1 00:00:05.310 --> 00:00:08.010 Sean Murray: Okay, hello, everybody, I'm back here. My 2 00:00:08.010 --> 00:00:10.350 name is Sean Murray with deBanked News and today I have 3 00:00:10.350 --> 00:00:13.530 Jared Weitz, who is the CEO of United Capital Source. Thank you 4 00:00:13.530 --> 00:00:14.430 for being here Jared. 5 00:00:14.940 --> 00:00:15.870 Jared Weitz: Thanks for having me, Sean. 6 00:00:16.350 --> 00:00:19.230 Sean Murray: No problem. So I want to get right to it. You've 7 00:00:19.230 --> 00:00:22.770 spoken at several of our events before, and you've even graced 8 00:00:22.800 --> 00:00:25.860 the cover of our magazine, as you might see in the background. 9 00:00:26.520 --> 00:00:29.280 And for those who don't know you, could you give us a little 10 00:00:29.280 --> 00:00:32.670 bit of a brief background of yourself and your work in the 11 00:00:32.670 --> 00:00:33.300 industry? 12 00:00:33.870 --> 00:00:37.230 Jared Weitz: Yeah, absolutely. I've been involved in the MCA 13 00:00:37.230 --> 00:00:42.960 and alternative lending space since 2006, at positions and 14 00:00:42.960 --> 00:00:46.110 underwriting and business development. But most notably, 15 00:00:47.100 --> 00:00:51.870 the start of United capital source in 2011, is I think, 16 00:00:51.870 --> 00:00:55.710 where I've made the most history in the space. We operate a very 17 00:00:55.830 --> 00:01:00.720 small sales team of 10 to 12 people, I've never really had 18 00:01:00.720 --> 00:01:03.900 more than that at any one time. However, we've always been able 19 00:01:03.900 --> 00:01:07.650 to hit fairly large numbers through really good marketing 20 00:01:07.650 --> 00:01:11.340 and technology. And I think, aside from really being a 21 00:01:11.340 --> 00:01:14.880 broker, we're most notably a marketing company that happens 22 00:01:14.880 --> 00:01:19.590 to be able to broker these deals as well. We've so far done close 23 00:01:19.590 --> 00:01:21.270 to a billion dollars in brokerage. 24 00:01:22.620 --> 00:01:26.760 Sean Murray: Wow. Okay. So as a broker, this is my first 25 00:01:26.760 --> 00:01:30.420 question to you. Um, it sounds like you work with merchants 26 00:01:30.510 --> 00:01:34.920 directly. Right? So you're on the front lines of it all. And 27 00:01:35.100 --> 00:01:38.430 I'm curious, have you seen any changes in in borrower behavior 28 00:01:38.430 --> 00:01:41.190 and merchant behavior? This is obviously an interesting year. 29 00:01:41.670 --> 00:01:45.420 And have you noticed the, the way that they operate or act? 30 00:01:45.570 --> 00:01:46.680 Has it changed at all? 31 00:01:47.650 --> 00:01:50.920 Jared Weitz: You know, I think that there's been a heavy amount 32 00:01:50.920 --> 00:01:55.960 of caution in the very beginning of the COVID months of March, 33 00:01:55.990 --> 00:02:00.850 April and May, we've seen that continued caution through June. 34 00:02:00.880 --> 00:02:05.470 And it started to lighten up a little bit in July, where 35 00:02:05.650 --> 00:02:08.350 businesses were really understanding and getting used 36 00:02:08.350 --> 00:02:12.370 to what their actual revenues were looking like for the year, 37 00:02:12.580 --> 00:02:16.660 there was hyper caution from business owners with just not 38 00:02:16.660 --> 00:02:19.330 understanding what their revenue would look like. And it's really 39 00:02:19.330 --> 00:02:21.820 difficult to make a decision on what type of financing to take 40 00:02:21.820 --> 00:02:24.670 when you don't know that. And so in the beginning months, we were 41 00:02:24.670 --> 00:02:30.760 really just focused on PPP and EIDL loans. We had our whole 42 00:02:30.760 --> 00:02:34.120 sales team really just focused on holding down our existing 43 00:02:34.120 --> 00:02:37.900 book of business, and then we automated our PPP side. So we 44 00:02:37.900 --> 00:02:43.720 processed about 3,500 PPP loans. The average loan was about 45 00:02:43.720 --> 00:02:48.070 $67,000. And we did that through our fintech partners, kabbage, 46 00:02:48.070 --> 00:02:50.410 veem, and bluevine. We're really thankful for those 47 00:02:50.410 --> 00:02:53.290 relationships, we worked directly with the SBA on the 48 00:02:53.320 --> 00:02:57.940 EIDL side, we've probably done about 100 or 150 of those now, 49 