1 00:00:00.000 --> 00:00:03.405 Just clarify, square is the largest 2 00:00:04.105 --> 00:00:08.725 online small business lender in the US Of those, 3 00:00:09.065 --> 00:00:13.365 for those which we have data on, let's keep in mind 4 00:00:13.595 --> 00:00:16.125 that there are plenty of large small business lenders out 5 00:00:16.125 --> 00:00:18.725 there who might not be considered an online lender, 6 00:00:19.105 --> 00:00:20.765 but we might not have data on them. 7 00:00:21.425 --> 00:00:24.085 Square AKA block is a publicly traded company. 8 00:00:24.085 --> 00:00:26.405 Therefore we have access to their origination volume 9 00:00:26.515 --> 00:00:30.245 through square loans of those that we have data on. 10 00:00:30.305 --> 00:00:31.325 And we consider part 11 00:00:31.325 --> 00:00:34.605 of its category square ranks number one. 12 00:00:35.185 --> 00:00:39.045 Now, I wasn't surprised to Sue Square at the top. Mm-Hmm. 13 00:00:39.785 --> 00:00:44.045 And I'll tell you why. Why Square is different from a lot 14 00:00:44.065 --> 00:00:45.925 of their peers in the industry. 15 00:00:45.925 --> 00:00:49.525 Because what they did is they combined the best attributes 16 00:00:49.985 --> 00:00:51.445 of their peers and competitors 17 00:00:51.825 --> 00:00:54.645 and lumped it all into one single business model. 18 00:00:54.835 --> 00:00:57.045 Yeah. I had to write them down. Yes. 19 00:00:57.045 --> 00:00:59.165 Because it's, it's truly kind 20 00:00:59.165 --> 00:01:00.605 of revolutionary when you think about it. 21 00:01:00.865 --> 00:01:02.965 And I actually talked about this particular topic 22 00:01:03.425 --> 00:01:04.485 at G Event Connect Miami. 23 00:01:04.665 --> 00:01:07.485 Mm-Hmm. My opening session in Miami was, 24 00:01:08.065 --> 00:01:11.245 how come these online business lenders are number one? 25 00:01:11.355 --> 00:01:13.245 Yeah. What is the, what is the reason for that? 26 00:01:13.825 --> 00:01:17.805 And I think it's important to kind of break down, are these, 27 00:01:18.225 --> 00:01:21.045 are these things that others can replicate 28 00:01:21.265 --> 00:01:22.885 or are they truly in some sort 29 00:01:22.885 --> 00:01:25.485 of a magical land of their own? 30 00:01:25.865 --> 00:01:28.285 And let's break down exactly why Square Yeah. 31 00:01:28.465 --> 00:01:29.525 Is what they are. Okay. 32 00:01:30.135 --> 00:01:33.165 First of all, square, they use split payments 33 00:01:33.315 --> 00:01:34.485 like an MCA product. 34 00:01:34.505 --> 00:01:37.445 Mm-Hmm. So when you get a loan from Square, you pay back 35 00:01:37.445 --> 00:01:40.605 by giving them a percentage of each card sale that you do. 36 00:01:41.355 --> 00:01:44.285 That mechanism is very merchant cash advance, 37 00:01:44.595 --> 00:01:45.965 like it's called a split. 38 00:01:46.465 --> 00:01:48.885 So they use that to get paid back. 39 00:01:49.745 --> 00:01:51.325 But here's where it gets a little different 40 00:01:51.665 --> 00:01:54.125 and why they depart from everybody else 41 00:01:54.465 --> 00:01:55.685 who uses that mechanism. 42 00:01:56.255 --> 00:01:59.085 Their product is absolutely repayable. Mm-Hmm. 43 00:01:59.165 --> 00:02:00.565 Because it's a loan. Mm-Hmm. 44 00:02:00.705 --> 00:02:03.125 And MCA is not absolutely repayable. Mm-Hmm. 45 00:02:03.205 --> 00:02:05.525 The square loan is, so they're taking a percentage 46 00:02:05.525 --> 00:02:09.605 of credit card sales, but if, uh, if they don't get them, 47 00:02:10.105 --> 00:02:12.405 uh, back, if there's no future generated 48 00:02:12.405 --> 00:02:14.485 receivables, you still owe the money. 49 00:02:14.555 --> 00:02:16.245 Yeah. It's absolutely repayable. 50 00:02:16.985 --> 00:02:19.605 Uh, number three, they're the max term. Okay. 51 00:02:20.025 --> 00:02:23.685 On this product for an MCA, you take a percentage 52 00:02:23.685 --> 00:02:25.045 of credit card sales up 53 00:02:25.045 --> 00:02:27.285 until you get back to purchase amount. 