218: Tap Into Non-Bank Funding with Joe Camberato

Joe Camberato’s Why is to simplify the financing process for entrepreneurs. He was inspired by the struggles he witnessed self-employed clients face with traditional banks, to launch National Business Capital, a platform that connects business owners with non-bank lenders to foster sustainable growth.

Joe outlines the National Business Capital Framework, which involves understanding client needs, reverse-engineering the right lending partner, and building a mutually efficient lending process. 

Listen to the podcast here

 

Tap Into Non-Bank Funding with Joe Camberato

Good day, dear listeners. Steve Preda here with the Management Blueprint Podcast, and my guest today is Joe Camberato, the Founder and CEO of National Business Capital, a company that helps entrepreneurs secure quick and fair financing to save time and cultivate sustainable growth. Joe, welcome to the show.

Hey, thanks for having me, Steve.

So, I’m really wondering, how did you develop this idea for national business capital? Was it that you were in need of financing yourself and you realized that the market is broken or there was some other reason?

Yeah, I was in a different industry and had a lot of self-employed customers and I saw how challenging it was for them to access financing. They’d go to a bank, they’d get turned down, they didn’t really know where to go. And I watched a lot of them refinance their homes, use a home equity line of credit to fuel their companies. And a lot of them kept asking me for financing for their business, and I would say, well, why can’t you just go to your bank? And they would share with me the challenges, how complicated it was, how time-consuming it was, or that they didn’t have a collateral that banks were looking for. So, I started to help these entrepreneurs and one deal at a time. And I found this whole world of non-bank lending, which kind of blew my mind. And it blew my mind that most entrepreneurs didn’t even know it existed. And this was back before, you know, we’re in the middle of this private credit boom right now, but private credit’s been happening since the beginning of time. And this is going back to 05, 06. And I uncovered this whole world of non-bank lending and I wound up getting a few deals done that both of these clients went to multiple banks, got declined. And I was able to pull in a non-bank lender, get them the money they were looking for, and I watched them scale and grow their businesses. And I was hooked. And I said, wow, there’s this whole world of lenders out there. And it was just really wild to me that there wasn’t like a go-to, a big brand name place that you could go to, to basically apply in one place and have access to all of these different business lenders. So there wasn’t anything out there. So I set off to go create it. And that’s exactly what I did in 2007. I brought in and started building relationships with all the best business lenders that were non-banks in the country. And there’s even non-bank SBA lenders, which most people don’t realize. So, everything from SBA term loans, lines of credit, equipment financing, I brought that all together in one place. And as an entrepreneur, you can apply.

We have a simple, easy process. We've got a really talented team now. Share on X

We’ve got over 70 folks in office, and we’ve helped fund over $2.5 billion in transactions since I started, which is crazy.

So, Joe, what I’m hearing, that would have been my second question, so thanks for answering it already. So I heard four types of non-bank lending. You said credit lines, you said SBA loans, you said term loans, and I think you said receivable financing was the third, fourth one?

Yeah, equipment. And we also, you know, the receivable and asset-based lending as well.

So, okay, so there are five, basically.

Yeah.

So, there’s receivable, asset-based. Okay. So these are the five major categories. And within these categories, is this quite uniform? Or the pricing differs or there are also many differences there?

Yeah, that’s a great question and that’s what most people don’t understand. So, really just depending on your business, what’s going on, your type of industry, all these different things will make up the pricing, the lending product, the lender and all the different lenders, the type of product, they all come with different type of interest rates and pricing and then just based on your business and risk. You know, right now we’re in a high rate environment, you know, so bank rates are anywhere from 8 to 12%, and then just based on risk and a number of things, you know, rates will go up from there.

So I imagine that SBA is probably the cheapest, SBO financing, maybe not, and then you have…

Yeah, sometimes, sometimes not, believe it or not. The asset-backed stuff will be the cheapest. So real estate or equipment or high-quality B2B receivables and inventory, that will get your best pricing. Even the SBA pricing is usually a prime rate plus type of pricing. So a lot of the SBA deals are prime rate plus 2 to 2.75%. So even some of the SBA deals right now are around 10%, which most people are like, wait, what? Why do you take 10? They can’t even believe it. We’re making this video in March of 2024. The rates have been the highest they’ve been in over 20 years. But we’re busy and we’ve never been busier and it’s still cheaper than selling equity in your company. And most of the customers that we work with are rapidly growing, they’re in high growth mode, they don’t have the time for banks, and they’ve got opportunities that they need to execute on, they’re very profitable opportunities. And those are the clients that we love that are trying to take advantage of the market opportunities to grow their companies.

