EFP 151: Funding Website Purchases With Lendvo

Justin Cooke

February 11, 2016

What if you could avoid the banks and get lightning-quick financing to help you make your next website purchase?

That’s exactly what the guys over at Lendvo.com are offering Empire Flippers listeners and I think you’re going to really dig this episode.

The Nuts and Bolts of Financing Online Businesses

I had a TON of questions for them about the nuts and bolts in their financing deals, but I first wanted to hear a bit more about their entrepreneurial story. I love how these guys got started and it really helped to explain where they’re coming from in terms of growing the business.

In this episode, we’ll cover who this financing is for (and who it’s not), the checks they make to ensure their loan is sound, and the types of deals they’re looking to fund.

If you’re a website buyer looking to scale up or reach for slightly larger sites, this episode is definitely for you!

Want to find a website you can finance? We have more than 40 deals available on the Empire Marketplace right now!

Check Out This Week’s Episode:

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Topics Discussed This Week:

  • Entrepreneurial story behind Lendvo.com
  • How exactly they offer to finance your next website acquisition

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“Sometimes accessing debt is great tool to put yourself into a position where you can make more money.” – Patrick – Tweet This!

“If you’re asking for money, ask for advice. If you’re asking for advice, ask them for money.” – Patrick – Tweet This!

Are you looking for financing on your next deal? Think Lendvo could help you out on your next purchase? If you have any questions from the guys they’ll be happy to respond in the comments!

 

Justin:                   Welcome to the Empire Podcast. Episode 151. We’re often asked what options there are for financing. And historically, the options aren’t great. You’re mostly looking at seller financing, if you can get the seller to agree to the deal. Now this is changing, hopefully. And today we talk to the guys over at Lendvo.com to discuss how they can help you fund website acquisitions.

                                You can find the show notes and all links discussed in this episode empireflippers.com/lendvo.

                                All right, let’s do this.

Speaker 2:           Sick of listening to entrepreneurial advice from guys with day jobs? Want to hear about the real successes and failures that come with building an online empire? You are not alone. From San Diego to Tokyo, New York to Bangkok, join thousands of entrepreneurs and investors who are prioritizing wealth and personal freedom over the oppression of an office cubical.

                                Check out the Empire Podcast. And now, your hosts Justin and Joe.

Justin:                   Joe, I am fired up about our guest on the show today, man. Financing is one of those things that I think is really holding our industry back. And I think if leverage becomes an option, people are able to use other peoples money to buy larger portfolios and really kind of expand their purchasing power, I think this industry could really blow up.

Joe:                        Not only am I fired up about it as well, because they’re finally coming into the online business world, but it’s coming in at such a level that it makes sense for even smaller sites. So before there might have been financing out there for multimillion dollar businesses, right? Or businesses that had large warehouses, a lot of inventory, stuff that the finance people could sell off afterwards. But we’re talking about content websites, Amazon, AdSense based websites, these guys can help you finance those small, $30-, $50-, $100,000 sites.

Justin:                   Yeah, when I got into this conversation with the guys, it was interesting because I want to talk about kind of what does and doesn’t qualify and I was expecting a laundry list of things. “Well, we can’t take this kind of business. We can’t take that kind of site.” And I was actually surprised at what they were able to accept. It’s outside of, like you said, trying to hold inventory or something like that where you’ve got some intrinsic value in the business. They’re willing to look at things that are straight content sites or straight affiliate sites.

Joe:                        Yeah, it was really appealing to me, and light bulbs started to go off in my head when I heard this kind of stuff because I know several buyers who are limited by their options just because they only have $10- or $15,000. With a company like this, they can really expand the amount of sites that they can look at.

Justin:                   So even though I thought they had a really interesting kind of offer, I think it really matches our audience. I thought they’d be great for the show. Ben and Patrick are great guys, but I didn’t want it to turn into a pitch fest. Right? I didn’t want it to be like, “Oh, come borrow money from us so you can buy sites and blah, blah, blah.” And I was like, “Look, fellas. Personally, I love hearing kind of entrepreneurial stories. I love to hear how you came up. And our customers like to know a bit about the business before they do business. Right? So why don’t you tell us a little bit about your story. Where you came from, how you got started, what you struggled with.” And I thought that would be interesting. So that’s actually the first half of the show. And then we kind of get into their offer in the second half, which I think particularly applies to our customers.

Joe:                        Well, it’s good that you’re not just being the ultimate salesman, Justin. I’m glad that that wasn’t the case.

Justin:                   I’m the pitch guy. Well, you know where they have those conferences, man, where someone gets up on stage and you’re like, “Oh, this is going to be great. We’re going to dig into the details. We’re going to get some really high quality stuff.” And then they just pitch to you the whole time. You’re like, “I paid to come to a sales conference? Where they’re just selling me? No, thank you.” I hate going to conferences like that. I’m really glad our buddies at the Tropical MBA don’t do that with the Dynamite Circle.

Joe:                        Yeah. It’s disgusting. It’s disgusting. And you’re right. There can be definitely a lot of people in the financing industry who are a little sketchy, to say the least. And they’re just the kind of guys that are always looking to get a deal done. But glad you got into their background and I’m interested to hear more about it because I talked to them on the phone as well and they sound like very interesting guys.

Justin:                   Yeah, we talked about ways you can come actually zero out of pocket, right? You can do some seller financing, bring some other peoples’ cash to the table. And then use their financing options to get to a 100%. They actually like to see a little bit of skin in the game though. Not the full thing, but at least 20%, 30%, 40% down. And we’re going to get into that on the call.

                                If anyone wants to check this out, they want to check out the company, you can go to Lendvo.com/empireflippers. Again, that’s Lendvo, L-E-N-D-V-O.com and take a look.

                                All right, but let’s get into the featured listing for the week. What you got for us?

Joe:                        This week we’re talking about listing 40424. It’s an Amazon associates, Amazon affiliate site in the firearms and ammo niche. You know-

Justin:                   It’s your favorite niche.

Joe:                        How excited I am about the firearms.

Justin:                   You hate guns, man. You’re a gun hater. That second amendment out the window, right? You’re done with it.