54 00:02:27.385 --> 00:02:29.005 That's not, that's not true. 55 00:02:29.465 --> 00:02:34.125 But Square, they put a maximum term on the loan. 56 00:02:35.345 --> 00:02:38.125 So they might say it's 12 months or 18 months. 57 00:02:38.825 --> 00:02:41.205 And if you don't pay back by that date, 58 00:02:41.745 --> 00:02:42.925 the whole thing is due anyway. 59 00:02:42.955 --> 00:02:44.805 Yeah. There's no infinite time. Yeah. Yeah. 60 00:02:45.185 --> 00:02:46.445 Um, number four, 61 00:02:46.835 --> 00:02:50.325 there's no reliance on a third party bank partnership. 62 00:02:51.155 --> 00:02:53.605 There's a lot of quote unquote lenders out there. 63 00:02:53.835 --> 00:02:55.965 They're not really the lenders themselves. 64 00:02:55.995 --> 00:02:57.565 What they're doing is they partnered up 65 00:02:57.565 --> 00:02:58.885 with the bank. The bank 66 00:02:58.965 --> 00:03:02.205 Makes the loan, and then they buy the loan from the bank. 67 00:03:02.425 --> 00:03:04.125 The bank partnership model. Yeah. 68 00:03:04.385 --> 00:03:06.645 And there are legal risks that come with that. 69 00:03:06.795 --> 00:03:09.685 It's been under attack somewhat by state 70 00:03:09.685 --> 00:03:11.845 and federal regulators or people who complain 71 00:03:11.845 --> 00:03:13.565 and they don't think it should work that way. 72 00:03:13.945 --> 00:03:16.405 But what's different is that Square is a bank. 73 00:03:17.435 --> 00:03:19.085 They are the bank. So it's not a bank 74 00:03:19.085 --> 00:03:20.165 partnership, they're the bank. 75 00:03:21.025 --> 00:03:24.045 Uh, the next one is that banks, now that they're a bank, 76 00:03:24.415 --> 00:03:25.885 banks are exempt from a lot 77 00:03:25.885 --> 00:03:27.605 of the disclosure laws that are coming out. 78 00:03:27.605 --> 00:03:30.365 Yeah. In fact, a lot of the, the new commercial finance laws 79 00:03:30.365 --> 00:03:32.045 that are coming out, banks are typically 80 00:03:32.045 --> 00:03:33.685 exempt from the beginning. 81 00:03:34.245 --> 00:03:35.565 'cause banks are already held 82 00:03:35.565 --> 00:03:38.805 to a very high standard from a reg regulatory perspective. 83 00:03:39.595 --> 00:03:41.565 They're also the credit card processor. 84 00:03:42.435 --> 00:03:45.245 When you do an MCA, typically you have 85 00:03:45.245 --> 00:03:46.365 to rely on a third party. 86 00:03:46.625 --> 00:03:49.085 The credit card processor takes a percentage 87 00:03:49.085 --> 00:03:50.925 of each sale on your behalf. 88 00:03:51.035 --> 00:03:53.005 Yeah. And then forwards it to you. Yeah. 89 00:03:53.145 --> 00:03:55.885 So you have, you're dependent on that partnership. Yeah. 90 00:03:56.225 --> 00:03:59.485 Square is the credit card processor or block is right. 91 00:03:59.555 --> 00:04:00.925 It's the same, but it's the same company. 92 00:04:01.505 --> 00:04:03.645 So that's a huge advantage. And then lastly, 93 00:04:03.645 --> 00:04:06.245 the borrowers are their own payments customers. 94 00:04:06.505 --> 00:04:09.605 One of the hardest things about the industry is the money 95 00:04:09.775 --> 00:04:11.445 spent acquiring new customers. 96 00:04:12.025 --> 00:04:13.885 That's why people spend money on leads. 97 00:04:13.945 --> 00:04:15.805 That's why everyone's concerned about 98 00:04:15.805 --> 00:04:16.925 how much they pay for marketing. 99 00:04:17.515 --> 00:04:18.805 It's because that's one of the, 100 00:04:18.805 --> 00:04:20.845 the biggest cost period in the entire industry. 101 00:04:21.035 --> 00:04:23.165 Imagine if you didn't have any marketing cost, 102 00:04:23.665 --> 00:04:25.005 any lead acquisition cost 103 00:04:25.025 --> 00:04:26.605 or customer acquisition cost at all, 104 00:04:26.795 --> 00:04:29.685 because this product is purely marketed to this massive 105 00:04:30.205 --> 00:04:32.085 existing customer base that you had. 106 00:04:32.505 --> 00:04:34.805 So when you asked Johnny, am I surprised 107 00:04:34.805 --> 00:04:35.965 that Square was number one? 108 00:04:36.605 --> 00:04:36.765 Absolutely.