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Sean Murray: I'm Sean Murray.

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Johny Fernandez: And I'm Johnny
Fernandez and this guy he's

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decked out for Christmas.

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Sean Murray: I'm feeling very
festive right now. I'm wearing

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black because I'm really getting
into the holiday spirit. Really?

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It's like a Christmas funeral
over here. I love it. Yeah.

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Johny Fernandez: I hate
Christmas.

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Sean Murray: You well you dress
like the Grinch, so I'm not

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surprised.

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Johny Fernandez: Well, you're
all decked out. Happy holidays.

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Sean Murray: Happy holidays,
Johnny. How are they? Yeah

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Johny Fernandez: So what are you
supposed to be?

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Sean Murray: What am I supposed
to be? A gift? Oh, I didn't

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know. This isn't like a costume.
Like how am I gift this year?

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No, I just threw some garlins
around me, you know, getting in

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the Spirit. And yeah, I do have
some regrets, though. It's a

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little itchy. Yeah,

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Johny Fernandez: You want to
take it off?

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Sean Murray: Let's just Let's
just go. Let's see what happens.

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Johny Fernandez: All right, so
let's just dive straight in. So

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we're gonna we're gonna we have
a couple of different

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conversations. That's gonna that
are gonna happen. But first and

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foremost, excited to be back.
It's been a great year. It's

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pretty. It's been a great year.

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Sean Murray: It's been great. I
don't know if it's been great. I

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think it's been

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Johny Fernandez: I think I'm
still riding the high of Broker

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Fair. That's got to be Yeah. So

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Sean Murray: I'd say it wasn't
the greatest year. You know, for

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a lot of people, but I'm right.
That Broker Fair Broker Fair in

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person. Okay, it is ending off
on a high note, I will give you

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that. It is ending off on a high
note. But I think a lot of 2021

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felt like a something of a
repeat of 2020. And it feels

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like it is turning around. Or
we're not quite out of all of

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it. Just just yet.

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Johny Fernandez: Yeah, that's
true. Alright, but to get to

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better news, let's, let's talk
about a couple of things going

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on in the industry. Okay.
Alright. So first things we're

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gonna talk about Balboa Capital,
it was recently acquired by

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amorous Bancorp, so little bit
break down Balboa Capital, they

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provide business lending
solution to small and midsize

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mid sized businesses around the
country. So what does this

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acquisition mean? So it's a it
will essentially be acquired by

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Amherst bank. And pretty much
increase your presence in the

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growing point of sale, finance
in the sales financing market, a

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diversified portfolio. So a
little bit of background about

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Balboa, it's a 30 year, it's
been around for about 30 years

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give or take capital of
technology and Amherst experts

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bank they expect a significant
earning from their core

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operating strategy with Balboa.
So they're pretty much looking

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for Balboa to really help them
out. On on the tech side, really

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just kind of get that moving and
get that going. Yeah, for by

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farming Balboa capital.

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Sean Murray: Yeah, it's kind of
a nice way to end the year in

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acquisition. It's by a bank. For
a long time we've been talking

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on here about how we're kind of
returning back to banking.

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Johny Fernandez: Yeah, We're re
we're banking, it's a cycle is

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it's going back again, and then
in a couple years, someone's

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gonna be like, hey, I really
discovered this really cool

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thing. Yeah. And it's, I

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Sean Murray: Have a new idea.
We're going to work outside of

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banking.

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Johny Fernandez: But yeah, I
feel like that comment kind of

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hurts my feelings a little bit
sometimes. Because I think I'm

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part of that generation that's
like, oh, my God, I discovered

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this new thing, put it into
play, and then you find out

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someone else did

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Sean Murray: it, or someone else
has been doing it for like, 30

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years. Yeah. Good one. Yeah. But
it's a it's a nice, nice way to

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end the year for Balboa Capital.
Congratulations to them on that

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news. We posted a link to it on
our website. And you know,

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they're they're pretty
significant in the equipment,

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finance, space. And I think it's
a positive sign for everyone who

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works in the in the small
business finance industry,

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regardless that a bank would
find Balboa an attractive acquisition.

