Well, I am super excited today
to be here in South Florida at the Biddy Advance
Headquarters with Craig.
Craig. Uh, we, we've been on here before.
We've chatted before.
So for those that don't know you go ahead
and introduce yourself, your title and the company
and what the company does. Yeah.
Well, first of all, thank you for having me.
Uh, my name's Craig Hecker.
Our company is Biddy Advance,
and I bought the company in February of 2020.
And, uh, we provide working capital solutions
to small businesses all over the country.
Talk really quick about like the
specific products you guys offer.
Different small businesses.
So we offer a revenue based finance product
where we're buying their future sales at a discount,
and we fund as low as $2,000 per merchant in
as high as 500,000.
We're funding the whole gamut,
but what we find is that every, every particular
business has a different margin threshold, you know, of, of,
in terms of their profitability.
So since 2020, let's talk a little bit about like what,
how you've seen this business evolve, uh,
whether it's like the MCA space,
the alternative finance space, uh,
and especially here in south Florida.
Yeah, so it's been interesting since Covid, you know,
COVID has changed a a lot, obviously, as we all,
as we all know in terms of, you know, remote working
and the ability for, for, you know, companies to employ
people to work remotely.
I've seen an influx of newer companies, uh,
companies in our space, funders, brokers that have kind
of flocked to South Florida post Covid just
because Florida, you know, had more conservative views,
you know, opening up sooner
after Covid, it was maybe a more friendly place to,
to do business, and I think that's sustained since then.
Uh, so I see, you know, still a, a number of
merchant cash advance companies,
revenue based finance companies that are still
located in, in South Florida.
So what would you say is the biggest difference?
I mean, when you're working with a company to,
to provide your services,
what would you say is the one thing
that is evolving constantly?
So I think the, the one thing
that's evolving constantly is continuing to get better
with the, with the technology.
Um, and, and creating a better user experience
for both our merchants and our sales partners.
So, you know, we've worked really hard since early 2020,
you know, constantly refining
and upgrading our sales partner portal, for example,
improving service levels, you know, improving
and adding additional product offerings that meet the needs
of our partners, you know, constantly changing
and adapting so that we're, you know, better able
to service our partners in a, in a streamlined way.
So how has this industry changed since you bought Biddy
Advance back in 2020?
So, I think clearly, you know, the last year, year
and a half for our merchant client has been trickier.
Um, you know, the inflationary pressures
and inflation is, has been real for,
for our small businesses that we serve.
Um, you know, we've definitely seen, you know, quite a bit
of margin suppression across the board, you know,
which translates into, you know, us having to
right rightsize the advances that we're making, you know,
making sure that we're, you know,
really understanding their revenue
in the underwriting phase.
So I think, I think that's one of the biggest things
that's changed is, you know, our
merchant customer is dealing with, you know,
higher expenses, you know, maybe stagnant to lower revenue.
Um, so it's been a little bit more
of a challenging environment for, for them.
So have you guys taken different steps now
that like when you're gonna offer your product to someone,
have you changed, uh, like the underwriting process
or anything of that nature?
So we're constantly evolving.
The nice part about our business is these are short duration
products, okay.
Where, you know, the, the longest, you know,
duration we go out is 12 months.
So we're able to acquire so much data on a,
on a monthly vintage, on a portfolio so quickly
that we're able to, you know, using our, our, our data,
we're able to make changes
to our credit decisioning algorithms in real time based on
what the data's telling us.
So it's, it's, it's constantly evolving and it's,
and it's a constant rotation of, you know, if we go back to
2021, it was very heavy, you know, post covid for example,
it was, it was very heavy transportation
and now, you know, in even into 2022.
But then we all saw that transportation struggled as an in,
as an industry overall.
So we're able to look at the data
because we get it, we get it back
so quickly based on the performance
of the underlying assets,
and then we're able to make adjustments
and pare down, for example,
how we wanna risk-based price transportation, for example,
or change guidelines for transportation in general.
So it's, it's, it's a very dynamic business that, you know,
the data allows us to rotate, you know,
rotate industries if you will, you know,
constantly, you know, over time.
