1 00:00:00.200 --> 00:00:03.100 The reason that Johnny and Sean of dbank are talking about 2 00:00:03.100 --> 00:00:07.000 it. We're not world-class Economist. But the reason what the 3 00:00:06.300 --> 00:00:08.800 reason we're talking about it is 4 00:00:10.300 --> 00:00:13.400 if there is an anticipated increase in interest rates 5 00:00:13.400 --> 00:00:17.200 over time that could spell difficulties 6 00:00:16.200 --> 00:00:19.200 and challenges in this small business 7 00:00:19.200 --> 00:00:20.300 financing Market. 8 00:00:21.600 --> 00:00:24.900 Previously, we have discussed that many of these companies borrow 9 00:00:24.900 --> 00:00:27.500 their own money. They borrow money 10 00:00:27.500 --> 00:00:30.300 to lend it out. Yeah and when interest rates 11 00:00:30.300 --> 00:00:33.500 go up that can compress their margins all when 12 00:00:33.500 --> 00:00:36.500 interest rates go up that can make their own lenders get 13 00:00:36.500 --> 00:00:39.600 a little scared about the risk. They're taking on that 14 00:00:39.600 --> 00:00:42.800 can also cause them to say hey, you know what? We're not 15 00:00:42.800 --> 00:00:45.200 just gonna increase the rate that you pay we're going to cut your 16 00:00:45.200 --> 00:00:48.200 credit line all together and say you have lenders and funders who 17 00:00:48.200 --> 00:00:51.500 have their credit lines all together cut or terminated and others 18 00:00:51.500 --> 00:00:54.800 who are forced to just pay more for the money. So it's a Troublesome 19 00:00:54.800 --> 00:00:57.200 impact all around when that type 20 00:00:57.200 --> 00:01:00.200 of thing occurs and if we're if we get data like we did today 21 00:01:00.200 --> 00:01:03.900 and that means that that is ultimately gonna try to overcorrect and 22 00:01:03.900 --> 00:01:06.100 increase rates at a fast or Pace and we had 23 00:01:06.100 --> 00:01:09.500 before that we could see that trickle down effect to 24 00:01:09.500 --> 00:01:12.100 the lenders and funders and the industries who are going to have to 25 00:01:12.100 --> 00:01:15.500 contend with their own lenders increasing their rates or 26 00:01:15.500 --> 00:01:18.000 saying you know what this Market is spooky me. 27 00:01:18.400 --> 00:01:20.900 I'm just gonna cut your line all together. I anticipate 28 00:01:21.200 --> 00:01:24.300 Going to hear a little bit of that type of thing in the near 29 00:01:24.300 --> 00:01:27.600 future not gonna say who or where but 30 00:01:27.600 --> 00:01:30.500 we were already starting to hear rumbling so that happening and so 31 00:01:30.500 --> 00:01:33.300 these impacts these effects are real. So when Johnny 32 00:01:33.300 --> 00:01:36.400 and I sit here we talk about interest rates. It's not 33 00:01:36.400 --> 00:01:39.200 because we think we're smarter than CNBC. I at least know 34 00:01:39.200 --> 00:01:42.500 that I am not but I I do know the the effect 35 00:01:42.500 --> 00:01:45.300 that interest rates increase in interest rates has in this 36 00:01:45.300 --> 00:01:49.100 particular industry and I had I have seen this industry at 37 00:01:48.100 --> 00:01:51.500 the plate out during the 2018 2009 financial 38 00:01:51.500 --> 00:01:54.300 crisis. I know when things can get tricky right but 39 00:01:54.300 --> 00:01:57.700 I think a couple of things to consideration is that number one 40 00:01:57.700 --> 00:02:00.300 the FED has announced in the past that 41 00:02:00.300 --> 00:02:03.200 interest rates will keep creeping up. I mean, that's something that 42 00:02:03.200 --> 00:02:06.300 if you're in this industry specifically you should not be 43 00:02:06.300 --> 00:02:09.600 surprised by it because they've been they've told us like Hey, 44 00:02:09.600 --> 00:02:12.800 we're gonna increase we're gonna increase until the economy cools 45 00:02:12.800 --> 00:02:15.200 down until there's that correction that happens they've told 46 00:02:15.200 --> 00:02:18.500 it to us so they shouldn't come a hundred percent as a surprise 47 00:02:18.500 --> 00:02:20.900 that you know, the rates are going up. 48 00:02:20.900 --> 00:02:24.100 Up, but I do think like you said understanding that 49 00:02:23.100 --> 00:02:26.600 right now the economy, there's two 50 00:02:26.600 --> 00:02:29.200 different things going on. There's the economy, you know and what 51 00:02:29.200 --> 00:02:32.400 these job reports are saying and then it's also what you see 52 00:02:32.400 --> 00:02:35.300 on a daily basis where you know, eggs are like a dollar an 53 00:02:35.300 --> 00:02:38.400 egg pretty much like it's crazy how expensive things are 54 00:02:38.400 --> 00:02:41.300 getting. I think the other thing to take into consideration is 55 00:02:41.300 --> 00:02:44.100 that and we talked about this last year is that if you 56 00:02:44.100 --> 00:02:47.600 are in this industry, you are in this in this 57 00:02:47.600 --> 00:02:50.800 space to be prepared for when 58 00:02:50.800 --> 00:02:53.700 that time comes when things start going crazy 59 00:02:53.700 --> 00:02:56.700 or when things you know, you don't know what's gonna happen