Joe:                        Porn, gambling, and guns. No, I actually don’t hate it. I just feel like it’s borderline.

Justin:                   It gives your liberal heart some ickiness. Something icky factor going on.

Joe:                        A little bit. I mean, this one really is about guides, about specific types of firearms. So it doesn’t talk about protecting your amendment rights and stuff like that. It’s more about different types of weapons and what not. So I do think that the niche is ready to take off. Especially in this year. It’s already done very well. But with the presidential elections coming up you’re only going to continue to see increased search volume in the firearm niche. So definitely expect that to happen.

                                It’s very affordable. Just under 39, just under $40,000. And it’s making about $1,500 a month net profit. The only thing owner is doing here is adding some content on a monthly level. So I think that it’s pretty much automatic. It’s WordPress site. Amazon site. The standard kind of sites that we deal with. And obviously something that would qualify quite well for funding. So that’s why we’re talking about it on this-

Justin:                   Program, in the firearms niche. And it’s doing really, really well. You can see, if you look at the graph of October, November, it really started to take off. We saw something similar happen and that site is crushing it right now.

                                I think the niche is going to continue to do well throughout this year. And we’ll see the following year, but I think you got a good 12 months of this one, for sure.

Joe:                        Absolutely. With the primaries next month and the presidential next election in November, there’s going to be a lot of traffic talking about guns.

Justin:                   This week’s episode I’m talking about funding website purchases with Lendvo.

Speaker 2:           Now for the heart of this week’s episode.

Justin:                   I’m really excited to have Ben and Patrick on the show. They work over at Lendvo.com and run a business where they can actually lend money to entrepreneurs, website buyers, website sellers, and I think it’s going to be a really interesting episode.

                                Ben, Patrick, thanks for coming on the show, man. Appreciate it.

Patrick:                 Yeah, thanks for having us.

Ben:                       Thanks for having us.

Justin:                   All right, tell me a little bit about your company. What do you offer right now? What’s your elevator pitch?

Patrick:                 So I guess the elevator pitch for Lendvo is that financial services are just not developed very well in the digital ecosystem. And we aim to be a full service commercial lender to anybody who’s out there, from a domain buyer to a website builder to an app developer. Provide a lot of diversified financial products and we just see a marketplace that’s not served well.

Justin:                   Yeah, I mean, we like to say that we’re in the Wild West here with online businesses and websites, and it really is. We have questions for our lawyer and our accountants. We’re like, “What’s the rule on this?” And they’re like, “Well, fellas, I hate to tell you this, but there isn’t. It’s pretty open. So here’s precedent with offline businesses. And here’s kind of what we’re looking for with online businesses, we think.”

Patrick:                 Yeah, it’s so true. I mean, it’s so true. We’ve had the same conversations with lawyers on a number of different fronts. There’s a whole bunch … I mean, pretty much all laws are written for the idea that business has to transact in a brick and mortar store or go through the doors of a bank or go on in an actual physical location. And there’s just so many things we see on a day to day basis that it’s just not ready for.

Justin:                   Well, you guys have a really interesting offer, I think, for our audience. And I actually want to get into that because I think there’s a ton of value for them. But before we do that, I’m always curious about how entrepreneurs got started. So I’d like to hear your background. Pre-setting up this business, pre-getting this up and running, what were you guys doing? And how did this idea strike you?

Patrick:                 Sure, Ben, you want to take that?

Ben:                       Yeah, this is Ben. So yeah, Justin, I myself love to hear stories about how entrepreneurs got to where they are. And it almost seems like it’s a never ending story. But the highlights for me really are I started my career in finance for a few years. Decided I hated it, actually. And went to go work with my uncle who was a domain name entrepreneur. And I was lucky enough to really work on some of the coolest things going on in domain names over the past 10 years. From parking domain names to flipping domain names as well as from really learning how to monetize traffic and all the different ways that you can monetize traffic. And how you can get the best yield possible. And learning about page optimization and key word research and valuate traffic and how to valuate domains. And I had just fell in love with digital as a whole. From [inaudible 00:09:52] all the way down to actually building some of my own websites.

                                One of my favorite things to do is actually build websites. Just I’m kind of bad at it. But I love to do it. And I love designing them. And I love everything digital.

                                It’s actually an interesting story is that over the years, I’ve had a really good friend, Patrick, who’s my partner now. And we actually went to school at Boston University together about 10 years ago. Wow.

                                But we really got to work on the side together a lot and exchange ideas and test things out. And Patrick was in finance during this whole time period. And I was really deep in digital. So we had this interesting night time talking where trying to combine those two universes and see what would cook. And then through a series of events, my uncle actually passed away on me. And then I went into digital. And then a year later my dad passed away. And I was like, “Wow. Holy shit. Life is short. I really want to do something entrepreneurial.” And I looked for the best people that I think I can work with and those that I thought had the best ideas. And that led me to kind of work with Patrick.

                                And I guess I’ll let Patrick talk a little bit about his background.

Patrick:                 Yeah, so Ben I think undersells his experience a little bit in digital. He’s sort of been … Domain names are kind of a family affair for him. So he was at least someone who was exposed to a lot of these monetization models and cool business models and things that other people, even 10 years ago had no idea what was going on or even now, some people, most people I would say, have no idea what’s going on. So he sort of brought me into domains and talked to me a lot about traffic monetization and that stuff. We had lots of long conversations.

                                And I was working at a sort of specialty credit hedge fund, which is basically just a way of saying a small group of investors that like to do a lot of weird stuff. We did a lot of business lending. We did a lot of structured financial deals with pools of small business loans. Originating pools of small business loans ourselves. Getting into just weird financial debt products. And I had experience with domain names so we did a little investing based on some domains and we did really well on it.

                                And long story short, that fund ended up having liquidity problems for other reasons where there were just a couple of big investors that wanted to pull their money out to do other things. So instead of joining the company that was sort of buying out my fund, I was talking to Ben the whole time and we were both saying, business lending is great. There’s such growth in the digital ecosystem and there’s just really not credit there. And at the same time, I was competing on a lot of deals with some of these other banks and even though they’re alternative lenders, like On Debt Capital, those types of shops you know, some of their institutional products. And I just saw that the underwriting template that a bank will use, or an alternative vendor will use, it’s just the same around the board. It’s landlord verification, bank statements, FICO score, credit reference, go. Site inspector. All right.

