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Judge Grants Restraining Order Against Deceptive Funding Company

May 6, 2018
Article by:

Court OrderJTT Funding, the company previously accused of having forged a Confession of Judgment, stands accused now of stealing the identity of a rival funding company. On May 3rd, New York Supreme Court Judge W. Franc Perry granted an injunction against JTT Funding from using the name, logo and likeness of Accel Capital from its marketing and contract materials.

Similar to the forged COJ suit (which was brought by FundKite), JTT Funding did not answer or contest the claims.

Plaintiff Accel Capital demonstrated in their papers that an agent of JTT was using a gmail address with “accelcapital” in the name and the company’s logo in its contracts. When a merchant funded by JTT Funding (who pretended to be Accel) inadvertently contacted the real Accel Capital, the scheme was revealed.

JTT Funding went on to ignore Accel’s Cease and Desist letter, court papers say, which led to the lawsuit and demand for an immediate injunction.

According to the Financial Times, JTT Funding is owned by Queens-born mixed martial arts fighter Jim “The Tyrant” Boudourakis. In his October 2017 interview with the publication, Boudourakis said, “There was a learning curve, going from being a fighter to a salesman. But I’m good with people.” FT also reported that his company had 18 full-time salespeople and was funding $4 – $5 million per month.

In the FundKite suit, it is alleged that Boudourakis’ first name Jim is an alias.

The Accel Capital suit can be found in the New York Supreme Court under Index Number: 153447/2018

Why Funders Are Investing in Real Estate As Their Side Hustle of Choice

January 25, 2021

house on cash

This story appeared in deBanked’s Nov/Dec 2020 magazine issue.

house for saleAfter five years in finance, Peter Ribeiro decided to strike out on his own and start US Business Funding in 2008, providing equipment leasing and financing for businesses. But when the housing market collapsed four months later, Ribeiro saw a second major business opportunity emerge. Earlier that year, he had purchased a $250,000 home in southern California that appraised for $355,000 at the time he bought it. Within seven months, the home’s value plummeted to $95,000. “I told myself I knew the area really well, so I might as well start buying some properties.”

At that point, Ribeiro’s fledgling company still wasn’t generating much revenue. “I thought, ‘Man, I just can’t get a lot of loans done right now. I only have three or four employees.’ That’s how I got into the real estate industry.” Twelve years later and at the height of a global pandemic, Ribeiro is simultaneously running two thriving ventures —US Business Funding, and a portfolio of hundreds of rental properties he now owns.

At a time when fintech startups and other industry innovators are looking for investors, alternative lending execs like Ribeiro are instead choosing to put their money in real estate to beef up their investment portfolios. Although some execs shy away from talking publicly about their real estate dealings, citing the fact that they don’t want too much exposure, the consensus is that there’s a lot of money to be made in buying, selling and renting property – if you know what you’re doing.

peter ribeiro“I think real estate is lucrative because when you look at the history of investments, there are two or three ways to really make money: You can put your money in the stock market, or you can put it in bonds. And the other one guaranteed to go up in value is real estate,” Ribeiro says.

To Ribeiro, real estate offers a few major advantages: It’s a tangible asset. You can leverage it as it appreciates in value. Deductions make it so you pay very little in taxes. And it offers significant cash flow. “It’s the best investment you can make,” he says.

What makes real estate an especially good fit for alternative lending and fintech execs is that they possess the skills, resources and financial literacy to succeed at it.

best investment you can make

“Real estate is a long-term gain,” Ribeiro says. “The industry we’re in is a cash-flow cow. People who are doing well are printing money. But what can you do with that money? You can put it in the stock market, but you won’t control much. Then you pay capital gains on it.”

paul riandaAttorney Paul Rianda, who represents both cash advance clients and real estate investors, says it makes sense that real estate investing appeals to alternative lenders – especially amidst the uncertainty of COVID-19.

“If you’re a cash advance guy and COVID happened, then you’re not doing very well,” he says. “If you diversified your assets by doing real estate and cash advance, you’re able to weather these downturns a lot more easily than you would otherwise.”

Rianda has not yet counseled any of his own cash advance clients on real estate matters. But based on his insights from working with both areas, he says real estate would be a logical move for MCA executives, and he’s seen some of his clients in the bankcard industry buy up properties.