Okay, okay, so maybe we can get a little bit deeper into this, but here is my question. So, this podcast is all about frameworks and you developed the National Business Capital Framework. Can you share with us what the steps are? How do you evaluate and decide and figure out what the best solution for a customer would be and make sure that they get it in the best way possible?

Yeah, I’m a big believer in processes and systems. I mean, that’s how I was able to scale and build my business. And all businesses share a lot of the same core problems and all need the same core things. Processes, systems, people, culture, accounting and finance, marketing and sales. So, all of those things, we put a lot of focus on and never-ending improvements in focus. And one of the biggest things in my business besides all that is lender access and understanding lender guidelines. We work with all industries in all 50 states. So, whether you’re, you know, transportation, construction, contracting, you’re a doctor, you’re a restaurant owner, you’re in manufacturing, you’re in tech, we work with all those industries.

So we put a lot of focus on training with the folks that work here, our business financing advisors. Share on X

And then we have our systems and processes. We utilize technology to make applying and all the document collection and the deal review, it all rolls into our system so we can easily review your application, your revenues, your financials, all that stuff we can view in one place. And then we have our lender access mix and we understand those guidelines very well. We use technology to assist with that, but also really great people here at the company. So when you apply with us, it goes through a very systematic, repeatable process. It gets all of your information in one secure core place. And then by a click of a button, we can apply with one or multiple lenders. And we’re always looking to match people with that right lender. And that’s one of the hardest things to do because lenders are always changing their guidelines and in this market, they’re ever-changing. So because we process over a thousand applications a month and we fund a few hundred transactions per month, we’re really seeing the lenders who are funding deals and not funding deals. And we’ll hear from clients all the time, oh, I was approved. Well, approved is one part. That’s like probably the easiest part of the equation. It’s getting funded. That’s the hardest part, right? So we also see lenders that are approving applications, but they’re not actually funding them. So we’re seeing all this stuff in real time. All that information, our systems are keeping track of it, and then also our teams. So when you apply with us, we’re gonna get you to the right lender, which we believe not only will approve you, but will also fund you and do it in a timely fashion, and also match a lending product for whatever it is that you’re trying to accomplish in your business.

So I don’t get what the difference between approved and funded, but I understand it. I get a lot of letters in the mail, you’re approved, you’re approved, which is basically BS. It’s just the marketing, you’re approved for applying to us for financing, and then we’ll decide whether we fund you, kind of thing.

Correct. You can even get an approval from a lender after applying, but sometimes there might be stipulations along with that term sheet, and there’s still an underwriting process that needs to happen. So sometimes you can get this approval, but then there’s still due diligence that happens after the fact. And certain lenders are notorious for issuing approvals, but never actually funding because they go so deep on the due diligence after the fact.

Right. So going back to this process, so what I really liked in our pre-call that you explained that there are three steps. So first you want to understand the client needs. So that’s one. And then you can reverse engineer the lending partner that will fit that client need. And then you build a process that is efficient both for the customer and for the team so that you can streamline everything.  So please help me understand a little bit about what are you looking for when you’re looking for understanding the client needs? And then what’s this process of reverse engineering the lender? What does that look like?

Yeah, so when someone comes to us, we do a very simple phone call, and we want to get a quick financial understanding of the business, what are they doing in sales, revenue, are they profitable, not profitable? We work with companies that are in both situations. We want to understand their industry, we want to understand what they’re using money for, and then based on what their opportunity is and what they’re using money for, we’ll then reverse engineer back the right lending partner. So, we’ll ask what your credit score is and how long you’ve been in business, and every lender has a different requirement. So, personal credit score, what the business credit looks like, how many years you’ve been in business, certain revenue sizes, profit size, and then some lenders only fund minimum deal sizes or higher, right? So, based on all of those questions and answers, we’ll then pull the right lender in. Another thing which people don’t understand, like if you want to finance equipment, there’s great equipment financing lenders out there that specifically finance equipment. So we want to work with one of those lenders. If you want a line of credit, well, certain lenders have line of credit and some don’t.

