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Finding Business Funding

Finding the Right Funding for you business Episode #49 Show Notes and Highlights

Finding business funding is often portrayed as part black magic and the other part eternal mystery. Yes getting the money you need to grow your business can be confusing and challenging. Traditional banks and SBA loans may not be the fit for everyone but neither in angel investors, venture capitalists, or other storied silicon valley firms or wall street behemoths. Jeremy Hill of JB Capital takes us through finding the right business funding including private lending and its benefits.

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Show Note Transcript for Money Matters – Finding the Right Funding for your Business Needs

Tim Kubiak 0:02
Hi, thanks for listening bow ties and business. I’m your host, Tim Kubiak. Today we have Jeremy hill of JB capital. As always, you can find us at Tim as well as on our socials, which are bow ties in business on Facebook and Instagram, as well as bow ties and bi z on Twitter. So often businesses talk about the funding the finding money, you hear terms thrown around every day, about friends and family, seed money, angel investing, if you’re in the tech world, you hear series ABC, we all have heard the term IPO or initial public offering. Well, Jeremy is going to talk to us about private lending, which is what he does, but we’re also going to cover all those different types of ways to raise money, so you can find the right funding for your business. So thanks for being here. If you haven’t already done so please subscribe, tell your friends and you can sign up for our newsletter, the weekly sales leader.

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Jeremy, thanks for being here. And welcome to the show. Can you introduce yourself?

Jeremy Hill 1:40
Hi, thanks for having me. So I am Jeremy Hill. Last time I checked, I am Jeremy Hill, Founder and Managing Partner of a company called JB capital just outside of the Seattle area. So we’re a private bank, if you will, we’re a private lender it is that makes credit investments to growing companies throughout the country.

Tim Kubiak 2:01
And so today we’re going to talk about finding the right kind of money for your business. So if we can start, can you just go through the types of money that are out there that people typically go after? And then talk about where you come into play?

Jeremy Hill 2:13
Yeah, of course. So

you know, I think there’s two classifications really, right. You know, there’s, there’s there’s debt, and there’s equity. And there’s, you know, 1000 different gymnastics for each one of those things it is but most people are either borrowing money, you know, from your banker, your rich uncle or somebody else, right? Or they’re going out and they’re actually looking for a an equity investor and giving up part and so if we if we start simply and say debt or equity, on equity, most people are familiar, or have heard of either venture capital or private equity or angel investing or anything like this, right. And so, the thing to know is that your your audience, so if it’s Tim and Jeremy’s growing software, business, restaurant, whatever it is that we do, right doesn’t matter. your your your investors on the other end of the equation, the way it is that they raise money, and where it is that they raise money from, and what it is that they promised their investors dictate a lot of how it is that they’re going to do business with you. And so depending upon where your businesses and stages really depends upon what type of partner you should be looking for. And so everybody’s heard of an angel investor, or an early stage investor or a high net worth investor, most of these guys are investing into companies that is that are really early stage, they may not even have revenue yet, and certainly probably aren’t profitable at this point. And so for those guys, they’re typically investing smaller amounts. So it may be five grand from your uncle To get started, it may be you know, 100 or 200 grand from the local rich guy or doctor or dentist or whoever it happens to be. And those guys are typically investing in equity and they’re looking for not a homerun necessarily, but they are taking definitely outsized risk at where that business is. And so they’re looking for a an outsized return as well, right. So that would be the the angel investor seed investor, high net worth rich uncle type investor, as your company progresses, gets a little bit further, everybody’s heard of venture capital, or vulture capital, or, you know, everybody’s got everybody’s got a name for him, right. And there’s a bunch of good guys in that business. And there’s a bunch of guys that have definitely earned the reputation that they have good and bad. But venture capital guys are still in the early stage of investing. But they’re there your ideas, maybe a little bit more baked, right, you’re a little bit further, you maybe got your your first generation product, you’ve got your first couple of customers one thing or another, you’re beyond the kind of good idea on a cocktail napkin kind of phase, right? But VCs are still typically early investors, they’re writing maybe a little bit larger checks. So depending upon That firm’s balance sheet, they may be writing a 250 or $500,000 check, or they could be writing a check one to 10 million, maybe even a little bit higher, those guys are typically investing in equity, right? So great, I’m gonna invest a million dollars for 10% of your business or, you know, whatever it is. And oftentimes, they may have some debt alongside of it. So there are certain banks and other lenders that is that work very closely with the venture capital community, it is to provide some additional juice there. The adage historically for venture capital is that they are looking for roughly about a 10 x return, meaning that they want 10 times on their money within a kind of a three to four year period of time. And so the old stories were is that for every 10 deals that they invested in, you know, six, maybe setup, seven of them were going to be a dog, right, like, they may not getting their money back one or two, they do pretty well. And then one, hopefully, they shoot the lights out, right. And, and the one that shoots the lights out, maybe makes up for the differences in the overall portfolio. So those guys are looking for kind of 10 x right on their money. The third and kind of more established side, for an equity investor would be kind of private equity, which is what most people have heard of. These are the guys are typically seen in the newspaper, The Wall Street Journal, The New York Times and these kinds of things. They are either mid to later stage, mid to later stage investors, and they’re, they’re reading meaningful checks. You know, typically, the more status guys are writing checks from from 10 million to 100 million, even greater, half a billion to a billion dollars or more. And these guys are less focused on I want a five x return or a 10 x return, they’re more focused on the fact of I want to deliver a certain internal rate of return, I’m going to deliver a, a 15% or 17%, or 20%, whatever the number is, annual return to my investors over the life of our portfolio of investments. And they’re going to do that through