                                And when you get these digital businesses, there’s just so much that’s there that the underwriting departments, these lenders, they just don’t understand how to handle. Right? They don’t understand click prices. They don’t understand domain name values. They don’t understand traffic. So there’s this giant disconnect, and you have this thriving marketplace. Ben and I would talk about it all of the time. And be like, “There’s this thriving marketplace and there’s not any capital. It’s crazy.”

                                So, at the end of the day, finance is a slow business. Digital’s a fast business, outpaced finance. And we’re sort of lucky in that we have the skills to understand the digital analytics. And also understand sort of how to be a good lender, run a smart lending business. And that’s when we started raising money, when we decided to work together and understand those things.

Justin:                   All right, so both of you guys were college buddies. You’ve kind of done your own thing. You both were somewhat involved in the financial markets and Ben had the experience with domain names and kind of online businesses, as a family affair, as you said. So you guys were kind of doing these masterminds. These late night calls going, “What the hell are we doing? There’s all this opportunity.” And then both of you, at some point, decided to jump on it. I mean you were having some issues with the company you were at and so you were looking to move on. Ben had gone through some personal issues with his family. And said, “Look. Let’s get this rolling.”

                                Okay. So you’ve got an idea. You see a hole in the market, which, by the way, I’ve noticed that finance guys see more opportunity in the buying, selling, investing in website space, right? They see an opportunity because they see this market moving. There’s cash. There’s businesses. There’s things that are happening. And I like your point that there’s no capital available in this growing, active market. Quick moving market. And that just seems odd, right?

Patrick:                 Yeah. I mean, it just goes to the fact that these things aren’t easy to understand. I mean, there’s no brick and mortar location. It goes back to what you were saying before about laws being built for a brick and mortar world. And an underwriter who’s used to looking at a bank statement and talking to a landlord and looking at a balance sheet doesn’t understand how to go and look at a backlink profile. They don’t understand how to go and weed out fraudulent traffic. They don’t know how to evaluate a domain name.

                                I mean, so, if you don’t understand what you’re lending on you just don’t lend on it. You don’t extend credit. If the guy’s got a house and he wants to leverage the house, you say, “Okay, maybe I’ll loan against the house, but the property.” So, it’s just the thing is that finance hasn’t caught up. And maybe we’re sort of the first edge of these financial services businesses really getting into digital. Maybe that’s how it is. But there’s really not the core competency in digital for financial institutions to get involved in.

Ben:                       We really get the digital space. There came a point in time where, years ago, I was like, “Hey, I want to buy 20 amazing websites and run them. And have a team and do inbound marketing and do traffic arbitrage for lead generation.” I wanted to do all of this stuff. And I was like, “Well, that’s great, but there’s no money. How do we leverage an asset?”

                                If I wanted to buy an apartment in New York, right? There’s financing available to do that. Of course, you need a down payment. Of course, you can’t have two dollars in your bank account and try to buy an apartment in New York. But there are tools that were available or are available in that sector. And, naturally, we felt as wanna be holding all these types of businesses, that we would essentially need to lean on different tools. And they just didn’t exist. And for any area in the markets, for any market, the supply of credit is really essential for those stakeholders in the market to leverage to grow. Whether it be grow as companies themselves, individually or as a whole sector.

                                We’re seeing such growth. For example, in your space of people actually buying web businesses. Five years ago, that wasn’t even the thing really. And a lot of people are looking at it and they’re like, “Wow. These are real businesses.” Already those that are kind of getting into it might be a little late in the game. But overall, it’s such a huge space. We live in a digital world. And more and more digital businesses are going to go online. They’re all going to start small unless they have A round funding or something. But they grow into things. They monetize themselves with advertising. But they might want to have a partner or a tool that they can lean on. Say, “Hey, I make like $10K a month in advertising, I just know if I had a cash injection right now to grow this business, that would be great.” But looking for equity partners is a pain. And you have to give them equity.

Patrick:                 Yeah.

Ben:                       So sometimes accessing debt is a great tool to put yourself into a position where you can make money and own things.

Justin:                   Yeah, it’s interesting. I think that you guys are pretty early. And by the way, I should mention that it’s not just our industry or space that you cover. We’re a part, I think, of what your bigger opportunity is. And you guys might be a little early there. But one of my questions, and I was thinking about this as you guys were talking, is that how you get into this space and you’re early and you see an opportunity. And if you guys do well, what’s to keep the larger institutions from just squashing you like a bug? What’s the moat around your castle that protects your business?

                                Actually, before I ask that question, I want to know, when you were starting this business up you say, “Obviously, we need cash. We need capital so we can lend the money and get this going.” How did you first answer that question? Were you like, “Okay. Let’s borrow money. Let’s find an investors.” And you guys had some connections in the space. But what was the first step? And how did you pitch it?

Patrick:                 So the first thing we did is we just talked to people who had knowledge about lending money… Well, not really lending money but raising money. And what you need to do and what they look for. So the first thing we had to do is we built a deck. Just a 21 slide presentation. I think our first version was 52 slides or something ungodly like that.

Ben:                       Business plan of like 100 pages. And what’s really interesting is I never wrote a business plan in my life. But with Patrick, we really sat down and wrote this business plan alongside the deck. And I never thought you could actually have 100 pages on, “Hey, let’s go lend money on domain names and websites and working capital and all of that stuff.” But you really can.

Patrick:                 I mean, part of it is you don’t really necessarily need that. It’s good to go through it, but Ben built us a really nice looking website. And we had a really good deck. We really refined what our message was. We talked to a lot of knowledgeable people about what the questions they would have for us are. And we really presented ourselves as professional guys who had a real clear vision, who knew how to answer hard questions, who had financial projections that they had a CPA help them on. And even though we didn’t have anything, we had a really good idea, several good ideas. We had them stress tested. We knew how to answer questions. And all our materials looked really good. And I think that, in itself, wasn’t even enough. It took us eight months, I think to fully-

Ben:                       More. It was a cold nine months of hiking all over the Eastern seaboard and going to meetings that didn’t pay off. And going the days … And taking transportation and thinking, “Wow, today was like a net $100.” Nothing came of it. We’ve had a string of days like this. To days where we would sit and compile lists of people that we wanted to speak with. And hours of that. Kind of not seeing the light at the end of the tunnel for a while.