“One of my clients had a portfolio of merchants and sold it for a few million, then flipped over to real estate. So it’s a means (to an end),” Rianda says.

‘Snowball effect’

Ribeiro has relied on a simple strategy to steadily build his portfolio of residential properties: Buy. Fix. Leverage. Repeat.

“I feel like the portfolio is doubling every couple of years. It’s just a snowball effect,” he says.

After Ribeiro buys a home, he waits about six months before he has it appraised and fixes it up in the meantime.

“If you go to the bank within the first six months of purchasing it, they’re going to give you the actual market value of whatever you purchased the house for,” he says. “If you wait six months, they’ll reappraise the home and give its true market value, which could be another 40, 50 or 60 percent. And so now you’re going to have a lot more equity in the house, and you’re going to get a lot more money when you leverage that home to go buy the next one.”

Ribeiro says he sees lots of people making the mistake of buying a home, and then going to the bank a week or two later for a loan.

buy fix leverageConstantly maintaining a positive cash flow is Ribeiro’s number one rule of real estate investing. “Your best friend is depreciation,” he says.

Depreciation refers to one of the key tax benefits of real estate. Since owning a rental property is technically a type of business because it generates income, the property is considered a business asset. The IRS allows you to deduct the cost of acquiring that asset – the property – over the span of its useful life. For residential properties, the IRS sets a standard depreciation period of 27.5 years.

So if you buy a $100,000 property with a $20,000 land value, $80,000 of the asset is considered depreciable. Over the course of 27.5 years, you can take an annual deduction of just over $2,900 a year.

The trick, Ribeiro says, is to stick to lower-priced properties with an 80/20 home-to-land value. Most of his properties are single- and multifamily homes between southern California and Las Vegas.

Like Ribeiro, Rianda’s investor clients concentrate on one geographic area to find the best properties. “They look at the area for a long time, understand the area,” he says. “In my neighborhood, three blocks can make a 50 percent difference in the price of a house. You need to focus on a particular geographic area and do a lot of transactions in it.”

Small portfolio, big impact

Jared WeitzReal estate investing has provided a way for Jared Weitz to earn more money while being able to focus on his primary job as CEO of New York-based United Capital Source Inc., the company he founded.

“For me, it’s just a really good second income stream and a way to have a secure return of 4.5% to 6.5% a year,” he says.

Growing up, Weitz got a feel for real estate by watching his uncles invest in multifamily properties. At one point, Weitz’s uncle owned 15 different multifamily homes, and Weitz would help do the maintenance on them.

Eight years ago, Weitz invested in his first two-family home and has fixed and flipped eight properties since then. He currently owns two two-family homes and invests primarily in multifamily homes in Long Island, Brooklyn and Queens. Over the next five years, he plans to pick up at least two more four- or eight-family properties. Working with a small portfolio of residences in his home state has allowed Weitz to have full control over managing his properties and to turn a good profit.

“I think for me, it just offers more liquidity,” he says. “It’s an asset I can sell and liquidate at any time. That’s really important for me.”

Ideally, Weitz would like for his investment to build generational wealth that he can pass down to his son. With many people in the U.S. unable to qualify for mortgages, Weitz sees real estate investing as an opportunity to help the economy by giving renters a place to live and put down roots. “Depending on the neighborhood, you can put yourself in a situation where you have good renters for 20 to 30 years. They want to raise their families and have their kids grow up there,” he says.

Litigation among the pitfalls

Even though Ribeiro has had success with his business model, he cautions that there’s considerable risk involved with real estate.

“I love the industry. It’s a passion. It’s beyond my wildest dreams of the size of the portfolio and how well it performs,” he says. “But don’t think it’s all cupcakes and unicorns. There’s a lot to the madness. That’s why not everyone can replicate the model.”

landlord tenant law“Professional litigators” and multiple lawsuits from renters are a major downfall that Ribeiro points to. He sees at least one substantial suit each year and tries to settle outside of court whenever possible.

As an attorney, Rianda says his real estate clients call on him not just for the purchase of the property, but for various issues that occur during the ownership period.

Here’s one scenario: A property owner has a tenant who isn’t paying rent, so the property owner sues the tenant. But while the lawsuit proceedings are under way, the tenant declares bankruptcy, which puts a stall on further litigation.

