Most Funding Decisions Come from Panic

Sara Weldon

0:21

Well then it's time.

Stoy Hall

0:29

Let's be real. Most. Our funding decisions don't just come because we've planned it for years and years and years. They come because something has happened, right? It's Tuesday and payroll's due Friday. We need to expand, but we don't have any capital. We just started our business and don't have the longevity of a business. I have a lot of personal debt. I want to make sure it's on my business. You name it. That's why we usually get funding on, on a non-traditional side of things. Traditionally, yeah, you want to go through those pipelines, but typically something happens to us and we go, shit, I need help. Mm-hmm. And what better way to reach out than to true FinCo with Sarah, but also understanding of why and what those mechanisms come from. And so that's what we're gonna talk about today in today's episode. So. Let's first just lay out today's topic of funding goods. Bads is indifference. We're all on social media. We all understand. There's a lot of people out there who spew things that aren't necessarily full truths. Uh, some do have some truths and then some are just pure bullshit. Uh, and we need to get through those. But let's first talk about the emotions. Like we talked about payroll's due Friday, expansion pans, slow month. We don't have reserves. How accurate when people come to you, um, and your team, that those are the initial feelings they go through?

The Real Emotions Behind Needing Money Now

Sara Weldon

1:48

Uh, very accurate. Unfortunately, you know, a lot of people, they don't come. You're right because they've been planning it forever that they need funding. It's that, oh shit, what am I gonna do? Like I am up a creek. I'm in a panic situation, I'm stressed, I'm not sleeping. I don't have any options. And it is a really. Scary feeling. I mean, face it anytime you need funding, I'll be honest, it brings up a lot of anxiety for most people, but that's kind of that extra anxiety inducing feeling that happens a lot because as a business owner, it ebbs and flows. It's very rarely ever consistent, and you just find yourself in that situation and it's like, what am I supposed to do? I've got people relying on me, but there's no money to give them. So yeah.

Stoy Hall

2:31

And with that though, then you make bad decisions, right? Because now you're, you're freaking out, things are going bad, you gotta figure it out. And as terrible it is for your industry. On the lending side, there's a lot of vultures out there. Yep. As soon as you apply to one, your number is out there, and now you're getting calls and texts and emails for the next a hundred years. It, it seems like there's no end in sight. Then that leads to getting a deal that. May work, may not work correct, but typically gets people trapped into something. What do you say to those that are in that mindset right now?'cause there's a lot of business owners, right? Our economy's not great. Society's going poorly. Things are happening that are listening to this right now going, Hey, I need some blending. But what is a proper way to make sure that they don't get stuck into or trapped into something?

How Lending Vultures Trap You at Your Worst

Sara Weldon

3:22

Well, I wish they could all hear me, but unfortunately, and, and you're right that that's the problem and that's what so many lenders count on. They prey on people like that. I wish people could just take a breath and realize now is not the time to jump into something As desperate as you are, you have to take a step back. Run those numbers, make sure it makes sense, maybe get a couple different options to consider. Don't just go with the first thing offered to you, because again, there's those vultures out there that will say, this is all you can qualify for. You have to take it. And you're in that desperate moment. So you take it, but you don't really run those numbers and they certainly aren't gonna give'em to you. And then that's just that downward spiral that begins and, and unfortunately we see that so often. So often it, it's terrible.

Stoy Hall

4:06

And I know we bought, we both don't have the data right now, but I would assume most that get into some of these programs, the reason that they fail is'cause they did not plan. Correct. And then you've got interest on interest and you're, you're, you're not being able to dig yourself out of the hole. Yep. Because you didn't plan for the use correctly. Or you have to keep dipping into that bucket because you didn't plan correctly and you just keep piling on debt. What? From that perspective, what do you see is kind of quote unquote, the worst program out there that gets people trapped?