So for 2024
and for 2023, what is the data that you've collected?
What is it showing about your clients?
So we're showing very healthy,
a very healthy merchant base.
Um, you know, we've clearly seen the Declan declination
rates, you know, escalate.
Um, meaning our approval rate has,
has declined, said differently.
We're, we're clearly more selective with the files
that we're approving.
Okay. So we're, you know, constantly evolving and pruning
and changing, you know, the, the criteria, you know,
what's the maximum withhold we're willing to, to,
to give the merchant towards their gross revenue
or, you know, with our bank aggregation sources, you know,
we're able to sort the data.
We're able to, you know, exclude certain revenue
that maybe in previous months or years we would've included.
We're able to say, you know what, that's not real revenue.
We're not gonna give them credit for it.
So we're able to size the deals better. Okay.
So that it's, it puts them in a position
to be more successful in terms
of the repayment puts us in a position
to be more successful in terms of hitting our
hurdles in terms of where we need to collect to.
So those are the types of adjustments
that I'm speaking about.
For someone that's new into this industry that needs money
that, you know, is trying to maneuver how
to get into the MCA space,
what advice would you have for them?
Kind of keep your belt tight, um, you know,
be very aware of your expenses.
You know, it's, it's a lot trickier right now to,
to navigate in, in, in an inflationary environment when,
you know, your, you SSG A is going up, your cost
of goods is going up, you know,
you're spending more money on payroll.
So I think, I think it's, it's a time for merchants
to be prudent in terms of how they're,
how they're running their business, right?
It's not, it's not a, a free for all
where they can just kind of run wild.
They, they have to be super disciplined in terms of,
you know, how they're managing their operation so
that they can still yield the profitability that they're,
that they're looking to achieve.
And for those small businesses
that are running into trouble
and that, you know, are not organized,
and they're, they're in a, in a weird situation, uh,
what would you tell those guys?
I, I would tell them that, you know, you just have to kind
of rightsize the business to, you know, what you're,
what you're able to handle, you know, based on staffing.
You know, everything's, everything's constantly evolving
and becoming a little bit trickier.
You know, certain industries maybe are having
a more difficult time hiring, for example.
Or maybe they're hiring people that just don't have,
don't have the experience that, you know, folks
that they used to hire back a few years ago.
So I think it's a, it's a time for the small business owner
to probably have to work harder, put more of their own time,
energy, and effort into their business.
They're obviously a big part of their small business, so,
you know, they can, they can clearly help compress a lot
of their costs by working harder
or, you know, logging more hours.
And maybe they don't need
as many staff members if they're willing
to contribute a little bit more than they, you know,
might have contributed in previous years
Overall for 2024.
I mean, with the companies that you work with,
what, what are your predictions?
So I think it's, you know, it's a, it's a time
to stay conservative.
Um, right now, I, I feel that, you know,
I don't have a crystal ball.
I don't, I don't think anyone has a crystal ball.
You know, are we going to go into a, a,
you know, a recession?
Are we going to soft land?
Are we gonna have some, some bumpy landing?
I, I think it's gonna be,
you know, it's gonna be one of those.
So I think this is a time in our space, in, in my opinion,
to, you know, really stick to your knitting
and, you know, stick to the products
and the product offerings that you have data on,
and that the data can guide you and be your compass and,
and, you know, navigate you through this period
of time in terms of providing working capital
to these small businesses, you need
to really rely on historical data to, you know,
to help you predict the future.
I think it's a time to be conservative
and kind of stay flat in terms of your, your volume,
you know, get incrementally better every day in terms of,
you know, the things you can control as a,
as a, as a funding company.
The, the service levels, the user experience
that you're providing to the merchants
and, you know, to, to the sales partners that are, are,
are sourcing the deals, um, you know,
collection activities, right?
Customer service, the customer service aspect of that.
You know, making sure that you're taking a,
a very friendly approach with the customers.
You know, you're sensitive to their, you know, circumstances
that they're dealing with, and the, you know, the ebbs
and flows and the bumps in the road so
that you can keep them on track, keep them paying, you know,
get to the ultimate goal for them
and for us, which is, you know, to complete the advance
and, you know, to move on with their business
and continue to have success.