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Johny Fernandez: Yeah, I think
it's interesting, because part

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of the acquisition, it's going
to increase Bancorp's presence

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in the fast growing point of
sale, financing markets. So I

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mean, they're really latching on
and really trying to see the

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benefit of acquiring something
like Balboa Capital. The next

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type of conversation,
QuickBooks, we've talked about

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QuickBooks, QuickBooks before,
but they're on their way to

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surpass pretty much the
financials their financials is

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gonna surpass previous years.
They're on they're on that

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trajectory. So we review their
fiscal year from 2019. best year

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ever. 316,000,0 2020. They went
243,000,0 2022. They're at 230

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$32 million.

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Sean Murray: So let's, let's,
let's just back it up and why it

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might be confusing because
they're, like you said they're

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on a fiscal year calendar. So
their 2021 ended June 30. That

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was when their 2021 financials
were completed. So they're in

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their fiscal year 2022. Now
right now, yeah, so that's where

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it can kind of get confusing.
They released their first

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quarter of fiscal year 2022. And
that number, this is small

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business loan originations.
QuickBooks Capital course is

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part of Intuit. This is a very
large company. And you can

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imagine the advantage they have
by having the QuickBooks

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software because so many small
business owners around the

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country rely on QuickBooks to do
their all their bookkeeping. So

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QuickBooks capital, their their
funding arm of the company in

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the first quarter of fiscal year
2022. They originated $125

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million with a small business
loans. And that's, that's

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obvious. That's already half the
volume of what they did in the

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whole previous fiscal year. This
is just one quarter. You

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mentioned before, they're 2019.
Fiscal Year was 316 million.

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That's for the entire year.
Yeah. So QuickBooks capital, if

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you just multiply their
quarterly number, by four,

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you're gonna get about 500
million. So they're, you know,

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we'll see what happens. Yeah,
but they're on pace for their

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their largest year ever. I'd say
that's a very bullish, bullish

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sign. COVID did slow them down.
Don't quote me on this

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particular number. But I was
comparing the $125 million that

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they did in this previous
quarter, to the same period in

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the, in the prior year. A lot of
times people look at quarter on

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quarter, because businesses are
cyclical, they can't always look

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at the past quarter, you can't
say, well, Q3 was worse than Q2,

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therefore, it must mean
something is wrong with the

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company, it could just, you
know, mean, the seasonality is

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what caused that. So people like
to look at quarter on quarter,

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you know, same period of the
same period. And if I recall

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correctly, QuickBooks capital
had only originated like $11

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million, with a small business
loans in the same period in the

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previous year. Granted, that was
the height of COVID. So it's no

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surprise that they scaled back.
But that's quite a scale back to

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go to $11 million, for a
quarter. Yep. And then to ramp

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that back up to $125 million for
a quarter. That's very that's

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it. I mean, that's, that's
major, it shows that QuickBooks

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Capital is feeling very
confident in the the prospects

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going forward, that they've
ramped their business lending

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operation, not only back to
where it was, but to a level

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that has higher than they've
ever done historically. And just

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another just another thing to
bring up on all this is that

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here the perfect example of a
tech company that's come into

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the small business lending
market, and just made a major

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splash. They came in late to the
game. Yeah, right. So many of

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your competitors have been in it
for more than 10 years. But what

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they have the advantage of they
already have, they already have

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scale. And they already have the
infrastructure in place where

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every small business in the
country is essentially using the

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software. Everyone needs.
Everyone uses QuickBooks. So if

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you were if you're a small
business lender, I would imagine

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that you would probably feel
quite threatened by QuickBooks

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capital, given that their
accounting software you know,

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they're they're a system that's
in every every business, you can

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just go and click the you know,
the funding button and apply for

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capital and get it quickly
because QuickBooks already has

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access to all your bookkeeping.
Yeah. So yeah.