some degree of financial engineering to where it is that they’re bringing in equity, they’re adding, you know, a turn or two of leverage. And then it’s really operationally focused to kind of help turn the screws and increase increase performance or, or better perfect margins, over the time of their investments, to get them to a point to where they can either sell it to another private equity firm, they can take it public, they look for some type of liquidity event, and then hopefully drive returns back to their investors. So the biggest thing for anybody out raising money is to really, it’s, it’s really to know your audience, right? It’s to know what it is that you want. So you’re not an early stage company pitching a private equity guy, just you’re not talking the same language, it’s really important to know your audience.

Tim Kubiak 7:53
So let’s say you are that mid stage person, and you’re looking at, maybe it’s a Series B or series C, or a private equity play. Right? How much control? Are you really going to give up? Are you going to give up board control executive control as well as ownership group?

Jeremy Hill 8:12
No, not necessarily. I mean, it’s there are there are two philosophies here and they operate simultaneously is there there is definitely truth to the fact of He who has the gold makes the rules, right. And so ultimately, the investor, you know, the rich guy, that is that’s writing the check to invest in your company or loaning you money either way, they’re more often than not going to have an idea of what it is that they want for that capital. Right? Just period they are right, and here’s what my capital is worth, here’s how it is that we invest, here’s my expectations, whether that’s, you know, board seats, or board observation rights, or what percent of equity, whether they want control or not a number of different things. In parallel with that, the the entrepreneur has to candidly decide what he’s willing to give up. How important is that capital for you? Because I can have as an investor, a an idea that says, I’m going to invest in Tim’s company and I want 51% of the business. And here’s how I’m going to work and here’s what it’s going to be you it you know, until you sign that you can always say no. And so the the reality there is that that entrepreneurs need to understand the fact that is that, that the these agreements, the contracts are for the divorced or not for the marriage. Right. And so that that’s of critical importance when an entrepreneur is looking at an equity partner. You need to think about this like a marriage, right? Is that that that equity relationships are equity relationships are like getting married and borrowing money or taking on debt is like dating. Right? And so, for me, I know a bunch of people that does that are in the equity business. Both of But early stage to venture to private equity great guys very successful and some good people. I also know some guys that is that have had interactions with with folks in that space that have been not so good. And just, you know, you and me both buddy we need we know people that is that have been married for 30 years and their wife is just the greatest thing since sliced bread. And that’s been a lot of my story, right? My wife and I’ve been married almost 25 years. And she’s just, she’s the hottest thing I’ve ever seen. And I love her to death. Right. But But I also know people that is that have chosen the wrong marriage partner. And it’s turned out it is to be the bane of their existence, right that. Similarly, you can see that in choosing the wrong equity partner for your business. So the people need to be very thoughtful of not getting so turned on by some rich guy writing you a check, you know, and that money. And you really need to look at an underwriter who you’re actually, you know, thinking about getting married to, right, it’s hugely important.

Tim Kubiak 11:06
It is. So the next question I’ve got to ask is, what about traditional banks? Right? You they all have business branches, they’re always going after it, you know, everybody wants to throw around small business, government loans, etc. Where does that actually come into play? And who actually benefits from that kind of money?