00:02:58.660 --> 00:03:01.660 they've been really helpful to the clients that we've been able 50 00:03:01.660 --> 00:03:05.290 to connect them with. And we've also been able to use that as an 51 00:03:05.290 --> 00:03:07.780 acquisition tool to just further chat with them about what their 52 00:03:07.780 --> 00:03:13.150 further needs might be. Because there's been more caution on the 53 00:03:13.540 --> 00:03:18.670 business owner side, what we've seen is business owners taking a 54 00:03:18.670 --> 00:03:21.400 little bit less than they qualify for, and really, really 55 00:03:21.400 --> 00:03:24.370 making sure that they're putting the funding to good use. Not 56 00:03:24.370 --> 00:03:26.560 that they weren't before, but because revenue was so 57 00:03:26.560 --> 00:03:29.860 predictable before, someone could say, Hey, I can take an 58 00:03:29.860 --> 00:03:32.650 extra 10. And I can do this or this with it. Now what we're 59 00:03:32.650 --> 00:03:35.740 seeing is someone that's approved for 50, taking 20 right 60 00:03:35.740 --> 00:03:40.630 now, really having that need for it, and then coming back and and 61 00:03:40.660 --> 00:03:42.790 you know, pulling the rest of it in this example, it would be 62 00:03:42.790 --> 00:03:45.970 like a line of credit that we're connecting them with. So we're 63 00:03:46.000 --> 00:03:49.270 really just seeing some cautious behavior. But I think that's, I 64 00:03:49.270 --> 00:03:51.820 think it's a good sign for the lenders, because I think that it 65 00:03:51.820 --> 00:03:55.450 means that the business owner will really, really focus on 66 00:03:55.450 --> 00:03:56.650 what that payback looks like. 67 00:03:58.480 --> 00:04:00.460 Sean Murray: So you know, I'm curious about your experience 68 00:04:00.460 --> 00:04:04.240 with PPP, you say that you automated it, but I imagine you 69 00:04:04.240 --> 00:04:09.610 must have had customers call you to talk to someone about it. 70 00:04:10.570 --> 00:04:11.050 Jared Weitz: Yeah. 71 00:04:11.080 --> 00:04:12.310 Sean Murray: has that happened, right? 72 00:04:12.660 --> 00:04:16.830 Jared Weitz: So yeah, we had all of our new sales reps, fielding 73 00:04:16.830 --> 00:04:20.430 those customer service calls in between, you know, working 74 00:04:20.430 --> 00:04:23.970 whatever funding they had, as well as their just customer book 75 00:04:23.970 --> 00:04:28.110 of business. And, and we had to do some quick tutorials and in 76 00:04:28.110 --> 00:04:32.100 around what the program looks like, and continue those on in 77 00:04:32.100 --> 00:04:35.700 early morning sales calls, as they were different program 78 00:04:35.700 --> 00:04:40.890 guidelines changing. So we had an 8:30am call and then we had a 79 00:04:40.890 --> 00:04:43.890 12pm call twice a day while everyone was working at home. 80 00:04:44.040 --> 00:04:47.370 And it was just a recalibration of just what the day is looking 81 00:04:47.370 --> 00:04:49.500 like what the questions are looking like and if there are 82 00:04:49.500 --> 00:04:54.690 any new PPP rules or EIDL rules that we should be letting our 83 00:04:54.690 --> 00:04:58.200 customer base know or that we can be letting them take 84 00:04:58.200 --> 00:04:58.800 advantage of. 85 00:05:00.160 --> 00:05:03.160 Sean Murray: Okay, and how do these customers, how did these 86 00:05:03.160 --> 00:05:07.690 merchants, how did they seem when it came to PPP, were they 87 00:05:07.690 --> 00:05:09.550 confused? where they... 88 00:05:09.360 --> 00:05:12.960 Jared Weitz: A lot of clients were confused at first because 89 00:05:13.260 --> 00:05:16.800 it was just this new program and their depository bank was either 90 00:05:16.800 --> 00:05:21.480 not offering it or just not taking any calls about it. So 91 00:05:21.480 --> 00:05:27.210 there was real confusion and a lot of panic. We spoke to a lot 92 00:05:27.210 --> 00:05:30.510 of people that were super thankful to be able to just put 93 00:05:30.510 --> 00:05:33.960 the application in through us see what their approval amount 94 00:05:33.960 --> 00:05:38.580 looks like. I mean fintech really rang true here into what 95 00:05:38.580 --> 00:05:42.360 we do, it was super beneficial to hear these merchants like oh, 96 00:05:42.360 --> 00:05:45.780 my God, I've been with, you know, my