Justin:                   You guys had some connections in the financial space. So I’m guessing you started there. You reached out to them and got probably didn’t even pitch them, but probably were looking for feedback on the idea to kind of refine your pitch and make sure everything sounds good. And you’ve got answers to questions. But did you end up finding someone that you already had a previously established relationship? Or did you ultimately get someone new? And if new, how did you find them?

Patrick:                 Yeah, so I mean, both really. We did two raises. We did an equity raise with some VCs and some angel investors and some private guys. And we did a debt line raise.

                                So the debt line raise sort of came through some connections that we had in that space. And the equity guys was a much tougher sell, right? The equity is much riskier than the debt. You tell the debt guy, “All right, I’m going to invest your money into a pool of diversified loans that are all collateralized. All have cash flows and all have been carefully and meticulously underwritten.” That’s not such a hard sell. Especially when there’s such a demand for debt right now.

                                The equity side was a lot harder. Some of them were people that we had done business with. A lot of them were just angel investors that we just had a … It was helpful for us just finding similar companies to us and trying to track down who those investors were. And try and talk to them. Right? Most of them didn’t want to. The hilarious thing Ben and I found was you find all these people who were angel investors. Angel investors, right? Early stage angel investors. And probably like 90% of them told us, “No. You’re too early for us.”

Ben:                       Yeah, it’s like too early? [crosstalk 00:22:20]

Patrick:                 You know?

Ben:                       Another thing-

Patrick:                 Okay. We need a new word for angel or something. Right? for the kind of people we’re looking for. Maybe crazy people? I don’t know. I mean, it’s hard man. That’s why it took so long. And we kept having to refine our deck and our financial model and all of this stuff. And just take so many calls and talk to so many different people.

                                And the thing with investors too is they’re all such different individuals. People have such different personalities that you get totally different responses from some people and you just have to figure out sort of how to deal with them on an individual basis.

                                I guess the best piece of advice that I personally got was someone was like, “If you’re trying to raise money, or if you’re asking for money, ask for advice. If you’re asking for advice, ask them for money.”

Justin:                   Yeah.

Patrick:                 Right? And that really helped a lot because some of the people got more interested that we weren’t asking for their money. And other people, if you came out really strong, like coming out strong against a … Like going after a girl, let’s say, just shot you down completely. It just sounded too desperate or something like that. It was such a long process. We learned a lot. And we had to just try. We had to just try so many crazy things to find the right people. And eventually you figure out, if you stick to it enough, you find a couple strategies that work and you get them on in a phone calls. Some of them pan out and most of them don’t.

Justin:                   You can’t see my head right now, but I’m actually nodding it. We went through a period where we were looking to raise money for portfolio for our investors program. Where we buy up portfolio sites and hold them and run them for those investors. And we were doing the same thing. So we would ask these investors for advice. And most of them came from our audience, so we didn’t have to go out and actually find new investors. But we would ask them for advice. Because we figured, “Look, these guys have way more experience in this space than we do. They can legitimately help us figure out our offer. Make sure it sounds legit and good.” And asking for that advice, I think is an ego boost. Kind of helps them. They’re like, “Oh, these guys aren’t some asshole hot shot think they know everything guys. They’re honestly listening to the market. So I’d love to help them.”

Patrick:                 Totally.

Justin:                   Yeah. It puts them in a much better position to work with you. Makes them much more comfortable working with you. And whether they do invest or not, you’re bound to get good advice because you’re asking for the help.

Patrick:                 Yeah. No, I mean, even some of the best advice we got was early on I went to a friend of mine’s dad who kind of a curmudgeon. Private equity guy. And just gave us … Ripped us apart with three page email. Just tore us apart. The only reason I went to him was-

Ben:                       [crosstalk 00:24:46]said to us?

Patrick:                 It looked like a kiddie crusade.

Ben:                       Kiddie crusade at some point.

Justin:                   Oh, God.

Ben:                       Yeah.

Patrick:                 Yeah. What was great about that was I knew that was the kind of feedback he was going to give us. I wasn’t really looking for money from him. But that in an early stage like that was really helpful. To just get someone just tear us a new one like that.

Justin:                   It is. I love when people give you honest feedback because it’s so rare. Often you’ll get, “Oh, sounds great. Can’t do it, but wishing you guys the best luck.” And that’s cool. And people are trying to be nice and helpful, but I love the raw feedback.

Patrick:                 You need it.

Justin:                   It might be an amazing offer, but I see some major, glaring holes. Here’s where they are. When people ask me for advice via email, and when I can get back to them, I try to do that. I try to be brutally honest because that’s the kind of … You just don’t have time to be nice when you’re trying to be an entrepreneur. You don’t have time for the niceness. You want the real deal.

                                Let me ask you guys, was there a point at which you said, in terms of raising the money and kind of setting up the business, was there a turning point? Was there a moment where you said, “You know what? I think we’re going to get the money and I think we’re at least going to have a shot at putting this together.”

Ben:                       You know, it was kind of like in a way a roller coaster. On some days we felt so close and then back to being far and then back to being close and then back to being far. It was kind of like a cycle. But it kind of went with the seasons. During the winter, it was really grinding it out, going to the meetings, refining our process, taking feedback, making it constructive, doing those kind of things. When the spring came about in May or April because at that point in time you have to double down and say, “Okay. We’re going to start doing the legal work to close a deal.” And it’s still, at that point, you have people that are a little on the fence. And you don’t know until the day that the money was wired to us and people signed that it was going to close. Seriously.

Justin:                   Yeah.

Ben:                       It’s just like that. Another thing we learned is, is that when you’re doing anything entrepreneurial like that, don’t think that everyone is always going to be around when you need them to be.

Patrick:                 They won’t be.