Jeremy Hill 11:26
Yeah, I mean, so. So banks do a great job. And banks historically have been kind of the cornerstone of lending in the United States, right, from our, from our mortgages on our house to car loans to small business loans to a number of things, right. Um, The unfortunate thing following the great financial crisis, we’ve gone from a 11,000 or so thrifts and financial institutions in the United States to seven to six now around 5000. And we’re on our way, probably to 3000. And so the challenge here is the amount of oversight and regulation and compliance it is that’s being forced on a lot of these banks is forcing a consolidation effort to where it is that you know, little community bank is getting bought by bigger community bank getting bought by bigger community bank, which two or three years later gets bought by US bank or Key Bank or somebody else, right. And so the challenge that these banks are having is that it’s difficult for a bank with less than kind of $10 billion in assets on their balance sheet It is to be profitable. And so a lot of times what happens there is that these banks are leaning on the SBA. And so banks have become very, very good at figuring out ways to do more with less, right. And so normally, a lot of this, well, I guess, now a lot of this consolidation function is that’s happened, has made, the bigger banks be more of a servicing engine, right? Like we can do everything we can do home home insurance and car insurance. I mean, they can do they can do everything right. For the businesses that is that are out looking to borrow. Typically, the banks for smaller businesses are looking to kind of direct you towards an SBA loan of one kind or another. The reasons it is that they do that are is that the smaller businesses oftentimes don’t either have the the balance sheet or the cash flow are the assets that is to support a conventional credit relationship with the bank. And so what the SBA does is the SBA provides an insurance policy, if you will, against loss against I think 80% of the losses that is that the bank would incur that, if they loaned me money for Jeremy’s construction business, or whatever my business is, and the bank loses money, the SBA will backstop that and provide additional insurance. And so the banks typically steer small businesses that way, because they get that additional insurance. The other piece, too, is candidly, there’s about two and a half times the fee income for the bank, in putting you in an SBA loan versus taking it direct, so not only did they get the insurance, but it’s more of an income generator for the bank. So it’s it’s done part to your benefit, but definitely part to their benefit as well.

Tim Kubiak 14:08
Back to the golden rule, he has the goal, right? Yeah, you got it. Exactly. So let’s talk about what you do in the segment that you play in, you know, are you private banking? Is that what you do?

Jeremy Hill 14:22
Similar, so so JB capital, so we spent nearly 20 years in kind of the investment banking and advisory business. And so companies and executives and boards in large projects it is would retain us to go solve complex financial problems, which usually met us going and raising money. After 20 years in close to a billion dollars or kind of transaction advisory work there. We elected to move out of the middle and do more so from a principal position what I’ve been doing as an advisor for 20 years. And so my business today operates very similar to a private version of a commercial bank. So we make credit investments throughout the country to Two growing companies that, for one reason or another don’t quite fit what a bank can do, but are not yet to a point to where they can warrant attention from large institutional investors. So, if you don’t fit a bank, for whatever reason, right, and the guys on Wall Street, don’t really care about writing a five or $10 million check. Those are the guys that are typically coming to me. And so about 80% of our portfolio is in normal commercial businesses. So these are healthcare and technology companies. These are software companies, professional services firms, you know, law firm CPA practices, this kind of a thing. And then we have about 20 or so percent of our portfolio is that’s allocated towards real estate assets. And so the goal here for not only for us, but for our investors, is to have a built in industry in a geographically diverse portfolio of assets, that’s generating income, and then we turn around and we we share that, that income and dividends back to our investors.

Tim Kubiak 16:04
So you own a mid sized business, you’re an executive at a mid sized business, revenue wise, people who should start thinking about talking to someone like you, is it 2 million? Is it 5 million? Is it 20 million?

Jeremy Hill 16:20
Sure. So we have companies, I mean, our sweet spot, candidly, is companies that are between kind of five and $50 million in revenue. I think the smallest company that we have in our portfolio now is five, we’re closing a deal this week for a company that is it’s kind of $55 million in revenue, and then we’re closing a deal the first of next month, that they’re finishing an acquisition, and they’ll be 100 and $30 million in revenue this year. So really, for us, it’s it’s a little bit of the gamut. But I for me, I can’t do startups or pre revenue. That’s, that’s not me. Because I’m a lender, I’m not an equity guy, right? So I’m just, I’m renting money, which means I want it back. A

Tim Kubiak 17:00
risk profile is completely different, right?

Jeremy Hill 17:03
A little different. That’s exactly what it’s totally different.

Tim Kubiak 17:05
Yeah, the is your involvement different, because a lot of times, in remember, I’m spent way too much time in Silicon Valley, right? A lot of times the minute you take somebody’s money in a series a seed seeds, not so bad. Take series A, B, or C, right, if you’re not hitting big markers, there’s a lot of external controls. And there’s a lot of management fees involved in