If it's more of like a long-term project or something like that, then maybe you want a term loan product. Share on X

So based on what the use of funds are, how quickly you need money, whatever it is that you’re financing, we will then back that right lender in. And so we’re looking to make it easy for the customer, but we also, which is really important, want to make it easy for the lending partner and underwriting, right? So when we work with our customers, we’re going to help package everything up and we want to serve it to the underwriters on a silver platter to make their lives easier, to ensure that we get a really good look at the application and also maximize the amount of funding that they’re going to get approved for. And then there’s things that sometimes get missed, like a lot of lenders utilize technology and AI and different things to underwrite, but then sometimes those things miss things. And when we see an approval that doesn’t look right, we’ll go back and we’ll fight for our customers with the underwriting team to point out things that may be missed. Where sometimes things on paper look like, we had a deal recently that was looking like their profits were going down dramatically. And they were, but it was because they were investing in something that they’re about to roll out, and they were investing in technology, and it was eating into their margins, but they just completed that, that was gonna stop. And now they’re actually able to do a lot more with less, so you don’t need to hire as many people. So you have to be able to tell these stories to the underwriting team. So we connect with our customers to understand through that conversation and the questions and the answers, we determine what we think will be the right lending partner, go over those terms and products. And if that makes sense for the client, then we’ll collect that financial package and then we’ll go and pitch it to our underwriting team to get the best approval.

So, Joe, that’s fascinating. So, you explained that things are changing and there’s many more lending partners are available than perhaps earlier. So, how is the market shifting post pandemic and which areas of credit becoming more available and maybe cheaper as a result? And what are the areas where lenders are smarting or holding back?

Yeah, so it’s a lot to unpack there. And it’s really been a wild time in the world of business lending and especially non-bank lending. So, in 2018 or 19, non-bank lending passed bank lending for the first time in the history of lending. So, private credit and non-bank lending did more than the banking system, which is just really like, when you really look at that. I mean, that’s just astonishing. So that’s really wild. And so this trend, and then COVID happened, and then we had a bank run last year, right, in 2023, which further made banks tighten up even more. So, this whole shift towards private credit and private lending, non-bank lending, has been happening pre-COVID. COVID fast forwarded and pushed more things out to the non-bank lenders. So, if you’re in business, you really need to understand the world that we’re living in today. For most businesses, small, medium, and large, not only am I talking about the local small businesses, middle market businesses, and also large, big mega corporations are doing their lending from a lot of non-bank lenders.

The flexibility, the ease, it just moves much faster. Share on X

The non-bank lenders utilize this old school type of lending approach where they really look to understand what’s happening in the business so there’s still this manual decision making that’s happening which is actually a good thing. And then they don’t have the regulations that the banks do. So, if you’re a business, and especially the smaller ones, the non-bank options are probably gonna be the most realistic options, unless you have a ton of real estate and a ton of profitability. For the most part, a non-bank lenders are really gonna make sense. And then what’s happening is in this market, I think everyone’s going through like a reset, lenders and business owners and businesses in general, there was all this pimped up demand, COVID happened, things crashed, then things bounced back, went crazy, and now things are kind of leveling off. So you’re having banks be really conservative because businesses that boomed during COVID are now getting back to reality. And folks are really starting to clean up their balance sheets and they had massive profit and now that profit’s getting back down to reality. So, you know, banks are being really cautious with those types of companies. And there’s industries that boomed and bust during COVID. So transportation, you know, like trucking companies that move goods and products took off and exploded during COVID. You couldn’t get enough trucks on the road. Now we’re seeing transportation, a lot of issues, demand has come back down. A lot of the big, big transportation businesses are dominating the market. And a lot of little guys are getting really beat up. So a lot of lenders all around from banks to non-bank lenders have really tightened up dramatically in transportation industry. So you’re just seeing this whole new shift happening and that’s why it’s more important if you’re gonna apply for capital to really work with someone that has access to multiple different lenders because all of these lenders are tight. Some are tightening up, some are opening up, some love certain industries, some don’t love certain industries.

So, Joe, what do you see as the biggest blind spot for borrowers, the people who come to you, business owners? What do you see as something that they miss and which prevents them to make good decisions?

Usually, their emotions are a big issue. They’re very emotional and us, as humans, were very emotional and a lot of our decision-making when you really think about it. Like a lot of things that we buy aren’t necessary logical. It’s an emotional decision. You know, like-

Justified in logic, right? They value the motion, not in logic.