“There are people who understand the system and can make it difficult for you to get them out (of the property),” Rianda says, adding that it’s important to have legal counsel readily available. “You need someone who has really done this a lot and knows how the system works to get that person out of the rental property as quickly as possible.”

To minimize liability, Ribeiro has divided his properties into about 10 different business entities – each with a separate umbrella insurance policy.

Rianda sees his own real estate investor clients follow this strategy by grouping multiple homes under the name of an LLC. “If you personally own all these various assets, there’s the potential that if something catastrophic happened at one, it could bleed into all your other properties and potentially put them at risk,” he says.

Dual careers

Ribeiro’s real estate investments and finance company both serve as full-time occupations for him. Some years, he’ll focus more on one area than on the other, depending on market conditions. He spent more time on real estate between 2008 and 2013; then his business needs flip-flopped when real estate prices started going back up. This past year, he’s directed more attention to the finance company because of COVID, which necessitated some operational changes and a need to help clients who had been trying to get PPP loans. But he’s also started investing in commercial real estate, which has taken a hit because of companies forgoing office space to save overhead costs while employees work remotely.

Ribeiro expects to start seeing more mortgage defaults on lower-level homes in 2021 and 2022, after forbearance periods are over. And he’s been leveraging his assets to start buying more properties around the second quarter of the new year. “I think it will be a good time to start buying heavy again,” he says.

An attractive investment vehicle

With the pandemic weakening business portfolios, secondary investment options might sound like just what the doctor ordered.

small business financing growthWhen COVID first hit, some of Rianda’s clients started pursuing other investments like personal protective equipment (PPE). Most of his cash advance clients closed up shop for a few months.

“As time goes on, I’m starting to see my clients go back into their lending,” Rianda says.

Even as clients start to recoup their business, Rianda sees the wisdom in other investments and says cash advance executives are well suited for real estate. “It’s just a way that people who have been successful and spin off a lot of cash for their businesses see as a safe way to diversify their income,” Rianda says. “It’s something I find that people who are doing well in their business do, regardless of what business they’re in. So cash advance guys are just following the things people have done for years.”

Ribeiro cautions that people who get into real estate should look at it as a 10-year investment minimum, and not just a two- or three-month stint.

“It’s not a lottery ticket, and it’s not an overnight race,” Ribeiro says. “This is a long-term gain. But it’s a very lucrative gain from a cash-flow perspective and a tax perspective. I don’t think there’s a more attractive vehicle than real estate.”

Michele Romanow to Keynote deBanked CONNECT Toronto

June 18, 2019
Article by:

Michele Romanow, a TV star on Dragon’s Den and Co-founder of Clearbanc, will be the keynote speaker at deBanked CONNECT Toronto on July 25th. She joins other industry executives speaking at the event from across the business finance industry in Canada.

romanow

Tech titan Michele Romanow is an engineer and a serial entrepreneur who started five companies before her 33rd birthday. A “Dragon” on CBC’s hit show Dragons’ Den, Michele is the co-founder of Clearbanc, which in 2018 gave entrepreneurs more than $100 million in funding; SnapSave, which was acquired by Groupon; and Buytopia.ca, ranked #3 on the Profit Hot 50 list of fastest growing companies. Named in WXN’s “100 Most Powerful in Canada” and listed as the only Canadian on Forbes’ “Millennial on a Mission” list, Michele brings her incredible entrepreneurial savvy to every stage.

Michele has driven new digital solutions to many of the world’s leading brands, including P&G, Netflix, Starbucks, and Cirque du Soleil, and she has advised Fortune 100s and governments on innovation, AI, blockchain, and the new economy. She was a finalist for the EY Entrepreneur of the Year Award; the RBC Canadian Women Entrepreneur Awards; and was a Cartier Women’s Initiative Award global finalist.

Awarded Angel Investor of the Year by the Canadian Innovation Awards, Michele is a prolific angel investor who has also co-founded the Canadian Entrepreneurship Initiative with Richard Branson to encourage more women entrepreneurs. Michele In the media, Michele’s work has been profiled in Forbes, The New York Times, Entrepreneur, The Globe and Mail, and Chatelaine.

During her Civil Engineering undergrad at Queen’s University, Michele founded The Tea Room, the first zero-consumer-waste coffee shop. She was also given the Queen’s Tricolour — the highest honour awarded by the university — and, after completing her Queen’s MBA, she founded Evandale Caviar, a vertically integrated commercial fishery.