Ben:                       They won’t be. They’ll be on vacation. They’ll have a three week hiking trip that they have to go on right when you need them. And so it’s always like think ahead on that kind of stuff. And that’s why probably in the spring time when we started doubling down and saying, “Okay. We’re going to start doing legal work that is really expensive and if it all falls apart at the end, we had nine months of a struggle and a really hefty legal bill that we’d have to go and try to figure out how to pay and go back to our day jobs.” So it was until the last minute.

Justin:                   I’m not actually a fan of setting up all of this structure and doing all of this legal work pre-setting up the business, but when you have investors, there’s really not much way around it. They’re either going to require it or you just want to make sure you’re setting off the right foot otherwise it can cause you all kind of legal issues further down the road.

                                At what point did you-

Ben:                       And lending is specific.

Justin:                   Yeah.

Ben:                       Sorry to interrupt. I was just going to say, lending in specific is an area that has legal frameworks that you can and cannot operate within. And so part of it was for us to get from the legal advice that came from a really good place, aka really expensive place unfortunately, but what are you going to do? Because our investors wanted to be sure that they were investing in something that was going to be properly structured because it has that nature.

                                So every business is going to have its nuances to think about as well.

Justin:                   So I know you guys are raising money from investors both in terms of equity and debt as well. What was the first time you got your first customer? So you had someone. How did you find them? Were you advertising? Were you doing paid traffic? How did you get that first business to lend in?

Patrick:                 So I think it came through a loan broker actually. Came through someone who works with small businesses, selling different services. And it was like an Ebay seller who needed money to buy inventory. It was that type of deal.

Ben:                       The way the broker found us was we spent weeks calling all sorts of brokers and being like, “Hey, you’ve gotta see some kind of digital businesses online, that come through to you. Please send them our way. We would be best suited to work with them.” And a lot of times we realized that the brokers didn’t really know what exactly what a web business is and we had to find different ways to communicate it to them. And there was several weeks of phones, pounding emails, taking meetings. And then like Patrick said, I think the first bid actually came from a broker.

Justin:                   Yeah, I think you guys found us through BizBuySell or something like that, which is traditionally an offline source. And we get inquiries through there pretty often that aren’t serious and are clearly not serious and we kind of ignore them. And I remember Joe told me about yours and I was like, “Oh, whatever.”

Ben:                       Yeah, I think I tried to connect with you on LinkedIn. You blew me off. I had to chase you down. You were playing hard to get. But you gotta be able to find people. We found you.

Justin:                   Yeah, I mean, there’s so much crap out there in terms of people trying to pitch or whatever. So it’s hard to separate yourselves from the noise. But eventually you guys got an interesting offer, it’s definitely aligned with our audience and so it’s going to get through. You might have to try a few times just to make sure that we see it amidst the noise, but eventually it’s going to get through. And I think you’re going to get some value.

                                Now I mentioned earlier, the bigger lenders coming in and squashing you like a bug. So let’s say you’ve got some loans under your belt. You’re getting a return for your investors. Your investors are digging it. You see the market is growing. Now you’re still pretty early, but let’s say a year from now, two years from now, let’s say you’re doing well. Someone bigger than you, five times the size, comes in and says, “I’m just snatching the market from them. I can dump money into this. We’re going to kiss them goodbye.” How do you avoid that as you grow your business from now through the next couple of years.

Ben:                       Listen, they’ve had 20 years to go for it and snatch it and squash everyone that didn’t exist like a bug and they didn’t. So I’m not so worried about it. I think the space is huge. I think that competition is healthy. It’ll make us, that’s what made Patrick and I get from point zero to today. So if competition wants to compete, I think the whole ecosystem will benefit. With or without the competition, but of course I don’t think it’s so easy as squash us like a bug. There are a lot of intricacies in lending in general as well as having the talent and the ability to run a lending business and valuate all of these assets and it’s changing. The whole ecosystem’s constantly changing.

Justin:                   I think that’s a unique position you guys have is that, you’re saying before, valuating traffic and monetization methods and websites and online businesses isn’t as straightforward as lending on a home.

Ben:                       Absolutely.

Justin:                   It’s not as established and well known. And it is changing. Right? It’s a very active environment. So I think that helps you. I think helping to educate the market will help you.

Ben:                       [crosstalk 00:32:19] with a lot of fraud.

Justin:                   Yeah. A ton of fraud.

Ben:                       Ton of fraud.

Justin:                   I think you guys are in a position too where you can make yourselves more valuable in an acquisition than someone wanting to get into the space. Because it’s going to years for them to kind of get up to speed because of all of this fluid dynamic market. So if you made yourselves a more interesting acquisition target, they’d rather buy you than try to compete directly. So that’s I think some upside there.

                                Let me ask you, what would you measure success or failure? Do you have goal posts in your business to where in 12 months we’re going to be here. If we’re not here, if we’re not above this bar, we’re sucking. In 24 months, we need to be here, or we’re out. Do you have anything like that?

Patrick:                 Yeah, I don’t know. Sometimes I feel like we have goals. We’re like, “All right, we want to be here by this point.” And then something crazy happens, we’re like, “Forget about that goal. Is there something else?” It’s like there’s so much that happens. A big thing for us is building strategic partnerships, which is another way we can stay ahead of our competition, by the way, is when we have really good partners who love working with us. But it’s just things keep changing. We’re just focused right now on underwrite a loan well. Have a good conversation. Do each little small thing really well and execute on all the individual tasks you’re doing and see where you go.

                                I think that we’ll probably grow, probably originate a monthly basis a year from now 10 times as many loans as we’re doing now. And we’re doing a decent amount now.

Justin:                   How many loans are you doing a month right now?

Patrick:                 So we do have nondisclosure provisions, unfortunately, with our investors. So a loan book metrics we can’t really get into. But it’s a good amount.

Justin:                   So let me ask you this, what’s the ultimate goal? Are you guys looking to sell this thing? Are you looking to sell off packages of the debt?

Patrick:                 I don’t know, are you buying?

Justin:                   What is the plan?

Patrick:                 You buying, Justin?

Justin:                   I don’t know, man, maybe. Maybe. I look at the cash.

Patrick:                 I don’t know. Frankly, I mean, sometimes we think about it and we’re like, “Yeah, if someone wants to pay a ridiculous amount of money for our business.” And we think it’s going to be a great freaking business. So it might be tough to wrestle it away from us at a valuation that they might think is appropriate. Maybe there’s a price to everything. Maybe we’d sell it.