Jeremy Hill 17:31
Which, candidly, are all the things that is that I hate about the valley? Right? And so the Remember, we talked about a lot of these guys have a well earned reputation good and bad, right? Yep. There. I think a lot of entrepreneurs are getting to a point to where it is that they’re getting wise to the fact that that they may not want to give up equity that they would rather candidly deal with somebody like me who’s going to loan the money, and I’m going to charge them higher percent interest rate than the bank. But they’re they’re not dealing with the the the capitalist mindset it is that is driving decision making and economics for the business. It is that helped me as the investor, get out of this thing in three years. So I can deliver a return to my investor. So I can use it in net next year’s pitch book that said, I delivered this kind of return to go raised funds seven, right, like, that is becoming a game that I think entrepreneurs are becoming aware of. And so, for us, as a private lender, I am looking at taking almost a a an active private equity approach to loaning money. So the minute for any of our portfolio companies that is that that they take my money, not only it is do you, do you, you know get a friendly checkbook, right, that’s open. But in addition to that it is you get the totality of myself, my team, our contacts in any of my reaches that we have. And so whether that reaches the fact that is that we’re helping you replace your CPA, or bringing in a different attorney, we’re for this new portfolio company that we have. They didn’t even know how to spell QE, right. Like they didn’t even know what equality of earnings was right. And so we’re moving into a situation to where it is that we’re increasing their financial reporting, which creates a better optic on the company from from how it is that they’re, they’re treating their financial statements. So next year when we coach them through and guide them through raising an external round of capital, that will end up being a recapitalisation for the business and a renumeration for me to pay off for me, right, we’re, we’re setting cornerstones in place it is that help these companies succeed, right? So it’s, it’s not just for us loaning money, like another lender that says, hey, you know, great, here’s $2 million, your payments due on this, you know, we’re gonna close this thing in two years. And by the way, don’t be late on your payment because I gotta make my BMW payment, right, you know, like, that’s the wrong way to do things. Right. And so we deftly take a different approach that so far has been really, really well received.

Tim Kubiak 20:06
So you do events based funding, you talked about, you know, an acquisition, what are other things that drive businesses to need capital.

Jeremy Hill 20:15
And so the the majority of companies that is that are reaching out to us, either directly or through their attorney or CPA or whoever it is, you know, we’d like to say it is that that there is a there’s a group of companies that is that either as a result of timing or circumstance or opportunity, they are now more concerned with the availability of capital than the cost of capital. Right? So Tim, and Jeremy software business or coffee shop, or whatever, businesses, right, businesses always been kicking butt. And you know, we’ve never borrowed money for more than 5%. But now that I’m trying to do X, whatever that is, buyout, my partner, open a shop across the street, get this new product out, do whatever it is, I don’t, I don’t have time to to wait for my bank or wait for my current equity partner, or wait for my rich uncle to get back. I don’t have four months to go through diligence. I’m looking to take advantage of XYZ. And I’m willing to pay an extra couple of points of this for doing that. And so really, a lot of times the catalyst for somebody reaching out to me as we historically would say, as people would come to me because they’re running towards something or running from something, right, you’re on this path of doing great things. And you’re trying to, you know, reach for the brass ring and do X, whatever that is right. And your bank and your rich uncle won’t call you back. Now you’re calling right? For your, your you’re running from something, right, you’re in this situation to where your partner died, or your bank kicked you out, or your wife left for your dog pitcher. kind of sounds like a country music song. But what it does,

Tim Kubiak 21:46
but I know guys, it’s happened to us a week.

Jeremy Hill 21:49
Right? Exactly, you know, but it’s that it’s that, that triage money, right? Like, it hasn’t always been like this, it’s not always going to be like this, but it is now. And so how do I structure and avail the most appropriate sources of capital to kind of manage through purgatory? How do I how do I do that? And so, you know, 20 years of being an advisor and banker at doing this has just given us a lot of visibility into a whole hell of a lot of scenarios to just be able to help guys along the way. And and, and again, I think we do a pretty damn good job of that.

Tim Kubiak 22:24
How long to deal for with you typically, is it a year? Is it three years? 60 months? Depending on the nature?

Jeremy Hill 22:31
Yeah, great question. So for us, it’s, it’s, I’m kind of in that tween tweener phase, right. So most of our loans are between one and three years. And so we are not meant to be, you know, an overnight bridge lender, like, I’m just not getting you through three months or six months kind of thing. But then we’re also not, you know, a five year paper, like, it’s, I want to be a stop along your way to success. Right. But we’re, you don’t want to pay my money for five years. Right? If you are, there’s other things going on. Right? And so we’re typically one to three year loans.

Tim Kubiak 23:06
So you talked about who often people come to you through an attorney or CPA or whatnot, do you see a lot of private ownership transitioning to senior management long term employees is a generational shift rather than a family generational shift?

Unknown Speaker 23:23
You can I mean, I think that there’s, you know, there’s really almost two types of businesses if you will, right, there is