Michele is currently a director for Vail Resorts, Freshii, League of Innovators, Queen’s Business School and Shad Valley, a transformational program that develops the entrepreneurial potential of exceptional Canadian youth.

Other great executives speaking at deBanked CONNECT Toronto:
Canada Speakers

ISO Pretending to be Funder May Be Sent to Jail

October 14, 2018
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A New York Supreme Court judge ordered on Thursday that Long Island-based ISO JTT Funding either be fined or sent to prison if it does not comply with a previous restraining order obtained by NYC-based funder Accel Capital.

JTT Funding Order

Accel alleges that JTT funding has been impersonating it through correspondence and on contracts, a scheme that was outed when merchants claimed they had been duped into sending thousands of dollars upfront to JTT (disguised as Accel) to obtain a loan yet never received one. Accel responded by suing JTT and obtained a restraining order on default when the defendant failed to respond.

According to the Financial Times, JTT Funding is owned by Queens-born mixed martial arts fighter Jim “The Tyrant” Boudourakis. In his October 2017 interview with the publication, Boudourakis said, “There was a learning curve, going from being a fighter to a salesman. But I’m good with people.” FT also reported that his company had 18 full-time salespeople and was funding $4 – $5 million per month.

In an unrelated suit, JTT Funding is accused of forging a confession of judgment.

The Accel Capital suit can be found in the New York Supreme Court under Index Number: 153447/2018

Merchant Cash and Capital Hits a Billion Dollars

March 18, 2015
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I was there. In August 2006, a little startup in College Point, Queens hired its third and fourth employees. One of them was me. The company’s CEO Steve Sheinbaum hired us to be underwriters of a financial product that at that point didn’t really have a name. It would later become referred to as a merchant cash advance.

The company grew fast, almost too fast. By December of 2006, half of the company was working out of temporary offices in the Empire State Building. And when that no longer made sense, we leased a floor at 450 Park Avenue South in mid-2007 where Merchant Cash and Capital still has its headquarters today.

Fast forward to 2008, I was the most senior risk manager of the firm. As the Director of Underwriting, my direct reports were two underwriting managers. Below them were three or four team leaders. And below them were entry-level underwriters and their administrative assistants. I oversaw what was arguably the most important department leading up to the financial crisis. I really believe the hard work of all the underwriters and the seriousness of which they took their job is a huge contributing factor to why MCC survived when many of their competitors did not.

It is great to see them hit the milestone of $1 billion in funding. Congratulations.

MCC CEO Steve Sheinbaum on CNBC

The Alternative Business Lending Worker Shortage

July 1, 2013
Article by:

You open 40 accounts, you start working for yourself. Sky’s the limit.

Is the dream getting harder to sell? The alternative business lending industry is booming and so much so that many job openings are going unfilled. I am asked on almost a daily basis if I know any experienced sales people that are looking for work. There really aren’t that many people out there with a strong merchant cash advance background and I think it’s impacting how fast this industry can grow. On the one hand, the industry is a lot less sophisticated than it used to be. Hold on for a second and allow me to explain myself. There was a good chunk of time in this business where saying the word, loan could get you fired. Loan?! Are you kidding? We buy future receivables at a discount!

Anyone could sell a prospect on working capital but only a select group of people could explain the purchase of future sales properly all while justifying the relatively high cost. And an even smaller group of people could take the deal to the next step and discuss the merchant’s current 3 tiered or interchange based rates, pick out the junk costs, and sell them on a better deal with a new payment processor. And an even smaller group of people could sell the merchant on the idea of using a new terminal due to PCI compliance issues or acquirer compatibility. And an even smaller group of people could sell or lease the merchant a new terminal instead of swapping out their current one or lending one for free with a multi-year contract. And still an even smaller group of people could convince the underwriter to approve their file in order for the 5 closed sales to even go through. Merchant cash advance in the traditional manner was and is a highly complicated multi-layered sale. The men and women that churn(ed) these deals out month after month on a consistent basis are nothing short of pros. Let’s not forget that payment processors have underwriters too so even after 6 closes, the payment processor could decline the approval of a merchant account, nuking the entire deal from start to finish.