MCAs Are a Shit Sandwich and Here's Why

Sara Weldon

4:37

Hmm. This is where I get in trouble. I'm the, I'm the person that tells you the truth. And, and a lot of lenders don't like me for that reason. I'm not a huge fan of mca. So merchant cash advances, and we jokingly call them a shit sandwich because, and let me preface it. For some people I've seen it work and it can make sense as long as you absolutely have that way out, you understand it fully. It's a quick in, quick out, but that's not the majority of the case. I hate these loans because they are extremely high interest and on paper it doesn't look as high as it is because they don't want you to realize you are digging yourself basically a grave for your business. I find those to be just a death sentence for most business owners because the problem is they get into it, then they find that they can't meet those payments, and guess what? Those lenders are there waiting for you going, guess what? I can give you another loan to help you get outta that loan. And they will pile up, pile up, pile up, pile up. I've seen people with up to eight to 10 of those. And we're talking daily payments. We are talking extreme interest and unfortunately that's where I've also seen so many businesses go bankrupt because there's no way out. I can edit that. I don't know why that, pause that. Hang on. Thankfully. You know, sometimes it makes sense, but I'll be honest, I, I just see that happening so often and it's just, you know, they can be labeled as something else. They're not always labeled as an MCA, but it, it is all about the same thing, honestly.

Stoy Hall

6:03

And I think the worst part about it is there's no, there's no real compliance or structure around protecting

Sara Weldon

6:10

Correct.

Stoy Hall

6:10

The, the, the end user. Right. Um, and, and from that's top to bottom right. We see all the ads on social media. They vulture text you, email you, um, telling you that you're pre-approved for$250,000. Just send us your docs.

Sara Weldon

6:24

Yep.

The Harassment That Never Stops

Stoy Hall

6:24

Um, and, and since I do role play things for my clients, like I've done this process, obviously everybody I've done it through, through trip income, my funding comes from them. But I do look outside to just figure, figure out processes. Well, now I get DocuSign that immediately have funding that you could just sign and walk through and like all of the most ral. Virtual, virtual things, I can't speak anymore to attack and to think this is a good idea. And it's not just once, it is now a daily occurrence. Yep. And that is what terrifies me the most is that yes, you might be able to have your guard up when you first do it and recognize, uh, that's not real, or I shouldn't get into that. But if it keeps pounding you and you get tired and eventually you do click. Not only could it be just getting trapped into something, now we're talking about they could steal information. Like it just gets a very, very slippery slope. So in your opinion, what's changed in this funding landscape in the last basically six to 12 months that has caused more of this to come out and more people to get trapped than we will say, you know, two years ago. Right. Um, in that landscape.

Sara Weldon

7:35

You know, I feel like more business owners are, are struggling right now. Struggling with the economy, struggling to make ends meet rising costs. I mean, you name it, it, it's just not pretty for business owners. So they're feeling more desperate. They're feeling like, how can I get out of this? And I, I'll be honest, I, I have no problem admitting I hate the industry I'm in. I hate it. What you're talking about is so real. I see it firsthand. It must have been three years ago. We, we were in a situation as business owners and we were kind of in that situation, so we thought, oh, let's just, let's just reach out. Let's maybe do a line of credit. Rick got on that list and it is, I mean, it's downright harassment. He still is getting multiple phone calls a day and the way they play it, and we know the truth, but most people don't. Hey, Rick, that that line of credit we were talking about, I got your approved for it. We never talked to that person, and it's just nonstop and it's text messages. I mean, I, I'm getting pissed at this point and he kind of plays with them a little.'cause he's just at the woods end. We've tried to get him off lists. It's just nonstop. We understand it'cause of where we come from, but there's so many people out there that I, I hate to say it, they'll, they'll absolutely be taken advantage of because they're in those mindsets of, oh gosh, this guy's so friendly. He's out there from my best interest. Oh, he even knows my name, and he knew that I was looking for 250,000. Oh my gosh. Heck yeah. You know, and they don't really think it through. And it's just, I, I'm ashamed, I'll be honest. I'm ashamed sometimes and that's why I try to be so. Different. I mean, I'll talk people out of, out of loans and I know that's probably not the best thing ever, but I wanna go to sleep at night. I have a, a dang conscience. Most of these people don't. And it's, it's just, it's a sleazy industry. It really is in so many ways because these people don't care. They care about how am I gonna make the most money off you? And unfortunately, those high interest loans are the biggest payday for brokers and lenders. Biggest payday, I mean. I could be be sitting in The Bahamas if that's all I sold, and I won't do it. It's, it's gross and it's completely just taking advantage of all these people and hopefully, you know, I'm hoping things will change, but right now it's just kind of a scary, scary environment for business owners.