Jeremy Hill 23:33
somebody that is who has a business it is who is trying to

maximize revenue growth, maximize profitability, minimize all the expenses, it is that they can and they are building it is to sell a business at some point time in the near or mid or future. It is on a on a revenue or an EBIT on multiple, right. Like there, this is more of a, a thoughtful, pragmatic approach, I’m going to build and sell a business, right? Yep. There’s and that’s kind of one category, there’s another category of businesses that is that are almost like a, like a lifestyle business. And, and you see a lot of people that is that have either, you know, work for a big company that like the industry it is that they’re in, they just don’t want to work for the man anymore, or whatever it is, right? Or you you find people that is that, you know, are maybe building houses or they were a plumber or contractor or one thing or another that you know, they just started doing a couple side jobs and side jobs grew a little bit bigger, and it was him and his wife, and then it was him and his wife plus one and then 10 years later, it’s him and his wife and they got 40 trucks and you know, but from a lifestyle business, right you are you’re you’re writing off, you know, your boat, your house, lake house and all of your cars you write off your dog, you write off your wife, you know, like profitability who gives a shit like I’m running everything I can through this business, right? And so a lot of times for those businesses there There really is no pot of gold at the end of the rainbow, right? Like if you like we’re advising just a good friend of mine it is that that’s been a contracting businesses electrical contractor for 25 years. And, you know, he’s either going to be in a situation to where over the the next three or four or five years that he’s going to try to either sell it to his employees like you’re talking about, which is a great way to do it,

he’s going to maybe try to sell to a competitor.

Or there’s just going to be a day or a point in time to where is just too damn tired to come to the office and turn the lights on. You know. And so for guys like that. Either funding an Aesop you know, employee stock option plan, or doing some type of transitional ownership it is to, you know, the two guys that have been with you for 10 years, or, you know, whatever that is a, that is a really prudent approach for figuring out a way for these for these entrepreneurs of these lifestyle businesses to kind of take some chips off the table, or maybe plan for your retirement because, you know, you know, for those guys, they don’t, they don’t have an employee, an employer that’s matching their 401k contributions. They don’t, you know, it’s, you don’t have these kinds of things. And so you’re left to kind of figure those devices out on your own. And so, you know, a transitional ownership and sale like that is actually a pretty good approach.

Tim Kubiak 26:24
So I’m gonna pick on the lifestyle businesses a little bit, right. So I’ve lived in an industry, that’s lifestyle businesses, and I love these guys, you’re right there right off the BMW, the jetski, the wife, you know, the dog and everything else. And then when they go to sell, they want the multiple on what he did or should have been. Yeah, right. Right. So So do they need to be

Jeremy Hill 26:45
a dog claw back right away?

Tim Kubiak 26:47
Exactly. Right.

No, no, no, the doggy health care was part of our benefits back. Yeah. But I literally had friends that I watched run, you know, 20 $40 million a year turnover kind of businesses, that when they went to sell them, they couldn’t get their multiple, because they put too much right. A couple of cars is one thing. They’d put everything through the business. Yeah, yeah. Yeah.

Jeremy Hill 27:12
No, for guys that is that are thinking like that. I mean, you really, you probably need to give yourself two years, maybe three, it is that if you know that, that you are you and your wife or you and your brother, what are the partnership agreement is, you know that if you want to start moving towards that, you probably need to do 24 months of cleanup, right, is just really start pulling some of that stuff back. Right? In preparation for that, I mean, it’s just just as anything, the more the cleaner stuff is, and this goes back to just you know, starting out and having good books and records and having a good attorney and a good CPA and a good controller and all these kinds of things. Right. But But spending a good kind of 18 to 24 months in cleanup before you’re ready to do that will will definitely pay dividends.

Tim Kubiak 27:59
How do you deal with audited and unaudited financials and that mid sized business?

Jeremy Hill 28:04
You know, it’s it again, I think goes back to what the intention is. So for us, a lot of the companies that is that we’re investing in the way it is that we are going to get our money back is through not only driving economics in the business to help them streamline costs and increase profitability and grow revenue. But, you know, for me, I’m looking at I’m going to get out of this one of three ways, right? So kind of like the old mafia movies, I always joke I want to, I want to go dig the hole before I got the body, right. Like, I don’t want to drive around with this thing in my trunk. You know, I want to know how I’m I want to know how I’m getting out of this thing. And so for us, we’re trying to drive to economics, it is that over the tenure of our loan, puts us in a situation to where their local bank is going to have a two to two and a half to maybe a three times multiple, long, EBITDA. It is that will provide my renumeration, right? If not, if we are moving to a situation to where it is that we’re looking to attract either their existing investors or Equity Partners or future Equity Partners it is to come in and put money into the into the business, I’m really wanting to, to put a significant focus on their on their degree of kind of financial reporting. And so there is audits are not cheap. And so for a a $5 million business, I’m depending upon what our strategy is, I’m probably not telling these guys it is to move towards spending $35,000 on a financial audit, right? It just, that’s it, that’s a big lift for those guys that they may not need. Now, we may have internally prepared an externally reviewed financials, right. So that’s kind of a that’s kind of a step along the way, you know, to that audit and instead of spending 30 grand or something that may be spending 10 right, and so that professionalizing To a certain degree, we’d also tell them to maybe do a QA V, right? That they can get done for seven to kind of 15, depending upon the size of the business, those things are all helpful for folks it is to kind of spit shine your business and give it a good Polish for when you’re either looking to attract investors or new business partners or anything else, they’re gonna, those things are definitely worth what it is that you pay for.