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Johny Fernandez: Well, and even
adds like, either you're an

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independent contractor or you
want to do something as opposed

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to like, look at your credit,
merge with intuit intuit

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QuickBooks like you don't you?
Don't even i

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Sean Murray: Yeah, you know,
among all the tech companies,

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QuickBook Capital is still on
the smaller side, they're not as

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big as PayPal or Square just
quite yet when it comes to the

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small business lending volume.
But I think that they will get

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there. Undoubtedly, because of
the advantage they have. I

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thought it was kind of curious.
I looked at the I listened to

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the earnings call that took
place every time company listed

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their quarterly figures, they do
an earnings call. And I was

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surprised and maybe I missed it.
But I was surprised to have not

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heard any questions about their
small business lending

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operation, maybe because in the
in the grand scheme of Intuit,

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which is such a large company,
they recently acquired

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MailChimp, they acquired Credit
Karma. So they got a lot of

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things going on. Yeah, and
QuickBooks is also is massive

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for the fact that they only did
$125 million in a quarter small

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business loans might have just
been something that's just too

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insignificant in the grand
scheme of things. None of the

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analysts and none of the
analysts on the call asked any

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questions about their QuickBooks
Capital business. In fact,

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that's why I had to do like a
double A double check of the

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numbers because I'm like, Hey,
this is a significant ramp up

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Yeah, right. This and it's stuff
it's stuff that we would write

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about things that we care about.
Yeah. But it seemed that nobody

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else found it significant enough
compared to the entire thing

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they own MailChimp Intuit owns
MailChimp, I have MailChimp

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account. See, I mean, think
about how powerful that is. If

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you if you have a small business
lending operation, if a business

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is using MailChimp, boom, that's
an opportunity for QuickBooks

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Capital jump in these QuickBooks
software. There's an opportunity

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they use Credit Karma if you're
you know, your business owner,

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your see you you are already
halfway into you. If you're a

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business owner halfway into
using QuickBooks for to get a

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loan right there. They already
have they already have you as

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the customer. But they

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Johny Fernandez: Also set up the
platform. So you can pretty much

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do like an ala carte servicing,
you know, pick and choose versus

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like only having one and then
going to go elsewhere to get all

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these different services. It's
all there. Yeah.

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Sean Murray: And you already
have a relationship with these

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companies. So if you're worried
about Who can I trust? Yeah.

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Because that's, that's a whole
part. That's a huge part of the

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transaction. If if two companies
are kind of offering things, you

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know, that at the same rate, or
whatever, and once someone

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called you on the phone, and
another say Credit Karma,

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MailChimp or QuickBooks, well,
you already have that

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established trust, they're not
going to screw me over, I'm

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already their customer. They're
a big company. That's what

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Johny Fernandez: I feel like,
with my bank, for example, I

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think, you know, or just any
service that you already have a

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relationship with you
automatically. They have

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everything. It's easy.

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Sean Murray: They have
everything. Yeah, so that's,

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that's what makes QuickBook's
Capital dangerous. So if you're

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looking at the number, and
you're like, showing, it's only

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$125 million for the quarter
it's big, but it's not massive,

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you have to worry what the
potential threat is down the

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road. Yeah, by them having that
access. And that existing

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relationship with customers, I
think time is proving that

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companies that had that
advantage, are just in a

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position to win long term, like
square square, for example, the

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fact that they're already the
the point of sale system for so

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many companies out there, and
they can just go on there and

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press the get capital button.
And if you enter into some type

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of recession, and the lending
business just comes to a

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screeching halt. Yeah, they have
the they're diversified. In

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another another thing, yeah,
that that keeps everything

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going. If you're a lender, and,
and nothing else. I understand

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that, you know, not everyone has
to be all things. But you could

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be at a at an inherent
disadvantage. Yeah. When things

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kind of go wrong, like, like a
COVID. You know, what I mean? Or

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like a, like a financial crisis
that Oh, ages stuff. So if you

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had the capability of becoming
of diversifying your product

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line, I don't just mean like,
another another loan product,

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you know, these people like we
have some new products. Yeah,

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right. We do another loan,
that's like, one, you know, 1%,

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cheaper than the other loan.
It's not a different product.