Do you have any idea how comical it was when the mortgage brokers invaded the industry as the housing market neared collapse? They had no idea what they were doing and some of them barely lasted for 90 days before saying “I give up, this makes no sense.

In today’s market, there’s a faster learning curve. I’d estimate that 55-60% of all new deals being funded with daily repayment in this country are using direct debit ACH to collect. Some funders and brokers lean towards this model so much so that they report funding more than 90% of their deals on ACH. That’s good news for new account reps because there isn’t much to learn about the product. There’s the amount being funded, the cost, and a daily debit to pay it back. Pretty simple stuff. This isn’t to say it’s not a tough sell or that it’s not competitive, because it is both of those things. Companies that swear by the ACH product have a hiring advantage because they don’t necessarily need salespeople with MCA specific experience. Almost any financial sales background will work or even no experience at all.

The smaller part of the industry is a mishmash of the old school sophisticated reps and the newbies that rely on the old schoolers to help them out with anything technical. When companies post ads saying they are looking for MCA sales reps with experience, they’re implying that they want people that can handle the multi-layer sale. A good craigslist ad should say:


Are you hungry?!

Must be able to do the following in a single phone call while driving at least 65 MPH on the Brooklyn Queens Expressway regardless of whether or not traffic is backed up:

  • Convert a Micros POS system
  • Lease an additional wireless terminal for off-premise sales
  • Shave 12 basis points off the non-qualified tier (but make it back up by adding a $15 monthly statement fee)
  • Close a 150k deal on a 1.40 (but know that the reduced factor rate is coming out of YOUR end)
  • Write in a 6% closing fee
  • Cut off 47 cars in traffic without hitting them
  • Eat a slice of greasy pizza with your left hand without getting a single drop on your lap

boiler room speechOh and below it will be a note that says “THIS POSITION IS COMMISSION BASED ONLY, NO DRAW, SELF-STARTERS WANTED, HOURS ARE 7-7 Mon-Sat“. Don’t laugh. This was the MCA industry for a time and a lot of people did very well in it. If you wanted to make money, you had to be able to do it all. For some of you, it’s still this way.

And let’s face it, the split-funding market may shrink but it will never die. Split-funding’s advantage is the ability to finance businesses that have poor cash flow. The risk of a bounced check is removed when payments are diverted to the funder by the payment processor. You hear that kids? You should be brushing up on your payment processing-ology.

Even as the ACH market boom continues, there are whispers of woe as funders deal with ACH rejects and closed bank accounts. It’s no surprise then that some companies are looking for pros, not just bodies to put on the telephone. It seems as the product has become less sophisticated, merchants have become more sophisticated. In 2007, I’d be willing to bet that more than 90% of small businesses had never even heard of a merchant cash advance and that was basically the only alternative available. In 2012 I actually did a presentation to a large room of business owners about merchant cash advance and none of them had ever heard of it until I taught them about it. That’s astounding!

steak knivesNow I don’t think that many more people know about the purchase of future credit card sales in 2013 specifically, but I am inclined to believe that 90% of merchants are at least aware that alternatives to bank loans exist. And when they encounter somebody offering an alternative, they do their homework and check these companies out online. They get 2nd opinions and question why they have to switch processing when four other account reps said they don’t have to. They ask for better deals, longer programs, and they look you up on facebook to see who you really are. This is a different sales environment than what there used to be. The lowest price, the fastest process, or the most charming personality won’t guarantee you’ll win anything. Seeing that you’re backed by Wells Fargo or learning that Peter Thiel is on your company’s board of directors might be the hook, line and sinker for a business with a full plate of options at their disposal. Yes, it’s a different world, a different sale, and even a different product.

Funders and brokers need human resources to keep up with the fast pace of growth and there’s not too many of the old school guys looking for work. Not to mention that fewer people are willing to work on a 100% commission only basis these days. During and after the financial crisis, the herd of out-of-work financial service people flocked to whatever opportunity the could find. It was like you could throw a fishing net in front of the Lehman Brothers entrance and use it to scoop up 50 brokers as they all ran out the door for the last time. Newly minted graduates wanted to build their resumés instead of remaining unemployed. Some people were willing to work all 31 days of a month just for the opportunity even if they walked away with zero dollars at the end of it. Although the economy hasn’t recovered much, that hunger has relaxed and job seekers are being a bit more selective of the opportunities they choose. They want a base salary (even if small), benefits, and vacation time. Somewhere out there in another universe, Ben Affleck’s younger self is crying at the thought of this. “Vacation time?