                                I also think it’s kind of great to, again, banks are … I don’t know, they’re like utilities almost. They’re really slow, cumbersome. If you apply for a small business loan at some banks now, you have to actually apply [inaudible 00:34:41] just because there’s all this regulatory framework that goes in when they take applications in. So I sort of see this opportunity for this whole new world of banks to emerge.

                                We do deals that … We do a lot of different deals and if you look at them individually, that’s this type of deal, that’s this type of deal. So I mean, Lendvo can really be a full service financial institution for the digital world. And you’re looking at a world where a billion people are going to come online in the next three years or something crazy like that and regular brick and mortar businesses, from hardware stores to retailers to grocery stores even are starting to go online or do more business online. And if we position ourselves to be the premier financial institution for all of these small businesses and maybe even have growth overseas through some strategic acquisitions or other things. We see such a big opportunity that I don’t know that we’d ever want to sell to company if we’re making money the entire time.

Justin:                   Yeah, I think it’s a billion dollar industry, right? It may not be now, but it will be. I see the opportunity there for sure.

                                You mentioned that there’s a lot of new kind of offline companies that are getting online. I think that opens up so opportunities for you guys. You said that you’re not necessarily … I mean, it’s a little early for you guys to be looking at an exit, right? So you’re looking to cash flow this. I mean, you’re going to make plenty of money. In the meantime, getting there, and then kind of see where you’re at. I mean, there’s always at some point you’re willing to sell the business for FU money and just get out probably. But in the meantime, while you’re kind of getting from here to there, we talked about goal setting, and you said that it’s not helpful when you are heading in one direction and then you set a goal for 12 months out and then you completely pivot.

                                So let’s say you had a goal because I want to do 10 loans on eCommerce businesses this year, and then you realize the eCommerce businesses are just not in the space for you to go. So you say, “Well, I have this goal, but it’s silly. I set this goal but we’re so fluid and changing so quickly that I need to avoid that.” How do you measure that? How do you guys decide when you’re heading down a path and you need to make a change? You don’t want to do this. Is it a group decision between the two of you? Does one of you make that decision? How does that work in terms of directing the company?

Patrick:                 What’s great with Ben and I and really we wouldn’t be here today if this wasn’t the case is that we’re just really different people, personality wise. We think the complete opposite a lot of times, and we fight a lot. But we always come to agreement, which is really important. And I would advise anyone who’s listening who’s trying to start something really significant beyond like a hobby project, if you can work with someone who’s really different than you, I think you get a lot of value out of those conversations and just diverse sets of opinions.

                                So, I mean, Ben and I, different opportunities will come and you have to … You can only do so many things. So you have to pick and you have to sit down, have a real conversation, bring in other people on the phone or in person and get their opinion on it. Make a decision on what’s a good way to go. I mean, you can’t be chasing after $100 bill and then you see $1000 bill five feet away from you and say, “No, I set a goal. I have to stick to the goal.” You have to be able to take advantage of opportunities.

                                A part of it is like goal setting can be really good and really valuable, but you also have to break that rule a lot of times if you really want to take advantage of all the great opportunities. It’s tough. I mean, you just have to evaluate all the things that come in front of you.

Justin:                   That’s one of the most challenging things we found in entrepreneurship is like which opportunities do you chase after and when do you drop one and go after something else. Is there already so much value when you go … You’re 80% there on the $100, is it worth starting over where you’re 5%? Do you know what I mean?

Patrick:                 Yeah, no. Totally.

Justin:                   And you’re constantly evaluating that. You’re constantly … There’s new opportunities, new opportunities, new opportunities, and you always have to be making that decision on a regular basis. I think we do a pretty good job with that, but we don’t have a great framework written out or kind of like laid out for that. Do you guys have? Can you think of any things that you use to help make those decisions? I’m really curious about this.

Patrick:                 I don’t know. I mean, what do you think, Ben? I think it’s just really having good conversations and trying to gain everything out in every direction when you have a major decision.

Ben:                       Yeah. I mean, I think fortunately I think one of our strengths is our partnership and we’ve had 10 years of practice of trying to figure out how to work between the two of us to hash out ideas and get the ultimate best outcome. I think we do that well. I’ve even see us flip sides on issues. Like we’ll have our go-to corners on things, and sometimes when we both agree on it, we kind of just automatically start arguing about it anyway to make sure that we really challenge where we’re putting in our energy. I think we do that well. I think that’s one of our strengths actually.

Patrick:                 Yeah.

Ben:                       We have a lot of weaknesses. I think that’s one of our strengths.

Justin:                   I think Joe and I do that too. We’ll do the devil’s advocate thing, and then we’ll debate topics to really kind of like flesh out their merit. I think that’s really important. I think when you talk about you guys being different and having kind of different interests and coming at things differently I think it’s really helpful as well.

                                All right. So we really kind of covered kind of your business, where you guys plan to go. I want to get into your offer a bit more because I think our listeners could actually get some value directly from what you guys are doing. I mean, we talked about you evaluating the credit-worthiness of potential lenders. How exactly do you do that? So how do you validate credit-worthiness from someone who’s looking for some cash?

Patrick:                 Right. So it depends. First of all, there’s a bunch of different kinds of credit products we offer. So some of it is you’re evaluating different things, right? We’re generally always looking two components. There’s generally always a borrower. I can pretty much guarantee there’s always a borrower, and there’s always an asset, right? So on the asset side, you sort of have this spectrum out there between all cash flow, no value, and all value, no cash flow. So you can have a domain name, like a great domain name that’s relatively liquid. You can talk to five domain brokers and do your own analysis and they’ll tell you $100,000 all day long. But the borrowers a deadbeat, doesn’t have any income, whatever. But you know the loans for $20,000. There’s no chance that you’re going to lose money on it, right? So that’s the situation where it’s just all value, no cash flow.