next to 60 00:02:56.700 --> 00:02:59.100 start preparing now like right now like they're still 61 00:02:59.100 --> 00:03:02.600 business things are still, you know, flowing, you know, the there's 62 00:03:02.600 --> 00:03:05.400 not as much fear as there was in previous years of 63 00:03:05.400 --> 00:03:08.100 like, we don't know what's gonna happen. Like we kind of see a pattern like we know that 64 00:03:08.100 --> 00:03:11.400 inflations gonna be here for a while. We know that rates are 65 00:03:11.400 --> 00:03:14.300 going are so going up. So they're so business being done. 66 00:03:14.300 --> 00:03:14.500 So, 67 00:03:15.200 --> 00:03:18.100 My the one thing that comes to mind for me for all these 68 00:03:18.100 --> 00:03:21.400 people that are watching is that you know, you definitely have to be prepared now like, 69 00:03:21.400 --> 00:03:25.400 you know start seeing where you can cut unnecessary 70 00:03:24.400 --> 00:03:27.600 things like really start prepaying your 71 00:03:27.600 --> 00:03:30.300 business for when the worst happens and we're not 72 00:03:30.300 --> 00:03:33.300 even in the worst of it. Yeah, and you know, what's interesting too is that 73 00:03:33.300 --> 00:03:36.400 I do talk to some people who say we're in the best of times ever that we're 74 00:03:36.400 --> 00:03:39.100 the things that could not be better. This is the period 75 00:03:39.100 --> 00:03:42.900 of rapid growth that they cannot fund enough 76 00:03:42.900 --> 00:03:45.500 so it's but I think that's that's when 77 00:03:45.500 --> 00:03:48.800 you start preparing for the worst of times when you when you're in the best you 78 00:03:48.800 --> 00:03:51.500 put money aside you start, you know, making sure your 79 00:03:51.500 --> 00:03:52.200 ducks on a row because 80 00:03:53.100 --> 00:03:56.200 You know, it's not gonna be like that forever. Here's a 81 00:03:56.200 --> 00:03:59.300 lesson for everybody. If you are a broken, you're saying Sean, 82 00:03:59.300 --> 00:03:59.700 I don't care. 83 00:04:00.400 --> 00:04:03.300 I work with a hundred funders if a funder 84 00:04:03.300 --> 00:04:06.200 goes down. I got 99 others I can work with that's all 85 00:04:06.200 --> 00:04:08.500 that matters to me. There's plenty of funders in the state. 86 00:04:09.100 --> 00:04:12.600 Here's the problem when a funder or lender 87 00:04:12.600 --> 00:04:15.300 experiences trouble or difficulty that start 88 00:04:15.300 --> 00:04:18.700 looking for ways. They go into they go into self-preservation mode. 89 00:04:18.700 --> 00:04:22.000 Yeah the start thinking what can we do to 90 00:04:21.600 --> 00:04:24.800 maximize the odds of our own Survival 91 00:04:24.800 --> 00:04:27.800 or to prove to our credit facility that we're 92 00:04:27.800 --> 00:04:30.400 going to make it and they may be looking to things 93 00:04:30.400 --> 00:04:33.100 like the iso or broker agreement that that they have 94 00:04:33.100 --> 00:04:36.300 with the referral partners and thinking about other causes 95 00:04:36.300 --> 00:04:39.200 that they can enforce that allow them to take possession of 96 00:04:39.200 --> 00:04:42.300 a broker's portfolio. Yeah, and so broker who's already 97 00:04:42.300 --> 00:04:45.700 done tons of business with the funders saying if you go down who 98 00:04:45.700 --> 00:04:48.100 cares I got all these other funders I can 99 00:04:48.100 --> 00:04:48.400 work with. 100 00:04:49.900 --> 00:04:52.800 You know keep in mind they may have a portfolio with that 101 00:04:52.800 --> 00:04:55.900 funding company. And if that funding company is experiencing difficulty 102 00:04:55.900 --> 00:04:59.300 forget about going out of business this experiencing difficulty facing 103 00:04:58.300 --> 00:05:01.500 risk getting questions from your credit 104 00:05:01.500 --> 00:05:04.100 facility. They may be put in a position where they need 105 00:05:04.100 --> 00:05:07.200 to enforce obscure causes in the buying print of your 106 00:05:07.200 --> 00:05:10.800 ISO agreement that allow them to take possession of a 107 00:05:10.800 --> 00:05:13.400 broker's portfolio. And so it's your passportfolio. It's 108 00:05:13.400 --> 00:05:16.400 your book that may be at risk. That's another lesson about 109 00:05:16.400 --> 00:05:19.500 choosing your partner's correctly. But if you're a broker you need 110 00:05:19.500 --> 00:05:22.800 to be well aware about who might be faced in difficulties because 111 00:05:22.800 --> 00:05:25.400 that type of thing can happen it always happens 112 00:05:25.400 --> 00:05:28.400 when times get tough. Yeah, and if you're broker saying, 113 00:05:28.400 --> 00:05:31.200 yeah, but I'm not the lender. I'm not the funder. 114 00:05:32.400 --> 00:05:34.600 Yeah, but the lender of the funder is now. 115 00:05:35.500 --> 00:05:38.400 Forced to reckon with its own reality and it 116 00:05:38.400 --> 00:05:41.600 could come at your expense with whatever path they 117 00:05:41.600 --> 00:05:44.400 decide to take. So something to be mindful of as 118 00:05:44.400 --> 00:05:46.200 all of this stuff starts to play out.