depository bank for 10 97 00:05:45.810 --> 00:05:49.050 years, I can't even get my banker on the phone. And you 98 00:05:49.050 --> 00:05:51.300 guys connected me with this guy. I saw my approval amount, I 99 00:05:51.300 --> 00:05:54.300 uploaded my documents, it was super easy. So it was it was 100 00:05:54.480 --> 00:05:58.500 rewarding, during a really choppy time to be able to help 101 00:05:58.770 --> 00:06:02.610 people that way. And I think it's also what our employees and 102 00:06:02.610 --> 00:06:06.150 staff needed to feel during that time as well, because everything 103 00:06:06.150 --> 00:06:10.440 is so up and down. And they were really getting to feel that 104 00:06:10.440 --> 00:06:13.200 satisfaction from helping people every day. So it was important 105 00:06:13.200 --> 00:06:16.530 for me to not furlough anyone, and to keep everyone working and 106 00:06:16.560 --> 00:06:18.330 keep everyone sane while they were home. 107 00:06:19.860 --> 00:06:23.910 Sean Murray: Right. Wow. So you know, there's going to be post 108 00:06:23.940 --> 00:06:26.220 PPP world. They're talking about, I mean, it's ended 109 00:06:26.220 --> 00:06:28.740 currently, but they're talking about potentially extending it. 110 00:06:29.250 --> 00:06:33.720 And so that obviously bring this back to the regular world of 111 00:06:33.990 --> 00:06:37.710 financial options outside of whatever the government can come 112 00:06:37.710 --> 00:06:40.680 up with. And so I'm curious, since you work, not only with 113 00:06:40.920 --> 00:06:45.060 merchants, customers, borrowers, you work with lender and funder 114 00:06:45.060 --> 00:06:49.590 partners, kind of what you're seeing from that. Have you seen 115 00:06:49.590 --> 00:06:55.020 any? I'm sure you've seen some changes, but have you seen some 116 00:06:55.050 --> 00:06:59.790 not come back? Have you seen some kind of operate at a at a 117 00:06:59.790 --> 00:07:03.780 lower capacity than than before? And are there some that have 118 00:07:03.780 --> 00:07:06.720 returned to somewhat normal? Like what what is the funding 119 00:07:06.720 --> 00:07:09.510 capacity outside of government looking like right now, 120 00:07:10.350 --> 00:07:14.820 Jared Weitz: if I were breaking it up in a pie, I would say that 121 00:07:15.030 --> 00:07:22.890 about 25% of the relationships that we've had before COVID are 122 00:07:22.890 --> 00:07:26.010 not funding anymore. They've just taken a path where they're 123 00:07:26.010 --> 00:07:33.330 not doing that. I'd say another 65% are back to funding. And 124 00:07:33.330 --> 00:07:37.080 they're doing so cautiously. They're changing their 125 00:07:37.080 --> 00:07:41.250 guidelines. You know, let's say they started funding in June, 126 00:07:41.400 --> 00:07:44.760 and they've changed their guidelines to loosen up each 127 00:07:44.760 --> 00:07:48.690 month since that opening, however, they all started, you 128 00:07:48.690 --> 00:07:52.530 know, very cautiously, which which is understandable. Um, and 129 00:07:52.530 --> 00:08:00.570 then I think there's about, call it 10%, or, you know, left that 130 00:08:00.840 --> 00:08:03.630 are really almost operating at full capacity, from what I see, 131 00:08:03.660 --> 00:08:06.240 you know, their offers haven't changed, the pricing hasn't 132 00:08:06.240 --> 00:08:11.250 changed the underwriting speed hasn't. Those guys all happen to 133 00:08:11.280 --> 00:08:15.810 have private lines. I will say that and I think, you know, 134 00:08:15.810 --> 00:08:19.110 having a private line or a private lender, albeit a little 135 00:08:19.110 --> 00:08:22.350 more expensive during this time could have been beneficial. Some 136 00:08:22.350 --> 00:08:25.230 of the guys that securitized weren't having the easiest time 137 00:08:25.230 --> 00:08:28.980 getting started again, the 65% of the lenders that are 138 00:08:28.980 --> 00:08:33.600 operating cautiously, but still funding, they've all shrunken 139 00:08:33.600 --> 00:08:37.890 their teams. And that makes sense in this environment as 140 00:08:37.890 --> 00:08:40.350 well. I think some people have even gotten rid of a lot of 141 00:08:40.350 --> 00:08:42.600 inside sales teams and really focused on operations and 142 00:08:42.600 --> 00:08:46.500 underwriting. We've