Stoy Hall

9:47

So we, we've, we've definitely hit upon that, the negatives a little bit, but what, what would say the number one misunderstanding about funding from a positive perspective is in your opinion, that you've seen?

Sara Weldon

10:00

It can absolutely make sense. That's the thing, like there are good loans and there are bad, and it's okay to take on debt. There's such a thing as good debt. There is such a thing as bad debt. I've seen good debt work so well for business owners where they sit down, they run the numbers, they realize, you know what, if I take this money, it's gonna make me x. Whatever it might be and it makes sense. Those are the times that I see the positive effects of it. You know, rather than struggling, rather than maxing out their personal credit cards, all these opposites, you know, there are times it absolutely makes sense, but not a plug for you. But it makes, where I really see it makes sense is to have someone likesto that is a little bit outside that can look at that and run those numbers and go, Hey guys, this actually makes sense. We can get out of this. It's gonna help us tremendously rather than us just inching along. You know, I've seen it do amazing things and, and that's, that's what keeps me going is when I've seen it change lives, when I've seen it change businesses. Those are why I keep at this day, after day after day, and we're going on our seventh year is because of those stories where I see the, the positives of, of borrowing and the good debt

Noise vs Truth: Funding Myths Exposed

Stoy Hall

11:11

and, yeah, selfish plug, having a planner probably. Exponentially changes your success rate. Okay. I don't have facts behind it. Right. I've just seen it both with my clients myself, and have spoken to others that have dealt with this as advisors. Like having the plan and someone to see both of it and to be able to balance it and make the true plan, your success rate goes up tremendously. Mm-hmm. But let's get through some No noise versus truth. Right. Um, the first one's kind of funny'cause you had already said it, so we're gonna hit upon it lightly and that is, debt is always bad. Now you are just literally said there is bad debt and there is good debt. This is the truth, folks. Most not, let me not even use the, most majority of successful businesses have debt. The most wealthy people in the world that you think, oh man, they have all the, the, the money in the world. They never have to get debt. Have a lot of debt. Because it's leverage. Mm-hmm. If you use it correctly to leverage yourself to get, like you had talked about, 2, 3, 4, 5 x, that's winning. That's how you properly use debt. You can also use debt to help with cashflow flexibility. I'm a huge proponent of that. I know we've discussed this before, but if I can go get some type of funding and lending,'cause I need it now, but it'll help me with my month to month cash flow, that is also a type of return that is a good debt. Bad debts when it keeps piling and piling piling and you're not using it to get ahead. So you already talked about that. So we're gonna take this one. So the next one you alluded to a little bit too, take the biggest offer you can get.

Sara Weldon

12:49

Hmm. No, no, do not take the biggest offer you can get. Take the offer that makes the most sense with your current situation. Take the offer. That's not going to drown you. That big offer might look beautiful and, and pretty and wrapped up in a special bow, but if you, if you really run your numbers, that might not make the most sense. If it's just adding more debt and piling it up, it does not make the most sense. At all. I see people doing that sometimes where they're like, oh, I must be doing really well if I got this big of an offer. No, it does not mean that, you know, again, that's where a story comes in because he can look at those and go, no, guys, just'cause you've got that offer does not mean that's what makes the most sense. This one that's in the middle might make the most sense

Stoy Hall

13:39

and that, I mean, it's. Use the analogy for your home when you're buying a home, it's the same thing, right? Mm-hmm. It, it doesn't matter what the usage is for. Just because you can get a$600,000 home does not mean you can afford a$600,000 home. It's the best thing for you. It's the same thing for our businesses.

Sara Weldon

13:54

Mm-hmm.

Stoy Hall

13:54

Just, you gotta, you gotta recognize and realize that plus it costs more to get more money. Right? Like the more you get, the more it's gonna cost. Let's just be real.

