In this part one of a three-part series, CEO of Reliant Funding, Adam Stettner sat down to talk with BISTalk radio host Bob Ryan and co-host, Montana Smit and color commentator Aaron Cannata. The show focuses on delivering useful financial and business information with the belief that the people who establish, own and manage substantial businesses are entertaining and their stories are inspiring. They invited Adam on air to discuss Reliant Funding and how the company helps underbanked small business owners. This is part one of a three-part series.
BOB: Adam Stettner is with us. Adam, welcome.
ADAM: Thanks, good to be here.
BOB: Glad you could be with us today. CEO of Reliant Funding. Tell us a little bit about Reliant Funding.
ADAM: Reliant Funding serves small business, nationwide. We provide capital to existing businesses; businesses that are already up and running. And we’ve funded nearly a billion dollars to small businesses in every state.
BOB: A billion dollars, that’s a big number, you know.
ADAM: It is. It’s kind of like that McDonald’s threshold.
BOB: So now it progresses geometrically from there. You said it was businesses up and running. So I take it you’re not looking to fund businesses where the business plan is on the back of napkin at this point. They actually have to have some revenue and some things going on. Give us some guidelines. Are we talking about a company doing a million a year, ten million a year, twenty million a year?
ADAM: No, no. Our preference is to work with businesses that have been around at least a year. The purpose of the timeline is it gives you a sense of all the cyclicality that may occur within a year and the cash flow associated. Of course, within the first year, there’s typically growth of some kind. But we’re not looking necessarily for a minimum. So the minimum, I would say, if we had one, is about $100,000 in gross revenue per year. So we will work with relatively small business and then business doing upwards of $10 million a year in revenue, are also within the businesses we serve. But the average is probably in the $1-5 million range, knowing full well that if a business is doing $200,000 we are just as happy to service them as the business that’s doing $2 million.
BOB: Why is Reliant Funding needed? Why can’t businesses just go to their bank, do an SBA loan, borrow it from mom and dad? What gap do you guy fill?
ADAM: It’s a great question and I’ll get to it. But I’ll say that there is a need for all of that whether it’s – maybe less mom and dad but of course, if it’s there, why not? Businesses all believe, we all believe, as a small business owner myself, we all believe that we are bankable. And the reality is, big banks approve small business at a rate of 23%.
BOB: That’s not really great odds.
ADAM: It’s terrible. And so if 77% of businesses are being declined, someone has to service them and Reliant is there for that group. What I would consider – I wouldn’t consider unbankable but under-banked, because these are good businesses that banks don’t serve. Banks prefer to do larger deals. For a bank, the same amount of effort, time, cost, resource, goes into underwriting a loan that might be $50,000 as they do on a loan that might be $5 million. And so for them, the value in writing a $50,000 loan is not really there. For Reliant to fund $50,000, we’re happy to do that all day. In fact, our average is a little bit shy of $50,000 where bank average is deep into six figures.
BOB: So the market gap that you’ve found are under served businesses that are just not getting the attention from the bank. If they’re not funding a $50,000 loan but they will a $5 million loan, if the company has the same credit, are they just not getting the attention? Does it just not get processed? Or the banks just don’t want to do that small of a loan?
ADAM: Well, no. When you think again of 77% of businesses are being declined. There is still some subset of that 23% that is under-banked. They’re approved but the service isn’t there or that the story that is told by the business isn’t really being listened to. The bank has a box and either you fit that box or you don’t. Now, even if you fit the box, here are the terms. And those are inflexible as well. So for the 23% that are getting approved, it’s one size fits all.
BOB: It still may not be the right loan for them.
ADAM: Correct. And for small business owners and for anyone that’s listening that’s a small business owner, you’re putting yourself on the line for everything your business does. Everything. It’s a personal signature for everything.
BOB: Most people don’t know that when you’re a small business owner, you personally sign for everything until your business reaches some critical mass where it has credit of its own.
ADAM: That’s right.
BOB: Which is a long way away, often.
ADAM: You are deep into seven figures by the time that occurs.
BOB: Because of debt that you have signed your name on.
ADAM: Or, in terms of revenue, before someone will extend to you a small piece.
BOB: Oh, I see what you’re saying.
AARON: It’s a catch 22. By that time, you’ve probably got enough revenue to cover your operating costs.
ADAM: And this is the small business conundrum. You have a formula that works well enough but you’re really looking to fuel either your growth or build inventory, expand to another location, spruce up the space. Where do you get the money for that? And to Aaron’s point, it becomes this vicious cycle. And we all know it as consumers, when you need the money, the banks aren’t there and when you don’t need the money –
BOB: They loan money to people that don’t need it, right?
ADAM: Right, and so as a small business owner, you’re often, with a bank, you’re signing for everything. It affects your debt to income; it affects your credit and your bureaus with the three credit reporting agencies. So what we do with Reliant, we advance and we’re not just looking at credit. We’re looking at cash flow of the business, health of the business. And we are really advancing the money to the business, not to the owner or the single operator.
BOB: That’s a difference.
ADAM: Therefore, we’re not effecting the owner’s ability to borrow in his or her personal life. So with a traditional bank loan, even for the 23% that are approved, if they then go to purchase a home and get a mortgage or get a lease or they have trade lines for the business that require signing, if they were to take a loan, the person extending the trade line, looks at all the credit that’s been extended to the individual. And so as you borrow in one place, again, debt, they look against your income and they come up with this formula; DtI or debt to income. So what we do is, we don’t report to the bureau and we don’t affect an owner’s debt to income. We’re purely looking at the cash flow and the health of the business and advancing to the business.
AARON: Is there any collateral? Are you looking at the business’ assets and saying –
BOB: Let me ask you to hold that thought. There’s so many more questions. Collateral is a good one. We’ll talk about that when we get back. Adam Stettner is with us, CEO of Reliant Funding. You’re listening to BISTalk, believing is seeing talk radio. I’m Bob Ryan.
Part two of this three part series coming soon.