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Yeah, it's the same product, but
we're talking about like, adding

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a different almost like a
different vertical, yeah, to

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your business. And then, and
then the loans becomes a value

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add, where you don't have to
have an acquisition cost to

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finding a loan customer, because
you already have them as a

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customer to something else, just
just things to think about and

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chew on out there.

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Johny Fernandez: For sure. And
it's it's, I just think the fact

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that they have different
platforms, essentially, that's

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going to give them the leg up
regardless. Because they have

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think about like how many people
use just their services in

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general, how many businesses,
you know, customer they just

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acquire by just being in that
space alone. Mm hmm. That's my

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Sure. So. So the next thing
we're gonna talk about is IOU,

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not IOU. You know, the company.
They announced that they will be

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Sean Murray: doing 24 months 24
month loans. Yeah, that's okay.

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Johny Fernandez: 24 months
loans. But there's actually news

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from the follow up from back in
August, when they announced that

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they were doing cash back loans.
So the range for these loans are

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going to be anywhere from
300,000 to 600,000. And some

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requirements, you know, the
requirements are things like you

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have to you have to have been in
business for seven years, and

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they'll give you rewards, if you
have like, high credit score,

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etc.

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Sean Murray: Yeah. So, yeah, I
think the you know, the only

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significant part of the news. I
mean, the news was the 24 month

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product, there has for a long
time been a great interest and

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being able to offer longer term
loans to small business

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customers. Yeah, I think that's
one of the complaints that is

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often heard is that the payment
terms are too short term. You

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know, if you have all these
players in the market, and

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they're all They're all offering
things that are essentially one

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year or last, right. Plenty of
plenty of them do like 18

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months. And so but I think
there's a tendency to focus on

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on the products that are like
six to 12 months like, why can't

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we do longer? And if you're a
loan broker, you would love to

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have that in your back pocket to
be like, I can give you a 30

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year loan. Yeah. Right. Because
it sounds so much better than

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saying you have to pay this back
in like six months, or like a

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year. Yeah. Because that's gonna
create some type of cash flow,

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which, you know, constraint on
that business now has a budget,

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six months to 12 months worth of
payments, versus something

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longer term. So if you're if
you're a business loan broker,

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you're always pushing for longer
terms, because you know, it'd be

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easier to sell the product.
Yeah, the challenge with really

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going out beyond 24 months is
that you're now subject to this

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so many fluctuations in the
market. Yeah, there was a there,

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there have been a couple
business lenders that have come

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in and looked at the small
business lending market and

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said, Why is everyone doing six
months? 12 months? Yeah, loans.

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You know, we're going to be
geniuses, and we're going to do

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five year loans and seven year
loans. Yeah, to help the

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merchant to help the customer.
Right? No, like, we're so smart.

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I don't know why I'm fixing it.
As if it has to be perfect.

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Yeah, it's just literally just
threw it out. Yeah, I'm like

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this to be adjusted right. But
they come in, and they're like,

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Well, we're so smart, we're
gonna help the customer, we're

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going to do these longer term
loans. And the problem is, is

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that so much can happen to that
business? In five years? If

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you're giving money to a
restaurant, you have to realize

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that the likelihood that of a
rest a restaurant even serve

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surviving five years, yeah, is
low. It's definitely it's

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doable,

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Johny Fernandez: But it's low.
And the fact is, well, a perfect

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example of these guys that
started in 2020, they, you know,

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they were ready to start a
business, or whatever, something

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like COVID hits.

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Sean Murray: Yeah, and then and
then this is gone, right? So

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even if there's no disaster, the
prospect for a restaurant to

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last a long period of time is
already low. Yeah. So to give

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them a loan for, say, five
years, and obviously it can be

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done. But but it becomes very
difficult to do at scale when

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you're just relying on FinTech.
And it was like, you know, the,

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the algorithm says, I can do it,
right. And you're like, wait a

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00:16:27.580 --> 00:16:32.680
minute, time goes by and things
just have a way of changing that

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restaurant falls out of favor,
right? Or they just can't get

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the staff to the wait staff that
they want. They get bad reviews

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on Yelp, the business is fine.
But Yelp reviews crashing, right

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when a new chef comes in, and
the food's is not the same.