Sara Weldon

14:02

Absolutely.

Stoy Hall

14:03

This one has everything to do with, so those that don't know whether it's MCA or some other types of funding, there are daily payments, weekly payments, monthly payments that you have to to occur. What do you say to this when someone, a lender says this to somebody, you'll figure it out later when it comes to those payments.

Sara Weldon

14:22

No, I've heard that Sid so many times and I hate it, and I cringe. You won't figure it out later either you figure it out now or don't do it. Do not figure it out later, because that later is gonna turn into the biggest snowball and nightmare of your life. That is the worst line I've ever heard used. I hate it. That's not planning. Borrowing money takes planning. It really does. There's no, there's no figuring it out later that, that, that shouldn't even exist in the lending world, but unfortunately it does. It does. It's figure it out now

Stoy Hall

14:53

and you hear it all the time and it's just mm-hmm. So infuriating. Alright. Last one, take number four. Revenue solves everything.

Sara Weldon

15:04

Gosh,

Stoy Hall

15:06

sounds different.

Sara Weldon

15:07

That's a good one. I mean it revenue definitely plays a big part, but it doesn't solve everything because I've got many examples where I've had clients that have tremendous revenue. But they're completely upside down and buried because they didn't plan effectively. They didn't borrow correctly, they didn't structure their debt correctly. They took on bad debt. I have a client that makes$14 million a year, and he's so buried Incas that he's completely broke. So revenue does not solve everything. It's nice. And if you have someone like STO to help you. Plan and structure that revenue and where it's gonna go and what's good debt and what's bad debt, great. But for most people thinking that revenue's gonna solve everything, that's, that's a big mistake. And that's just an an accident waiting to happen.

The 3 Step Framework Before You Borrow a Dime

Stoy Hall

15:57

I agree. Now, now, does profit help? Huh? Yes, of course all that does. But there are cer, there are certain ways to get a bunch of revenue that at the end of the day, you're not making a profit.

Sara Weldon

16:07

Correct.

Stoy Hall

16:08

Right. Just like your client, I mean, if someone is clearing 14 million in revenue, you would assume one would assume that they're doing just fine. Right. But it's not always that case. So just be careful out there. Or as we get into the expert lens piece of this, there's a framework. That you had discussed and talked about in terms of when you're looking to get lending and funding that you should follow. And so I wanna elaborate more on those steps as well. So the first step is to define the use of funds and the return of those funds. Talk us through what that means from your perspective.

Sara Weldon

16:43

So, defining the use of funds. So for example, don't just borrow to borrow a good case. I like, we do a lot with real estate investors. So for example, we have people that borrow the funds to flip, do fix and flips. To find that use of funds, what are you gonna be using it for? Well, I'm gonna be using it for rehab. Okay, great. How much is that gonna cost me? Great. Figure all those pieces out first, that use of funds, and then understand, okay, well if I spend this much and I borrow this much and it costs me this much and I can supposedly sell it for this much, then what's my return going to be on that? It's really sitting down and, and running those numbers first. And not just borrowing to borrow just because you can, we help people in all industries. So for us it's always a discovery call. What are you borrowing this for? What are you specifically going to be doing with it? And how are you gonna pay that back? And, and does that make sense? And it's just really having that thoughtful conversation that is unusual in the lending world.'cause most people just wanna. Here you go. But it, it's so important because then you go in there with a clear path and a clear plan and it kind of, I feel like it takes away that that big stress factor that people have when they don't have that plan in place and they borrow just a borrow

Stoy Hall

18:02

agree. And step two is set a max payment that the business can actually safely carry. I think that's the the bottom piece that people don't really know, and it's not easy for even your team to truly understand what the business can carry because they're not running the business. It's not their business, right? We all know that. Well, you should know as a business owner what you can personally pay for and what your max is not What. The financials and the lending company state they are, because to me they're always gonna be different.

Sara Weldon

18:31

Correct.

Stoy Hall

18:31

Because there are so many moving pieces in your own business. So the next one is just always make sure to set the maximum payment, whatever that is, have that number.