So for someone that's looking
or that's interested in working with you for 2024,
what's the best piece of advice? My
Best piece of advice would be to take
what you need, right?
Don't, don't take more capital than,
than you have a use for.
So I think that use of proceeds is, is very big.
You know, if I'm running a small business, I'm going
to be super sensitive right now in 2024 to
how much capital I actually need in order to
function my business, right?
I don't think it's healthy to take more.
Just because somebody's willing to give it
to you doesn't mean that you should necessarily take it,
because that requires you to, to pay it back
and you know, it, it, it eats into your margins
as you're, as you're paying it back.
So I would say, you know, kind of right-size your operation
and, you know, of course take working capital
when you need it to expand your business, kind
of keep your head above water, make payroll,
all the different uses of capital
that you're gonna have as a small business.
But, but don't take more than, than what you need.
Be be thoughtful
and mindful about, about, you know, kind of
how much capital you're, you're taking for your business.
And then for the other person,
you said, 'cause you said merchant,
So for the, for the sales partners.
Yeah. So advice that I would give to the sales partners is,
you know, pick the right funders.
I, I know it's important to, to all brokers to have
multiple funders because they need optionality, right?
Like they're spending a lot of money on lead generation
sourcing the, the full application,
you know, from the merchant.
And they need to make sure that they have enough options.
A funder, they need to have their B
and C funders, they need to have kind
of the higher risk bucket.
Um, so I understand that, that ISOs need this waterfall of,
you know, multiple funders.
But I would advise ISOs
and sales partners to really hone in on kind
of the best in breed funders that are consistent,
that have good platforms, that are reliable, that
pay them contemporaneously with funding,
funding the merchant.
You know, I think reliability is very important,
and I think building goodwill
with the funders will help the brokers achieve more
and achieve more of their goals.
So for 2024, I mean,
what is 2024 gonna hold for Biddy Advance?
So for, for Biddy advance it, you know, we're,
we're doing much of the same.
We're, you know, continuing to improve constantly with,
with technology, we're continuing to constantly improve
with our scoring models.
You know, we have, we have so much data, you know, I,
I've had Biddy Advance since beginning of 2020, so,
you know, we have so many merchants that we funded,
you know, in, in four years, that, you know, we're able to
constantly change our, our credit decisioning model,
which is a positive, which means, you know, we're,
we're able to look at the data in real time
and, you know, choose more good, you know,
and choose less bad, which to the sales partners
and to the merchants is, is healthy
because it means, you know, we should be able to fund more
of their opportunities because we understand the risk. So
To wrap it up, what are your predictions for the MCA space
and for the alternative finance space?
I, I'm bullish on alternative finance,
space revenue-based finance space, you know,
A-K-A-M-C-A space, whatever you wanna call it.
I'm, I'm very optimistic.
I think that the disclosure laws are really healthy, um,
very, very optimistic.
Um, last year was a big year for us
with California disclosures, Virginia disclosures,
Utah disclosures, you know, January we launched, um, Georgia
and Florida more to come in 2024.
So I think disclosure laws are great.
I think disclosure laws require the funders to be,
you know, super compliant.
And it's kind of, you know, the first opportunity
that we've had in, in years since I've been in the business
since 2008, to really separate yourself, you know, and,
and separate kind of the, the good actors from, you know,
the, not the not so good actors or, or,
or said differently the companies that have the,
the resources and the, the technology resources
to implement these disclosure laws quickly and efficiently
and, and not miss a beat.
So I think, you know, I'm,
I'm very optimistic about the state
of the state of the industry.
I think we just need to kind of, you know,
take it one day, one day at a time.
And, and this is probably not the year to go crazy.
I think it's a year to just kind, you know, maintain,
you know, stick to what you're good at, stick
to your knitting, service your customers and, and, you know,
and have a successful year.
Craig, thanks so much. Okay.
I appreciate you chatting with us and giving us Absolutely.
Advice and just, uh, how to maneuver this, this industry. So
Absolutely. Appreciate it.
Yep. Appreciate you having me.