat normal? Like what what is the funding
capacity outside of government looking like right now,
Jared Weitz: if I were breaking it up in a pie, I would say that
about 25% of the relationships that we've had before COVID are
not funding anymore. They've just taken a path where they're
not doing that. I'd say another 65% are back to funding. And
they're doing so cautiously. They're changing their
guidelines. You know, let's say they started funding in June,
and they've changed their guidelines to loosen up each
month since that opening, however, they all started, you
know, very cautiously, which which is understandable. Um, and
then I think there's about, call it 10%, or, you know, left that
are really almost operating at full capacity, from what I see,
you know, their offers haven't changed, the pricing hasn't
changed the underwriting speed hasn't. Those guys all happen to
have private lines. I will say that and I think, you know,
having a private line or a private lender, albeit a little
more expensive during this time could have been beneficial. Some
of the guys that securitized weren't having the easiest time
getting started again, the 65% of the lenders that are
operating cautiously, but still funding, they've all shrunken
their teams. And that makes sense in this environment as
well. I think some people have even gotten rid of a lot of
inside sales teams and really focused on operations and
underwriting. We've heard a lot of them are thriving from a work
from home environment, which is really good to hear, you know,
we want to hear that everyone's operational. I always tell my
team, you know, we never want to be the last one standing in the
space, right? Like, that just means it's us. So we want there
to be everyone around and operating. And so it's good to
see more and more of that.
Sean Murray: Have you noticed I'm interested in a second group
that is not operating back to full capacity? Have they been
more selective with who they work with? Because they might be
working with you? Right, but United Capital Source has been
around for a long time. You know, they know of you. But
let's say you're a smaller, lesser known company, or perhaps
not operating within a specific, you know, realm of ethics and
guidelines. Is it harder for others to sign up with these
lenders and funders? Are they being more selective out there?
Jared Weitz: Yeah, absolutely. Each one of the lenders in that
second group that I mentioned, when they restarted their
systems, they had reached out to me and said, you know, we're
only starting with a handful of ISOs right now, we want to
really make sure that the money that we're putting out, keep in
mind, this is probably a lot of equity money now that's being
you know, put back into a company to be able to re-lend,
so we want to make sure that the equity money we're putting in
is, is really being handled with kid gloves. And it's what you're
mentioning, you know, they're reaching out to the brokers that
have been around a long time and have a good reputation. I'm
super thankful to be one of those guys. And to get those
phone calls, it was really beneficial for the group to, you
know, each week say, hey, this guy's back, and this guy's back
up. And, you know, it continues to lift spirits as well. And I
think that you need to keep the spirits high during, you know,
an uncertain time.
Sean Murray: Yeah, that's understandable. So my last
question to you is, what's going to change permanently? If
anything, and you're in sort of, in your own thoughts and ideas?
And what's your prediction for what's going to happen next? A
lot, where are we going from here?
Jared Weitz: So I think that, um, I think there's going to be
a sector of businesses that will continue to do well during this
time, you know, transportation, and e-commerce, any kind of
delivery routes, medical, you know, all of these things have
been able to withstand this time and actually be an essential
business. So I think more essential businesses will
continue to grow and learn to operate, and they'll continue to
hire, and they'll continue to need money. And so those are
folks that you can all help in service, I think there's going
to be up to two out of four restaurants, maybe that don't
make it unfortunately, I think that's an industry that's going
to go through a little bit of a tougher rebuild. The guys that
are going to make it maybe more QSRs (quick service restaurants)
that have delivery, they don't have such a high rent, their
food cost and their staff cost is super fixed. And they really
make their money on outbound deliveries. And so I think that
lenders will continue to follow these trends with businesses.
And it will allow them to come up with aggressive programs for
businesses that are flourishing, it'll allow them to come up with
some shorter term programs for the businesses that may be
facing challenges in the future. And I think that it will
continue this way into 2021 as well, unfortunately, we have an
election coming up. We have no vaccine yet. Even the first year
of vaccine could be pretty wonky. So I think people should
really buckle up. We've told our team like, hey, this is like
boots on the ground for the next year plus right now. And and I
think that's what it's going to look like until possibly toward
the end of 2021, where there's a bit more of an understanding the
things from the election have possibly settled. And then maybe
a restart of how the economy is going to look thereafter.
Sean Murray: Yeah. It just made me think you mentioned that two
out of four restaurants may not make it do you think that some
have held on longer than they normally would have? Because it
had the opportunity if you're in the northern part of the country
to do outdoor dining. And now, now it's September, right. So
it's starting to cool off and there will still be some outdoor
dining, and states like New York trying to relieve some of those
restrictions. But once we get to November, December, you know,
outdoor dining is is gone. So do you think that we could see a
further drop off kind of as the year goes off, in the
restaurants?
Jared Weitz: You know, they actually estimate that one in
every four restaurants is going to drop off. I'm saying it's
going to be two. So I'm actually going higher based upon what
you're just mentioning. And I would also just dovetail into
saying, landlords have given six to eight month reprieves to a
lot of restaurants during this time, and that term is going to
end soon. So you're going to go back to having to pay whatever
rent while you're at 25 to 35% capacity and serving, and it's
going to be a little more difficult for fine dining or,
you know, catering halls or bigger, you know, places like
that to have a larger staff or to have a higher rent.
Sean Murray: I appreciate that very much . Everybody that was
Jared Weitz with United Capital Source. Thank you, Jared.
Jared Weitz: Thanks, Sean.