Sara Weldon

18:39

Yep.

Stoy Hall

18:40

And use that as as your own thought process. I would also go out and say, don't necessarily give it to your lender what your max payment is either. Okay. I don't care how much you think you trust them or whatever. And this goes for all lenders, mortgages, you name it.

NoBS Wealth

18:54

Mm-hmm.

Stoy Hall

18:54

You know your max. Let them know what your max is, but not your real max, a different one. And then work from there, because they can spin it in a way and get you into something again that gets you stuck. Just know what you can afford for your business. And then the last one, which is I wanna get your more detail on this, is step three, compare offers by total cost and repayment structure, not solely on the interest rate.

Sara Weldon

19:20

Hmm. I like that. I agree, I, I absolutely agree. And that's where those numbers really make sense is when you're looking at the two different options. So for example, I like comparing capital stacking versus just a straight line of credit. You know, really running those numbers because. Capital stacking has 0% interest, which to some might be like, boom, that makes the most sense. But maybe that line of credit that you're just gonna be taking and, and turning around and paying off within three weeks, four weeks just to buy this piece of equipment, maybe that's gonna make more sense. So it, again, it's sitting down. Running those numbers, and it's not always apples to apples. That's, that's the, the other piece to consider. So yes, it's not always just all about the interest rate.

Stoy Hall

20:06

And I would love everyone to go into these with like, open thoughts with all the plans. Mm-hmm. And, and options that are presented. Right. Don't go in saying, I'm only gonna do a line of credit, or I only want capital stacking. You need to go in, kind of open and just figure'em out because there's different. One, there's different ways to stack'em both. Mm-hmm. Two, one might be better. Another, and it's also long term, like there's so many thoughts and questions than just picking up the phone and saying, Hey, gimme a hundred thousand.'cause yeah, that could happen. But again, if you don't plan, kind of where, where do you, where do you stand? So I want to kind of end, not end with, but this segment with the three top mistakes I believe. Are the most common that business owners make, and I want to see if you think they're truthful or at least give your opinion on them. Okay, so I'm gonna rapid fire them all three of'em, and you let me know what you would say is the top mistake.

Sara Weldon

20:58

Okay.

The Biggest Funding Mistake Business Owners Make

Stoy Hall

20:59

Borrowing to cover broken cash flow. Mm-hmm. Ignoring the repayment structure or continuously stacking funding on top of itself.

Sara Weldon

21:13

I mean, I feel like borrowing to fix broken cash flow is really my, my biggest mistake because that's, that's the desperation move is when you're borrowing to fix broken cash flow. And if you're already broken, how. The repayment is where we fall into the deeper holes. So that's, that's where I've seen the biggest problems happen. I mean, can all those be mistakes? Absolutely. But that's the one where I just feel like they're just on that edge of that cliff and they, they fall off very easily. The other ones you can kind of put the brakes on a little bit. Um, but that's, that's the one that I've seen the biggest problems with.

Stoy Hall

21:52

And that's, I think, fundamentally the biggest problem in business in general. Right? Mm-hmm. Is people keep throwing money at a bad situation. Right? Don't throw good money at bad money. We've all heard that. But if you have a cashflow problem, it's one of two things. One, you're disorganized and don't know where money's coming in and out of in its cluster and, or number two is maybe your business model isn't correct. Yep. And it's not a good business. Maybe it, whatever. You need to ask yourself that. And I think a lot of business owners get in trouble because it's our baby, right? Like our business is our baby. It's been around for a year, five years, 20 years, whatever. And we don't wanna let it go because it's gonna hurt us or we don't know what to figure out. But at the end of the day, you need to be truthful. And ask yourself, is my cashflow problem because I'm unorganized, I can figure it out. Or is it truly because my model or my business actually can't sustain in today's society?

NoBS Wealth

22:45

Mm-hmm.

Stoy Hall

22:46

And tough questions, tough things to go through, but I agree why that's that number one mistake.

22:51

Mm-hmm.