heard a lot of them are thriving from a work 143 00:08:46.500 --> 00:08:49.620 from home environment, which is really good to hear, you know, 144 00:08:49.620 --> 00:08:53.730 we want to hear that everyone's operational. I always tell my 145 00:08:53.730 --> 00:08:55.920 team, you know, we never want to be the last one standing in the 146 00:08:55.920 --> 00:08:59.220 space, right? Like, that just means it's us. So we want there 147 00:08:59.220 --> 00:09:02.550 to be everyone around and operating. And so it's good to 148 00:09:02.700 --> 00:09:03.840 see more and more of that. 149 00:09:05.250 --> 00:09:07.440 Sean Murray: Have you noticed I'm interested in a second group 150 00:09:07.500 --> 00:09:11.100 that is not operating back to full capacity? Have they been 151 00:09:11.100 --> 00:09:14.700 more selective with who they work with? Because they might be 152 00:09:14.700 --> 00:09:17.130 working with you? Right, but United Capital Source has been 153 00:09:17.130 --> 00:09:21.480 around for a long time. You know, they know of you. But 154 00:09:21.720 --> 00:09:25.710 let's say you're a smaller, lesser known company, or perhaps 155 00:09:25.800 --> 00:09:32.130 not operating within a specific, you know, realm of ethics and 156 00:09:32.130 --> 00:09:35.820 guidelines. Is it harder for others to sign up with these 157 00:09:35.820 --> 00:09:38.280 lenders and funders? Are they being more selective out there? 158 00:09:38.510 --> 00:09:42.620 Jared Weitz: Yeah, absolutely. Each one of the lenders in that 159 00:09:42.620 --> 00:09:44.990 second group that I mentioned, when they restarted their 160 00:09:44.990 --> 00:09:47.600 systems, they had reached out to me and said, you know, we're 161 00:09:47.600 --> 00:09:50.360 only starting with a handful of ISOs right now, we want to 162 00:09:50.360 --> 00:09:53.960 really make sure that the money that we're putting out, keep in 163 00:09:53.960 --> 00:09:56.390 mind, this is probably a lot of equity money now that's being 164 00:09:57.020 --> 00:09:59.540 you know, put back into a company to be able to re-lend, 165 00:09:59.540 --> 00:10:01.730 so we want to make sure that the equity money we're putting in 166 00:10:01.730 --> 00:10:04.970 is, is really being handled with kid gloves. And it's what you're 167 00:10:04.970 --> 00:10:06.500 mentioning, you know, they're reaching out to the brokers that 168 00:10:06.500 --> 00:10:09.980 have been around a long time and have a good reputation. I'm 169 00:10:10.160 --> 00:10:12.560 super thankful to be one of those guys. And to get those 170 00:10:12.560 --> 00:10:15.950 phone calls, it was really beneficial for the group to, you 171 00:10:15.950 --> 00:10:18.260 know, each week say, hey, this guy's back, and this guy's back 172 00:10:18.260 --> 00:10:22.250 up. And, you know, it continues to lift spirits as well. And I 173 00:10:22.250 --> 00:10:25.400 think that you need to keep the spirits high during, you know, 174 00:10:25.430 --> 00:10:26.180 an uncertain time. 175 00:10:27.360 --> 00:10:30.450 Sean Murray: Yeah, that's understandable. So my last 176 00:10:30.450 --> 00:10:34.830 question to you is, what's going to change permanently? If 177 00:10:34.830 --> 00:10:39.450 anything, and you're in sort of, in your own thoughts and ideas? 178 00:10:39.450 --> 00:10:42.480 And what's your prediction for what's going to happen next? A 179 00:10:42.480 --> 00:10:43.680 lot, where are we going from here? 180 00:10:44.740 --> 00:10:48.640 Jared Weitz: So I think that, um, I think there's going to be 181 00:10:48.730 --> 00:10:55.690 a sector of businesses that will continue to do well during this 182 00:10:55.690 --> 00:11:01.510 time, you know, transportation, and e-commerce, any kind of 183 00:11:01.510 --> 00:11:05.560 delivery routes, medical, you know, all of these things have 184 00:11:05.620 --> 00:11:09.250 been able to withstand this time and actually be an essential 185 00:11:09.250 --> 00:11:12.550 business. So I think more essential businesses will 186 00:11:12.550 --> 00:11:15.850 continue to grow and learn to operate, and they'll continue to 187 00:11:15.850 --> 00:11:18.940 hire, and they'll continue to need money. And so those are 188 00:11:18.940 --> 00:11:21.910 folks that you can all help in service, I think there's going 