                                Then on the other end of the complete other end of the spectrum, you have a business that has New Jersey lawn care-also dog walker, but it’s got incredible cash flow, and the business is doing something that the guys got great credit. Maybe you don’t really think you can replicate his model if you were to default. And he’s just someone who’s proven out his business model, and he just needs that capital because he knows. He’s like, “Hey, you give me some capital, and I’m going to quadruple the amount of net profit I’m taking home each month.” So it’s like sometimes a lot of it’s taking a bet on the right person and what they’re doing and seeing that cash flow.

                                So, again, you’ll have the difference between value and cash flow, and almost all the time it ends up somewhere in the middle. There’s some kind of value there. If there’s a default and you have an asset that can be resold, or there’s just some sort of good cash flow stream that you can continue getting paid from as a leader.

                                And then you look at the borrower. So we look at credit, but we can’t always look at credit. And it’s really mostly something that tells us, “Okay. They’re not in bankruptcy,” which if you’re in bankruptcy, we can’t lend to you because then you don’t have to pay us back. There’s nothing we can do about it. And we also like to see that you’re not an identity theft and that you’re also not screwing over every single creditor you ever done business with. You’re not delinquent on everything. So it’s really just to weed out bad actors on the credit side.

                                But we like to see people that know what they’re doing. They’ve got somewhat of a plan. They’re like, “Hey, I’m a really great marketing guy. I’m going to buy this SAS business because this guy who owns it is just a coder, and he’s got a great product but he doesn’t know how to market it. I know I can make a huge difference here.” It’s like yeah, that’s a lot of value there. What have you done? “Well, I’ve done this business. I’ve done that business. I’ve tried this. I’m running this currently.” So understand what they’ve done in the past, how they’ve proven themselves out and understanding if that business is a good fit for them is also a key part of the underwriting for us.

                                And then it’s understanding, again, back to the asset value. There’s so much involved with looking at traffic and sustainability, all this stuff. So we think we do a decent job of it.

Justin:                   So the factors I hear from you … I like your framework for the spectrum between value, no cash flow, tons of cash flow, no value. So all these businesses are going to fall somewhere along those lines, and it sounds like you can lend to all of them. Things you look at, I mean, obviously you look at kind of the plan, what they’re actually looking to do with the business, whether it kind of makes sense. You’re going to look at their individual kind of make sure they’re not bankruptcy, make sure that they are not identity thieves, make sure they seem to pay back most of their loans. It sounds like FICO scores are of lower concern to you than some of these other things.

                                So which do you prefer? Do you prefer to lend to like an all value, no cash flow or an all cash flow, no value business, and under what situations would one be more appealing-

Patrick:                 That’s a good questions. I mean, that’s a good question. I’m personally … I think Ben is actually opposite. I think Ben would probably prefer, I don’t know, maybe Ben will disagree with me now, but I think he would prefer more value. I like to see really healthy, big fat cash flows. Part of it is just they’re so different. You know these businesses, there’s so many different ones. I mean, I like to see a healthy mix. I like to see a business that is resellable. I like to see a business that has a really fat cash flow stream. So you’ve got a good asset and good cash flow stream. I like to see both ideally. But I don’t know, Ben, what do you think? I like bigger cash flows more than I like bigger value.

Ben:                       Well, just because you said that, I’m going to take the opposite. But I think what Patrick said is I kind of like it all really, depending on where in the spectrum it plays out. So on some days, I kind of like value deals more. Other days, I like cash flow more. But at the end of the day, for helping an entrepreneur grow their business and it’s a way for us to make a loan that fits our risk profile. I’m happy to do one or the other. At the end of the day, diversification is not a bad thing either. So I’m open to both and new ones to come in the future.

Justin:                   On both sides of the spectrum, it seems that there’s always going to be the sticking point of valuations. We run into this all the time where sellers with us think their site is worth way more than it actually is. So that’s always sucks to be the bearer of bad news there. I’m guessing you guys have that too where they’re like, “Oh, my domain’s worth $300,000.” You’re like, “No. Not really. And not only that, it’s not worth $300,000, we can’t lend not even close to that.” So let’s say, for example, that-

Ben:                       Justin, they’re like, “But I bought it for …”

Justin:                   I spent so much money, you don’t understand, on the tech, on the backend of this business. I spent $300,000. It’s worth at least that, right? Well, no. No one cares about your tech. It sucks. It’s a shitty conversation.

                                But let’s say, for example, that you’ve got a domain, just a domain only that’s definitely worth $100,000 retail. So you could go out there and sell it reasonably for somewhere between $90- and $110,000. What are you guys willing to lend on with $100,000 domain?

Patrick:                 Well, it depends because it’s not just about the V. It’s not just about the V in LTV with domain names. It’s also about liquidity. I mean, there’s plenty of domains that when they sell, they sell for $100,000, but you got to sit on it for three years. So if we have a default, you have a situation where … or end up losing money because we’re essentially paying some level of interest on that asset until it sells.

                                So first thing we look at is we’ll say, “Okay. What is liquidity on this? What’s the likelihood we’re going to sell it in X period of days, X period of months, and at what price?” [crosstalk 00:46:47][inaudible 00:46:47].

                                Yeah, and in fact, we’re in commission cost there too. That’s about the bar. I mean, also I want to .. The LTV is going to be different. If someone shows me, “I run this business. I’m building the domain name. I’m actually adding value to it. It’s an integral part of what I’m doing already.” That’s different than somebody who’s like, “I’m having real trouble with my business. This is my last chance. As you can see, I have all collection accounts on my credit report.” I mean, obviously we’re going to have a lower LTV on one of those deals than we are going to have on the other one.

                                So once you understand who the borrower is, what the use case is, and then what the liquidity of the domain name is, that will affect LTV. Usually when people have dealt with us in the past, will give a spread of offers. So if it’s $100,000 domain, let’s say average liquidity, maybe we’ll come in at offers at $40-, $50-, $60-, $70-. Something like that over different durations as well.

Justin:                   Appropriates.