Tim Kubiak 30:28
So you talk about acquisitions, buying a competitor buying into different territory, whatever, how do you look at it operational efficiencies? Or do you?

Jeremy Hill 30:41
Yeah, I mean, the, and the private equity guys are better at that than me, you know, honestly. But the reality is, is that if Company A is buying Company B, we shouldn’t just, you know, combine balance sheets and combine expenses, right? Otherwise, you know, are we actually creating efficiencies? Right, you know, and so, there are, there are a creative benefits it is to gaining, you know, somebody else’s customer or geography or territory, or one thing or another, which is great, but, you know, hopefully you don’t need, you know, to have the same operating softwares, and to have the same CRM systems and to have the same, you know, supply chain systems. And, you know, you don’t need, you know, two directors of HR and two directors of marketing, right, so there needs to be some operational efficiencies that create the justify the the pains of going through the acquisition, right. More often than not, for us, as we are we are providing a funding mechanism for the company that is to, to acquire that business, right? And so, I really don’t, I don’t, for our business, my practice and kind of philosophy is I’m really not chasing sponsors, so I don’t like to be the, the, the yield enhancer for the private equity firm, it is just by borrowing money from me, right? Like I, I would rather work with the borrower, with the company itself, it’s doing the acquisition, right. And then we’re looking at just kind of formulas on on how our capital and how this acquisition is, is beneficial and accretive to their business. And then hopefully, it is that they’re able to strip out, you know, 10 to 2010 to 30% of those operational expenses that will provide the additional yield to justify my capital.

Tim Kubiak 32:22
usually do us anywhere else? You do business Canada, North America, do you do any? Any other global?

Jeremy Hill 32:30
Yeah, for us. So our business in the construct of how it is that we can learn to set up US and Canada. The reality is, is that currently our entire portfolio is in the United States, I’d love to look at deals in Toronto or Ontario, and then Vancouver is kind of in my backyard. We’ve got a number of friends up that way. But haven’t seen anything yet. Happy to happy to look, I love Canada. So

Tim Kubiak 32:55
great. I hate the FX stuff.

Jeremy Hill 32:57
Yes, yes. Agreed. Agreed.

Tim Kubiak 33:02
So what Haven’t I asked that I should ask?

Jeremy Hill 33:05
I think it is, you know, really, for companies that is that are going through and trying to understand, you know where to go? I think the things ultimately for them to understand is number one, are you are you are you looking for debt or equity? Right? Like, are you? Are you looking to borrow money? Can you can you what you think you want to do? Is it better for you it is to go borrow money from either a bank, somebody locally high net worth guy a fund, you know, a credit strategy, or somebody like me, or you better suited is to to find an equity partner. Right? And so the things and Either way, it’s up to the entrepreneur, just to decide, I have always, in my mind been a proponent of debt, I would, I would, you know, debt is like dating and equity is like marriage, you know, as you as we talked about, right. And so, the only person I want to be married to is my wife, right? And so, and she tells me what to do. And not Fred, I don’t need a business partner doing that, too. Right. So the please let’s this call is recorded. Hopefully, my wife’s not listening. But, you know, the, the things there is that entrepreneurs need to decide that I think first and then ultimately to you need to realize that if you are going the equity route, you are going to you know, have a local investor or venture capital or private equity investor. Understand the fact that is that that really is like a marriage, right? And so you want to go into that gingerly. You you because you’re going to be stuck with these guys. And and they may turn out to be fantastic. But I would tell people that if they’re going to go that route, there needs to be additional benefits other than just the money. Whether you’re borrowing money from somebody like me, or you’re going to go get a venture capital or private equity investor, there has to be more than just the million or five or 10 or whatever it is that they’re giving you into their business, right. They, they need to be able to you know, I’ve had three exits. With a similar business at a similar stage to what it is that you’re doing, they need to agree it is that they’re going to walk you and introduce you to five of their clients that is that you may have not got access to unless you knew this guy and just there needs to be something there, that’s more than just money. And if there’s not, then don’t take their money. Because the reality is, is money is just money until money is not just money. And it’s not just money, when there’s other benefits. And so that’s one of the things that is that I would just tell people to be thoughtful and cautious of.

Tim Kubiak 35:32
Okay, have you seen credit conditions changing yet with the pandemic and recessionary trends?