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Yeah, right. And

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Johny Fernandez: There's so many
little things that can happen,

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essentially, that can just make
a business go wrong. But I think

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I mean, at the end of the day,
when you wait five years, give

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someone a long pin, but then and
they have to pay that back. I

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mean, we just don't there's no
guarantee there's ever any

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guarantee guarantee, essentially
that they will even last that

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long. So I mean,

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Sean Murray: Whether they had a
loan or not. So it's very, very

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00:17:10.480 --> 00:17:15.190
difficult. Yeah, to do long term
loans, things like seven year

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loans and stuff. I don't know
how to do it. And the other

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elephant in the room, the other
elephant in the room, that when

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you do these long term loans
they seem to be coupled with

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we're going to, we're also going
to do low interest rates. Well,

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guess what? Well, inflation,
over a trailing 12 month period

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is now about 7%. So if you're
like we're gonna help the

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customer, we're gonna do
business loans at 5% APR. Well,

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you're also just starting at a
loss before you have any

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00:17:44.680 --> 00:17:48.760
administrative fees. Your 5%
return is going to underperform

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00:17:48.760 --> 00:17:51.370
inflation by 2%. That doesn't
include all the administrative

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00:17:51.370 --> 00:17:54.220
costs, you know that you had
involved with it? It doesn't get

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00:17:54.220 --> 00:17:58.330
you had to pay rent, overhead,
your credit poles, your

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00:17:58.330 --> 00:18:01.900
collections team, you had to pay
for all these things. Yeah. And

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so you've made far less then.
than anything? Yeah, right.

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You've lost money. So you're
setting yourself up for a

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complete fail? Yeah, right out
of the gate.

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Johny Fernandez: Yeah it's true.
So, again, 24 month loans, you

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know, and as a big announcement,

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Sean Murray: Yeah. So 24 months.
That's tough. That's probably

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00:18:19.660 --> 00:18:22.270
those. That's one of those
magical thresholds. Yeah, well,

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00:18:22.270 --> 00:18:25.780
it's still short. But it's still
it's still long. It's still

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long. So that's, that's what I
was getting at and all that.

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Johny Fernandez: But all that to
say. It's been fun. It's been

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00:18:37.230 --> 00:18:39.930
fun talking about these topics.
Yeah, it's been fun. You're

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00:18:39.930 --> 00:18:41.490
probably thinking where I'm
going with this.

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00:18:41.520 --> 00:18:42.810
Sean Murray: I am wondering,
yes.

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Johny Fernandez: I'm not going
anywhere, though. Say it's been

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fun talking about this. Okay. So
we're almost to the end of the

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year. And next week, were gonna
have a pretty cool show.

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Sean Murray: Yeah, Monday is
gonna be our last show for 2021

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we'll obviously be back in 2022.
But we're not going to be we're

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not going to be here like New
Year's Eve, you know, rot. You

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know what, unless unless Well,
you know, chew on that. Yeah,

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00:19:09.090 --> 00:19:11.250
well think about it think about
it. Well think about that, but

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00:19:11.280 --> 00:19:17.490
yet Monday's should be our last
last show of 2021 and that what

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00:19:17.490 --> 00:19:22.080
you what the wheels are turning
here you want to do you want to

353
00:19:22.080 --> 00:19:24.780
do like a New Year's Eve
Countdown should we be like live

354
00:19:24.780 --> 00:19:28.140
in Times Square? I mean, we
won't even be able to get into

355
00:19:28.140 --> 00:19:30.870
Time Square that's a lot I
noticed the more you get out of

356
00:19:30.870 --> 00:19:37.050
here really I do know, someone
Alright, so who knows what's

357
00:19:37.050 --> 00:19:40.140
gonna happen I thought Monday
would be a last show. Somehow

358
00:19:40.140 --> 00:19:43.800
this is already potentially
turning into broadcasting live

359
00:19:43.800 --> 00:19:46.260
from Times Square. Don't get any
of your hopes up because he's

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00:19:46.470 --> 00:19:48.750
he's literally proposing this on
the fly. I don't know where it's

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going, or how real this friend
is or whatever.