Yeah, everything is emotion. So, I think most business owners aren’t realistic with where the market is and what reality is and where the cost of capital is today. We’ve been also in this world, zero percent interest rates and very low rates. And we almost have been programmed in the last 14 years that low rates were normal. I don’t know about you, Steve, but when I bought my first house, my mortgage was like 5.25, 5.5%. And that was a good rate. And it’s funny today where, you know, mortgage rates are 6%, bank rates are higher than that, business lending rates are higher than that. And where people are like, oh my God, you know, 6% mortgage, that’s crazy. But that was like a normal rate, like a good rate for a very long time. So business changes so fast, the market changes so fast. And people have been so used to this low-rate environment that when they’re going and applying for financing, whether it’s in their personal lives, like mortgages, or in what I do on the business lending side, they’re like blown away where the cost of capital is, but that’s just the market now. And I see a lot of people that are like, well, I’m going to wait till things come back down. And really, since COVID happened, there’s been a lot of people that have been waiting, waiting to buy a home, waiting to reinvest back in their business, waiting to grow their business, waiting to borrow money for rates to come back down. And the reality is inflation is still up. Interest rates, I don’t think we’re going to see really make a move towards the end of the year. If they do go down, it’ll be a quarter point, half a point. It’s not really gonna move the needle. It’ll be nowhere close to where we were pre-COVID and during COVID. And you have to be able to mentally move faster to what reality is today. And we’re doing a lot of business and a lot of deals with companies that are private equity backed and they’re borrowing at these higher rates. These are smart, sophisticated groups that get business. They know how to borrow money. They have more access than most of us. And they’re working with my company to help them access non-bank lending outside of what they’re already doing. And they’re buying companies and they’re doing deals and they’re continuing to move where then we see a lot of single owner operators that are a little bit behind the times of what’s happening in the market and they’re not making any moves and they’re not growing and they’re not investing and they’re emotional about what interest rates are and taking it personal. Well, what most of the deals that we do, people are borrowing money and yes, the rates are higher but they’re using the money for very profitable things and the business owners that understand this and know their numbers are like, hey, I can borrow money at X. Yes, it’s higher than where I want it to be, but it’s cheaper than selling equity and I can still grow my business or acquire a company and add more to the bottom line and they’re maneuvering and doing things and they’re growing and are continuing to grow in this market. Where then you have the other side of people that are like kind of stuck and doing nothing and you’re seeing them really fall behind. And if you’re concerned about inflation and what’s going on in the market, I actually think that you need to go. Like you’re forced to grow, because if you don’t grow and you don’t continue to like grow your company and make more profit, it’s just gonna be harder and harder for you to do business and also to fuel your personal lifestyle because everything continues to become more expensive. So you have to grow. Share on X

If you’re not growing revenues, your profits are going to fall. That’s the clear equation.

And if your profit stays the same, you’re technically making less because inflation never stops. Yeah, in real terms. You can’t live on, like, you can’t operate on what you used to operate pre-COVID. It just doesn’t work. So you’re like forced to grow. And I don’t think a lot of people really understand that.

Okay, so Joe, so thanks for explaining this. So, our time is coming to an end but before we wrap up, I’d like to ask you what is it that you’re working on that most excites you right now?

Well, I’m starting to work on a book which I’m very excited about which really explains a lot of the stuff that we’re talking about and that should be hopefully coming out in the next six months and then just working with growing my team here at the company to help entrepreneurs, you know, access more capital in an easier way, and I’m all about growth. I mean, you know, you could follow me at @growbyjoe. So I’m committed to growth. And I do believe that the more capital that we can get out there and deploy and make it easier for entrepreneurs to grow, so it’s fueling the whole country. And the more businesses, the more jobs, the more people can make and grow. I think it’s a great thing.

Yeah. Well, thank you. I think this is a plug for Steve Preda Business Growth because we are all about growth here as well. So if people would like to learn about this new method of reverse engineering, the right lender for them, where should they go and where can they maybe get in touch with you?

Yeah. If you want to learn more about my company, you can visit nationalbusinesscapital.com. That’s nationalbusinesscapital.com. And if you want to, I put up a ton of content and videos and talk about a lot of this stuff. You can follow my YouTube channel or my LinkedIn channel. It’s youtube.com or linkedin.com/growbyjoe channel.

Fantastic. So, thanks to Joe Camberato, Founder and CEO of National Business Capital, who is curating different lending sources for entrepreneurs. Super exciting stuff. Thanks for coming and sharing your thoughts on the market and how you look at selecting the right kind of financing. And those of you listening, please, if you enjoyed the show, please don’t forget to subscribe for us on YouTube, the YouTube channel of the Management Blueprint Podcast and on Apple Podcast. So thanks for coming and thanks for listening.

 

Important Links:

This entry was posted in . Bookmark the permalink.