189 00:11:21.910 --> 00:11:25.990 to be up to two out of four restaurants, maybe that don't 190 00:11:25.990 --> 00:11:30.310 make it unfortunately, I think that's an industry that's going 191 00:11:30.310 --> 00:11:33.850 to go through a little bit of a tougher rebuild. The guys that 192 00:11:33.850 --> 00:11:36.760 are going to make it maybe more QSRs (quick service restaurants) 193 00:11:36.760 --> 00:11:39.970 that have delivery, they don't have such a high rent, their 194 00:11:39.970 --> 00:11:43.840 food cost and their staff cost is super fixed. And they really 195 00:11:43.840 --> 00:11:49.660 make their money on outbound deliveries. And so I think that 196 00:11:49.660 --> 00:11:52.600 lenders will continue to follow these trends with businesses. 197 00:11:52.900 --> 00:11:56.140 And it will allow them to come up with aggressive programs for 198 00:11:56.140 --> 00:11:58.510 businesses that are flourishing, it'll allow them to come up with 199 00:11:58.510 --> 00:12:02.380 some shorter term programs for the businesses that may be 200 00:12:02.620 --> 00:12:06.010 facing challenges in the future. And I think that it will 201 00:12:06.010 --> 00:12:10.810 continue this way into 2021 as well, unfortunately, we have an 202 00:12:10.810 --> 00:12:15.160 election coming up. We have no vaccine yet. Even the first year 203 00:12:15.160 --> 00:12:18.010 of vaccine could be pretty wonky. So I think people should 204 00:12:18.010 --> 00:12:22.330 really buckle up. We've told our team like, hey, this is like 205 00:12:22.330 --> 00:12:26.980 boots on the ground for the next year plus right now. And and I 206 00:12:26.980 --> 00:12:30.910 think that's what it's going to look like until possibly toward 207 00:12:30.910 --> 00:12:34.270 the end of 2021, where there's a bit more of an understanding the 208 00:12:34.300 --> 00:12:38.800 things from the election have possibly settled. And then maybe 209 00:12:38.800 --> 00:12:42.910 a restart of how the economy is going to look thereafter. 210 00:12:42.000 --> 00:12:46.740 Sean Murray: Yeah. It just made me think you mentioned that two 211 00:12:46.740 --> 00:12:49.560 out of four restaurants may not make it do you think that some 212 00:12:49.560 --> 00:12:52.740 have held on longer than they normally would have? Because it 213 00:12:52.740 --> 00:12:55.200 had the opportunity if you're in the northern part of the country 214 00:12:55.410 --> 00:12:59.730 to do outdoor dining. And now, now it's September, right. So 215 00:12:59.730 --> 00:13:01.980 it's starting to cool off and there will still be some outdoor 216 00:13:01.980 --> 00:13:06.030 dining, and states like New York trying to relieve some of those 217 00:13:06.030 --> 00:13:09.390 restrictions. But once we get to November, December, you know, 218 00:13:09.390 --> 00:13:14.370 outdoor dining is is gone. So do you think that we could see a 219 00:13:14.460 --> 00:13:17.700 further drop off kind of as the year goes off, in the 220 00:13:17.700 --> 00:13:18.570 restaurants? 221 00:13:20.430 --> 00:13:22.980 Jared Weitz: You know, they actually estimate that one in 222 00:13:22.980 --> 00:13:25.980 every four restaurants is going to drop off. I'm saying it's 223 00:13:25.980 --> 00:13:29.730 going to be two. So I'm actually going higher based upon what 224 00:13:29.730 --> 00:13:33.900 you're just mentioning. And I would also just dovetail into 225 00:13:33.900 --> 00:13:39.000 saying, landlords have given six to eight month reprieves to a 226 00:13:39.000 --> 00:13:42.390 lot of restaurants during this time, and that term is going to 227 00:13:42.420 --> 00:13:46.080 end soon. So you're going to go back to having to pay whatever 228 00:13:46.080 --> 00:13:51.360 rent while you're at 25 to 35% capacity and serving, and it's 229 00:13:51.360 --> 00:13:55.350 going to be a little more difficult for fine dining or, 230 00:13:55.380 --> 00:13:58.890 you know, catering halls or bigger, you know, places like 231 00:13:58.890 --> 00:14:03.750 that to have a larger staff or to have a higher rent. 232 00:14:04.710 --> 00:14:07.500 Sean Murray: I appreciate that very much . Everybody that was 233 00:14:07.500 --> 00:14:10.380 Jared Weitz with United Capital Source. Thank you, Jared. 234 00:14:10.560 --> 00:14:11.130 Jared Weitz: Thanks, Sean.