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Johny Fernandez: I'll make a
phone call. I'll see

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00:19:56.130 --> 00:19:59.090
Sean Murray: How you you know a
guy I know. I know a guy.

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Johny Fernandez: Famous last
words anyone ever said, alright,

365
00:20:02.000 --> 00:20:05.180
but yeah, Monday, possibly
tentatively will be our last

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00:20:05.180 --> 00:20:11.930
show. And we have a recap on
Monday. So be fun. It's been a

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great year. So,

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00:20:13.430 --> 00:20:16.580
Sean Murray: Yeah, it has been
here. Yeah. It has been a great

369
00:20:16.580 --> 00:20:20.990
year. Yeah. It didn't end up on
a high note. I think having

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Broker Fair in December, worked
in a lot of different ways. It

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00:20:26.150 --> 00:20:30.200
rejuvenated the industry. It
did. It gave them so much

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00:20:30.230 --> 00:20:33.260
optimism for 2022. I'm just
saying this from from what I've

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seen, from the energy Yeah, the
energy,

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Johny Fernandez: things that
people have said to us. The

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00:20:38.310 --> 00:20:41.280
comments, the messages.
Everyone's ready to come back.

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00:20:41.310 --> 00:20:43.950
Yeah, she's back. They did come
back.

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00:20:44.070 --> 00:20:46.620
Sean Murray: And they came back.
So yeah, I think it was a nice a

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00:20:46.620 --> 00:20:49.350
nice jolt of energy for the end
of the year. Yeah, people are

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super pumped for 2022 We will be
back in Miami.

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00:20:53.750 --> 00:20:55.130
Johny Fernandez: So if you
haven't got a ticket, go ahead

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00:20:55.130 --> 00:20:56.660
and do that. And about that.

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00:20:56.940 --> 00:20:59.721
Sean Murray: Don't forget about
it because guess what the price

383
00:20:59.777 --> 00:21:02.948
is going to go up the price you
see now is the early bird

384
00:21:03.003 --> 00:21:06.397
pricing. Yep. Not this is not
part of my marketing pitch. The

385
00:21:06.452 --> 00:21:09.679
price will go up will go up by
you waiting to be like, you

386
00:21:09.734 --> 00:21:13.072
know, buy my ticket, whatever
after the new year when things

387
00:21:13.128 --> 00:21:16.410
are squared away. That's fine.
You'll just pay more and I'm

388
00:21:16.466 --> 00:21:19.692
totally fine with that. So if
you want to pay less buy the

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00:21:19.748 --> 00:21:23.197
ticket now where's the location.
The JW Marriott Marquis There

390
00:21:23.253 --> 00:21:26.423
you go. That's a JW Marriott
Marquis. Alright in Miami in

391
00:21:26.479 --> 00:21:29.984
Miami. Prop Miami proper Miami
proper not Miami Beach. We'll be

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00:21:30.039 --> 00:21:30.930
in Miami proper.

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Johny Fernandez: Alright, let's
do it. She's going back to Miami

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00:21:36.500 --> 00:21:37.770
do do do do

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00:21:39.330 --> 00:21:41.640
Sean Murray: I wish we had some
music to just like yeah, it's

396
00:21:41.640 --> 00:21:42.750
just kind of let it hang out
there.

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00:21:42.780 --> 00:21:45.750
Johny Fernandez: Yeah. Alright,
so don't forget about that. And

398
00:21:45.750 --> 00:21:48.930
then for the meantime, we'll see
you guys next week.

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00:21:49.590 --> 00:21:52.680
Sean Murray: Yeah, for our last
show of 2021. Potentially

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00:21:52.770 --> 00:21:53.490
potentially.

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00:21:55.230 --> 00:21:59.730
Johny Fernandez: See you guys
next time. I'm Johny. I'm Sean