The Hard Truth Every Owner Needs to Hear

Stoy Hall

22:55

So as we round out today's conversation, besides the fact that we all, we both loa loathe M Cs, right, we, we wanna make sure everyone has a plan and the proper way is to go to True Fin Cove course to have these discussions as well as make sure you have a planner to walk yourself through. Is there any story or hard truth that you want everyone to know? About getting funding in today's markets, right? We got a lot going on. Mm-hmm. We've got war, we've got oil, we've got costs going through the roof across all industries. We've got interest rates that are babbling around, uh, who knows what the future holds there. Is there any hard truth that you want to get through to everyone?

Sara Weldon

23:39

I mean, you know what? I'm gonna speak from personal experience. The hard truth is. I really believe every business owner needs a story. And whether it's a story or it's someone else, it really makes a big difference because that story or that other person, they're gonna help you weed through those hard truths and help you look at that objectively. Because otherwise you just kind of, you're spinning around and, and that's when you make those poor decisions. And, and I wanna say from experience, you know, we operated, we're going on our seventh year and our first few years we didn't have you. We made some bad decisions. We're human, we're business owners, but. Having you there just provided that sounding board that I think every business owner needs to have. And I'm sure there's people that will go, well, that's an extra expense. How does that make any sense? In the long run, that's gonna save you money. And it's true. You do have to have those hard truths. I mean, we've even experienced it. Our business has gone up and down and it is hard. It is your baby and you're like, I don't wanna change it. I did this. We've had to look at restructuring, eliminating some positions because it was drowning us. And sometimes that's hard. You know, you like your employees, you like your staff, you like what they do, but at the end of the day, you're drowning yourself just to save them. So I just, yes, I, I agree with all the points we made about running the numbers, all of that. But at the end of the day, I feel like the most important thing when it comes to borrowing money is actually having a you to talk it through with, because. I know my strengths, I know my weaknesses. I'm not somebody that is going to sit down honestly and run all these numbers. I won't. I, I can look at it on a basic level, but I'm the person that would impulsively go. Gosh, that's gonna help. I know that about myself. Rick's much better. But then you kind of meet us in the middle where you really write it all out and we talk it through makes com and then it makes complete sense to me. I just don't have that mindset. I don't operate from that. Business owner needs to understand and recognize how they operate and that's okay. And that's where a you comes in because it just kind of, it, it, it makes all of that make sense. It fixes those flaws in our characters. But helps us operate better. I, I just, you know, I, I could sing your praises to the moon. I don't even know if that's the right thing to say, but I just have noticed such a huge difference and I see all these business owners and they come to us and, you know, I can't just sit there and say, well meet with sto. You know, they don't believe me necessarily, but I wish they would because it would really change the entire trajectory as well as their mindset, um, altogether.

Stoy Hall

26:22

The hard truth is knowing who the hell you are, knowing your lane, and being okay with bringing in a team to help you. That that's what it is. And luckily enough, right? We're we're not, we're not spring chickens, right? We're not the youngest, but we've been through so much in life and our experience has led us to this that I think the younger you are, the better opportunity. Just like in anything, if you can take these conversations and truly work on that. The better. And I don't mean in terms of age per se, also age of business. Mm-hmm. And being in business too. As soon as you can get to that point faster, the faster you can get there, the more successful your business is gonna be.'cause at the end of the day, like you said, we're all really good at what we're good at. We're not good at everything. And if you can't see that and you try to do everything yourselves, then you're gonna be trapped. Then you're gonna get funding, then you're gonna get lending, something's gonna happen. And by that time, then it's too late. And that's where we, we personally mean you don't want businesses to fail. We don't wanna see that because it provides so much for everyone. So without further ado on that, Sarah, I appreciate your time everybody. There is a lot of good stuff going on. Reach out to us. Please reach out to True FinCo. They have all the social media in the world reach out to to no BS wealth or Black Mammoth. At the end of the day. There's a lot going on and there are people here for you. To help you through that situation and if you so choose, go ahead and reach out to Cash crew because there is a whole donkey party going on and I'm gonna leave it at that'cause people are gonna be, what the hell's a donkey party? Don't worry, just Google it. You'll be fine.

NoBS Wealth

28:13

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