So when you put up an ad on LinkedIn or Craigslist and say you’re looking for 10 guys with MCA experience, just know that breed is in short supply and high demand. If you’re heavy on ACH, you can train new guys quick but they’re not going be equipped to take on the multi-layered sale if the tide turns back towards split-funding. There are tons of job openings out there for sales reps but those spots aren’t as easy to fill as they used to be.

You become an employee of this firm, you will make your first million within three years. I’m gonna repeat that – you will make a million dollars.

Happy hiring.

– Merchant Processing Resource.com
https://debanked.com
MPR.mobi on iPhone, iPad, and Android

Beyond Merchant Cash Advance: An Interview With Karlene Sinclair-Robinson

March 24, 2013
Article by:

Guest: Karlene Sinclair-Robinson

plansPeople come to me for advice on business lending quite often. I’ve spent years helping small business owners obtain financing, many of whom were turned down previously by a bank. And so the story has been told that if traditional lending doesn’t seem to be an option, there is an excellent Plan B, Merchant Cash Advance (MCA). The characteristics of an MCA have changed over the years though, by a wide margin.

At one point in the past, they were discernibly different from a loan, and most often structured as a purchase of future credit or debit card sales. Factoring costs amongst funding providers were relatively uniform, and advances were estimated to completely pay off in 8 months or less. It’s different now. MCA has since been semantically broadened to include non-bank financial service programs that are structured as a loan. Factoring or interest rates costs vary widely, and terms can go out as long as 18 months. 

But maybe you knew all that, and so when the follow up question becomes, “Sean, how else can I raise capital besides MCA?” I resort to throwing out buzz words such as Venture Capital financing or Peer-to-Peer lending. Oh I can tell you how these things work but certainly not with the amount of details that I could about MCA. As some folks depend on me to help them out and list all of their options, I find myself promising to send them “something” through e-mail later.

As I started drafting one e-mail, I began to wish there was a comprehensive book, one that I could simply recommend as an easy read to newly minted entrepreneurs and wise old business owners alike. It turns out that such a book exists and it’s got tons of tips that I hadn’t even thought of; It’s called Spank the Bank, by Karlene Sinclair-Robinson. I was so glad to have found it, that I went off in search of Karlene, hoping that she would be able to answer some of my questions. Luckily, she was nice enough to respond!

——————————-
Sean: Karlene, I can tell you from my experience in the MCA field that a lot of people looking to start a business hope that MCA is the answer when the bank turns them down, when in fact it is not. You list many alternative funding options in your book, so if an individual were interested in starting a restaurant or brick and mortar retail business, what 4 options would you recommend they try? Which one do you think they should try first?

Karlene: Sean, thanks for reaching out to me and spreading the word about my book, Spank The Bank. In response to your question, it reminds me of a jigsaw puzzle. Why you might ask? This is due, in part, to the type of business, industry, how much financing they need and who the new entrepreneur will be. There are variables that must be considered in order to decide on the best financing solutions. So, in order to help a restaurant startup or retail business, they should consider the following, if appropriate:

  • Equipment Lease or Vendor Financing
  • Franchise Financing
  • Microloan or Peer-to-Peer Lending
  • Private Commercial Loan

The great part about alternative financing is the ability to use more than one option at the same time to gain the financing needed.

Sean: You list Peer-to-Peer lending in your book as an alternative. I am familiar with Prosper.com, but are there any others that you know of? Do you have any tips to make such a lending campaign successful? 

spank the bankKarlene: Great question. Yes, there are more Peer-to-Peer lending sites. Prosper.com is one of the two major sites I mention in the book. LendingClub.com is the other site borrowers should consider. They have funded over U.S. $1.5 billion as of this month. LendingClub.com hit the billion $$$ threshold on November 5, 2012, and so, in the space of just over 4 months have financed more than $500 million in loans. What is so unique about both sites is the maximum amount they can lend. Prosper lends up to $25,000 while Lending Club goes up to $35,000. Are they making a difference? Absolutely! By the way, this is not just a U.S. phenomenon, it is happening worldwide. Checkout Kiva.org

Sean: You mentioned that a website is important to alternative financing sources. I find this very interesting and agree with you completely. I have gone so far as to suggest to my peers in lending that in 2013 and beyond, it does not make sense to approve a business that does not have  a website, even if the business looks decent on paper. There is even one specialized MCA firm that I know of that actually evaluates the amount of Likes and Followers you have on social media in the application process. For a very small business that just needs to get their web presence up and running, how much do you think it would cost to do this and would they need to hire a designer or programmer? 