Jeremy Hill 35:41
For for us? Yes, and no, you know, I don’t, I don’t spend a bunch of time thinking about other people’s businesses, I think about mine, you know, 25 hours a day. And so for us, we the the, the COVID world is putting us in a situation to where it is that we now have a kind of a secondary diligence of, you know, looking through COVID, colored glasses kind of a thing, right. So as we would run normally, our companies to a certain diligence process to understand the benefits of us coming in, and whether it makes sense. And we can get behind the management, the philosophy, the strategy, the tenure and everything else, if we can get behind that, then there is now a kind of a COVID looking glass that we layer on top of that, that looks at, okay, if this is not over at the end of this year, if this is another 12 months out, or longer, or if we’re going to be stuck around the next two years, or if we can’t jump on an airplane, or if we you know, whatever the situation is, how does that business operate? And can it continue to operate in a way it is that allows them to continue to be profitable, and protects ours and our investors interests? So thus far, I’m pleased to say our entire portfolio is so performing, nobody’s been laying down a payment. And, you know, nobody’s been, you know, nobody’s business has been crushed by the coven yet, right, you know, when hopefully not, but we are having conversations with these guys about, you know, for going to we’ve been home for six months, or ever longer than home now, six years, it seems like if we’ve been home for six months, you know, now, and our 50 employees are working from home, or paying $40,000 a month for rent, there’s a point in time where that starts to kind of not make sense, right? And so should we renegotiate things with our with our landlord? Should we ask for indifferent? Should we try to sublease that space out? Should we look for smaller space? Should you know I mean, there’s a lot of those questions that is that are being asked that we’re coaching our, you know, entrepreneurs and companies through when PPP came out, everybody was like, well, should I apply? And if I apply? How does that work? And how does it forgiveness work? And how does that affect your credit investment, if now the government’s in this thing, and so figuring all those things out right was another thing. And so I think that there’s just an additional layer of diligence and hand holding that needs to be had. I think one of the most prudent things that is that I heard is that I was listening to a Goldman podcast maybe should spend maybe three months ago now or four months ago now, it is where CEO of Goldman comes on and just says, everybody that’s in the credit space, I just became a bridge lender. Whether you say whether you think you are you’re not? You are. Right, because we if you thought that you were writing three year paper, it’s not four year paper. Right? If you thought you’re writing four, it’s now five, because for the next year, we’re all in purgatory. Nobody knows what the hell’s going on. Right? And so the thought here is, is Be patient a little bit, right? Like the not that not that you want to let companies get out of whack or not have certain control mechanisms there. But all of us no matter which side of the of the balance sheet it is that you’re on, all of us are figuring this out a little bit. Right. So there’s a little grace to this, that’s gonna happen there to a certain degree.

Tim Kubiak 39:16
Yeah, it’s been interesting, working with some of my clients on 2021 forecasts and projections and planning from a sales perspective here. You know, you had people that were projecting maybe mid teens low 20s growth this year, that have done double, and now you’re walking them back, and then you have the opposite side of that. Right. You had markets that declined. Yeah. So setting that reality is an interesting challenge.

Jeremy Hill 39:44
It is and it’s, you know, for all of us, it’s, you know, you just kind of peeling it back one day at a time, right because, you know, the elections important, and, um, but it’s also not at the same point, right. You know, I mean, it’s important to a certain degree. But policy is probably going to keep us in a certain situation, regardless of what politics says November, right. And so it would just be interesting to see how this kind of whole thing unfolds. Some of the larger companies, it is, I think, have been very disappointed with their version of PPP, like this main street lending program, it is that came out, I think that they allocated 600 and $50 billion, it is for Main Street, and they’ve only deployed like 200 and 50 million, like it, just crazy numbers to where you’re thinking that’s just, that’s an academic, you know, even approached, like, they just, they did nothing. So it’ll be it’ll be interesting for some of the larger companies, that is to see how it is that they’re handling more macro movements, I think what we will see is that we’re going to see a fast forward in some of the larger technology companies, like the reality is, is that the Fang companies, the Facebook and Apple, and Google and Netflix, and these guys of the world candidate, they’re probably not going to be too impacted for this. And they’re going to gain additional market share. Because they have so much freakin cash on their balance sheets, that it’s really not going to move the needle too much for them. And so it’ll it’ll, it’ll be interesting to see what happens there.

Tim Kubiak 41:17
Yeah, so the thing I think will be interesting is, you talked about real estate space, you talked about work from home. Yeah, right. The telecom and cable company infrastructure really has to evolve quickly and shift. We’re behind Europe by leaps and bounds. So if people keep working from home, their ability to deploy and work in the same manner, it’s going to be really challenged, I literally can tell every day when online school starts in my neighborhood, right? Because you just watched the speeds crash?