Karlene: Thanks for agreeing with me on the website factor. I believe it should be a part of the due diligence process. In order to help those who are in need of website development, I suggest you check with you local area SCORE offices, Small Business Development Centers, Women’s Business Centers or other business affiliated sources that can give you a good reference to a web designer or use networking sources to help you find a competent one. Depending on what must be on the site, the price can range from $500 to as high as $10,000. No startup business needs to pay that much. Use a budget that is in line with what you need first; then add on what you want at a later date. Be sure to carefully read the web designer’s contract that outlines what they are going to do and the cost to you. Pay for services based on work completed. Most will require a down payment.

Sean: A tough question now. Is it feasible for an entrepreneur that literally has no capital of their own to invest in their startup to go out and raise 100% of the funds to see it through? I ask because I have heard this story a lot. “I have a great business plan but I have no funds to make it reality.” Do they need to save up their own money first to get started? Even alternative lenders like MCA firms prefer for a business owner to be personally financially invested. It makes them more confident that the owner will never give up. 

Karlene: This is a great question Sean. Let us add to the question – how much are they seeking? Again, the type of business will also determine the funding possibilities. However, let me make this very clear: startups need to come to the financing table with something to back them. Whether you are using savings, family and friends, or your IRA, having some money in the transaction or added collateral appropriate to the financing option to be used, makes it more likely that the financing request will be approved.

Sean: I’ve heard all the rumors about SBA loans; That they take 6 months to get an approval, 9 months to get the funds, that the bank can change their mind at the last minute, etc. But i’ve also heard it can happen in a matter of days. What is the real story here?

Karlene: Yes, I have to agree, there are a lot of rumors or myths about the SBA. Since I do not work for the SBA nor any banks providing SBA guaranteed loans, I cannot give the facts on this question. However, I can say this: since all financing requests (traditional and non-traditional) goes through due diligence phases from pre-qualification, initial approval, committee review (if appropriate) to final approval for transfer of funds, depending on all parties involved, it can be fast or it can be slow. When borrowers are unwilling to provide financial records or don’t have the required collateral to make a transaction work, this can delay or stop the deal. I often tell borrowers, lenders are in the business of lending, the more qualified transactions they can approve; they will do so. If the borrower is not on par with their financial records, this can also slow down the process.

Sean: Great answer. I agree that part of how long an application process takes is on the shoulders of the applicant. The more prepared they are, the faster it should be. Any final words?

Karlene: Sean, I appreciate the invite to shed more light on this topic of alternative business financing. You offer a product that many non-banking customers can use. Finally, I’d like your audience to take from this conversation, if nothing else, the fact that they do have options available to help them. So when banks say ‘no’, they’ll know where to go.

Sean: Thanks so much for taking the time to speak with me personally and for answering several questions that tons of small business owners and even peers in my field find themselves asking at some point. You are doing so many good things out there to help people and your book is excellent.
——————————-

After our interview, I also got to sit in on a twitter talk show in which Karlene was a special guest. The show was #SmallBizChat, a weekly event at 8pm EST. You can read the extended interview between the host and Karlene at http://succeedasyourownboss.com/03/2013/where-to-go-when-the-bank-says-no-finding-alternative-funding-for-your-small-business/. I intend to join as many future events as possible. So if you stop by, please say hello. I am @financeguy74.

Bio
ksrKarlene Sinclair-Robinson, dubbed “The Queen of Business Financing” is the Bestselling Author of ‘SPANK THE BANK: The Guide to Alternative Business Financing’. She is considered a foremost expert on ‘Alternative Business Financing’ for startups, small businesses and struggling entrepreneurs. She is a speaker, instructor, business consultant and principal of KSR Solutions, LLC, based in Northern Virginia.  She is also a top Twitter Business Financing source to follow via @KarleneSinRob. Website: http://www.SpankTheBankNow.com.



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