Jeremy Hill 41:50
Exactly. Yeah, it’s, you know, it’ll be interesting for that space, as this becomes a little bit longer term. And so I know, a number of executives at Microsoft, Google and Facebook here locally on the west coast. And then some, you know, some some other larger, you know, kind of 20 to 100 billion dollar valuation companies it is. And a lot of these guys have now come back and said, Hey, everybody’s going to be home, was first through January 1, than it was through July. And now a lot of these guys are saying, hey, it’s going to be September 1, before bringing anybody back at the office. And then some of the companies that just said, Forget it work from home, right. And so as that continues to become more pervasive across companies, like you said, the demand is on on communication infrastructure is going to be greater. You’re seeing the home builders. So a number of people in the in the residential construction space, you’re seeing the homebuilders it is, are selling homes as fast as they can build them, right. Interest rates are really low. Guys are saying, well forget it. You know, you know, I think listings in San Francisco were up with the journalist and last week listings in San Francisco were up 96% over this time last year, because everybody’s like, if I’m going to work from home for the next year, why am I paying seven grand for a one bedroom apartment? Right? Forget it. I’m moving to Wyoming right over wherever they’re moving. Right. You know, which Yeah, totally. Right. Yeah. And so the home builders are building a little bit bigger houses, you’re seeing now dual offices in the house, you’re seeing more infrastructure and you know, cool home automation stuff that is that people are demanding, because Forget it. I’m gonna be at home for the next year. I might as well buy a cheaper house out in the sticks with a big office in the backyard.

Tim Kubiak 43:29
Yeah, yeah, that tax base flight. There’s been a lot of articles and economic journals and some of the World Bank stuff and everything on that. And it’s been fascinating to watch. Because San Francisco, New York are the two prime candidates.

Jeremy Hill 43:44
Oh, 100%. Well, what’s the guy’s name in New York de Blasio, right? He’s Yeah, he’s like, please, please come back to New York. There’s like mass exodus out of New York. Right. And so which, which is sad, because like, my favorite city, like I love being in Manhattan, and and it’s just it’s different now. Right? Like, it’s just different.

Tim Kubiak 44:05
Yeah, I’d literally gotten a thing from a hotel I stayed at in Midtown. And it’s like, Hey, we’re doing daily office rentals. So you can rent a hotel room for, you know, x and treat it like an office. Here’s how we’re sanitizing it that at the desk, right, you know, 42nd Street kind of thing. Right? Right in the middle everything. And I’m looking like, you can’t get a closet in New York for this for a day.

Jeremy Hill 44:29
No, totally. And, and you know, even the weird thing is, though, is that even if you’re like, that’s a great deal, I’m gonna go to the city. I’m gonna spend two days. Like, who are you gonna meet with? Like, so? There’s nobody there.

Tim Kubiak 44:40
I think the hook was different. I think it was for the guys that were stuck up in the 80s. Right. That wanted to get out of that one bedroom apartment.

Jeremy Hill 44:47

Unknown Speaker 44:50
I was upset. I read yesterday that what’s the what’s the cooler European cafe, the mace on qaiser or whatever it is in New York.

Jeremy Hill 44:59
filed for banruptcy. aaah,

yeah. So it’s just it’s the landscapes definitely going to change in this, especially in the big core cities. It is the, you know, New York and San Francisco and Chicago and LA and it’s just it’s Yeah, it’s gonna be, it’s gonna be different.

Tim Kubiak 45:15
Yeah, there was actually an article a few weeks back in the UK, where they were begging people to reopen their offices, the government were saying, reopen for several days a week, you’re killing the sandwich shops,

or the pubs.

Yeah, the probably going out of business. Yeah. All the pubs are going out of business. And actually one of the major change, I think, just this weekend, it came out, they had 50, infractions and 50 different clubs. So they’ve got some challenges.

Jeremy Hill 45:39
They got some challenges. Yeah. Yeah. That’s

Tim Kubiak 45:44
so Jeremy, anything else you want to add?

Jeremy Hill 45:47
Well, this is wonderful, buddy. I appreciate you having me on. I’m disappointed. I didn’t have a bow tie. I’m feeling a little bit, you know, feeling a little bit out maybe next time, I get to up my game a little bit, but absolutely love sharing some time. You know what, hopefully, hopefully your audience enjoyed it. But it’s great to share some time with you. Thank you. Thank you so much for having me on.

Tim Kubiak 46:05
Genuinely enjoyed it. You’re welcome back anytime you want. So you know, just let me know.

Jeremy Hill 46:09
Thank you, my friend. I appreciate it.

Tim Kubiak 46:15
I hope this brought you new insights and thoughts on how to grow your business, and how to plan for expansion. As always, you know, you can find links to everything we talked about here in the show notes, Tim And you can find Jeremy J B dash 2021 is almost upon us. And are you willing to bet your job for your business that the big sale you’re counting on is going to come in how and when you expect no in less than five minutes if what you’re thinking is fact or fiction? Take our online assessment at Tim slash fact to find out

Tim Kubiak is a Business Geek, Nomad, Aging Metal Head, Nerd, & Coffee Addict. Plus the only big guy at Hot Yoga. For over 25 years he's been building high-performance sales teams globally. With over 2 billion in lifetime sales in goods and services. Tim works as a coach mentor with Founders, Business Owners, Executives, and High Performing individuals to transform companies, bring new solutions to market and achieve their professional goals.

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