Patrick:                 Yeah, exactly. It’s like you take more money, yeah you’re going to pay a higher rate. You want to money out longer. We’re taking duration risk on our side. So there’s going to be a higher rate. You pledge extra collateral maybe, maybe you’re going to have a lower rate. We don’t have just one type of loan. There’s interest only products too. There’s fully advertising products. There’s hybrid products. So it also depends on what kind of loan you’re taking, what loan fits best for your situation and your-

Justin:                   That’s really interesting. In the example I just gave, I said $100,000 on both sides agree. Let’s just make it easy. Both sides agree. You guys retail $100,000. But in your head, you’re like, “Look, I know we can sell this in 30-60 days at maybe $50- or $60-. So I know we can sell it quickly at that. So I’m willing to give a loan at a lower interest rate, $40-$50,000. I’m willing to do that. Above that, $60-$70-, I know it’ll take longer to sell for us to get our money back. So we’re going to have to charge a higher rate of interest and that kind of thing.”

                                So yeah, that’s interesting. That’s pretty cool. Is that typical a 40-70% range, or does it really just depend?

Patrick:                 Well, yeah. That’s the thing is it varies. Frankly, some people don’t want to take out the full amount. Some people come to you and they’re like, “Yeah, it’s $100,000 but I only want $10,000. Give me a low rate anyways.” So it just varies.

Ben:                       Max, max, max all the time. And that may say something in itself as well, right?

Justin:                   How long’s the process take? So if I come to you and I’m willing to work with you, I’m willing to get all my ducks in a row, how long could it be between me asking for the cash? Let’s say I need to buy some goods. It’s an inventory issue. I need more inventory out of China. I need it right away. How quickly could I get a loan from you guys?

Patrick:                 That’s a working capital loan. Ben, you want to go ahead?

Ben:                       Yeah. I was going to say this is like where we really crush the banks right now at least, which is if all the ducks are in a row, we can go from meeting for the first time, seeing the deal, to actually funding the deal in as little as 24-48 hours.

Justin:                   Wow. That’s quick.

Patrick:                 Yeah, and if you’re a client already with us and you want to refire, re-up what you’re doing, and we’re already familiar with everything, it can be like an hour.

Justin:                   Yeah. I can see that because you’ve already got all their information. Some of the vetting you need to do is already completed.

                                I know a ton of people, and we have a bunch of listeners in this space. I know a ton of people that are in that FBA business that’s just a cash suck, right? So they’re constantly dumping profits into inventory, shipping stuff from China to Amazon so they can sell it via the FBA business, and I think this kind of offer, especially when they can get the cash quickly and buy more inventory, might be of interest.

                                Now I understand you guys are going to hold, in terms of like leverage, you’re going to hold a domain name, right? You hold the … I have to transfer the domain to you if I take this money. When I pay it back, I get the domain name back. That’s pretty straight forward.

                                What do you do with a cash flow business? Let’s say I’m buying on Amazon and selling on Ebay. It’s this like arbitrage play. I have a website but none of my business goes through there. All my business comes through, let’s say, Facebook paid traffic. What leverage is there for you to hold?

Patrick:                 That’s an example of a business where we might say, “Hey, the V is really small, but it’s good cash flow.” So you want to see a better history there. We still will try and hold domains when we can, and then a lot of businesses, we can actually collateralize pretty well with being able to copy all the pages, all the intellectual property, hold different accounts in our name if we feel it’s really necessary to do that in that instance. And then we’ll have some sort of an asset to resell in case of a default. But if it’s someone who we’re … Sometimes we’ll see these businesses, and we’re like even if we hold this thing, I don’t know what keywords this guy’s buying. I don’t know what he’s doing here, and sometimes you have to risk price that stuff, and you just sort of have to get a good feeling for who the borrower is on the other side. Maybe credit plays a little bit more of a role in that situation, maybe you want to have a real good personal conversation with him and understand who he is. Understanding your borrower in that case is really important.

                                And that’s another way where everyone wants to automate stuff. We automate a decent amount of things too, but at the end of the day, computers are not great yet at figuring out people’s true intentions. And sometimes you got to feel people out as well.

Justin:                   Yeah. So let’s talk a little bit about rates and fees. Let’s say that I am a potential buyer. I come along, I’ve got a business on Empire Flippers that I’m looking to buy. It’s a $200,000 business. I have $120,000 cash. I’m looking to get $80,000. What am I looking to pay on that $80,000? And then what are my options? You guys talked about different types of lending. What are the different types of loans I can get to buy this type of business?

Patrick:                 You’re looking at a purchase finance deal there, right? So generally when you’re looking at purchase finance, you’re always going to see from us at least a minimum of 30% down. We want to see you’ve got skin in the game, and we want a margin of safety for ourselves as a lender. So you’ve got to have some cash that you’re going to put up. Conversely to that though there are some people that have approached us to take a loan against some other property that you already have and leverage that into your down payment or just leverage that to make a bigger down payment. So your debt service burden is maybe different than it might otherwise be or maybe you can leverage yourself into lower rates because we can see more collateral on that side.

                                So process is you got to have at least 30% down. We’ll underwrite-

Justin:                   Will you take that 30% as collateral, is that what you’re saying? Let’s say I want to put 10% down but 20% comes out of equity in another business that clearly has the value there. Would that be acceptable?

Patrick:                 Yeah, we can do that. It’s just you get into a position sometimes where business is so esoteric, it’s really hard to collateralize or it’s just not worth the time for a $15,000 loan, let’s say.

Justin:                   Yeah.

Patrick:                 So you get those issues sometimes, but yeah, we’re totally open to that. We’ve had people approach us to do exactly that. So yeah, you can definitely do that, and then we’ll look at the business, underwrite the business, talk to you, try and understand what’s going on, see what your plan is, are there synergies with the stuff you’re already operating, and that’s another good benefit of working with us is we spend a lot of money on tools that commercial leaders use. And just really digital tools too. So we really dig into the businesses you’re buying, and you get a little bit of free due diligence from us on our end. We’re doing things like paying services to get automatic reports from the IRS to make sure there’s no tax liabilities, to background checks, to figuring out if there’s state tax liens, which they can come in and freeze bank accounts or freeze PayPal accounts if there’s state tax liens. If there’s any lingering liens, like a UCC filing from a business credit card, which could really cause a liability later on, or anything else. Or even lingering lawsuits or UDRPs. So we’ll do a lot of due diligence that way to try and understand things. In that respect, we’re on the same side of the table as the buyer.

                                So you have to have value out of it. We’ll try and understand the asset, and then we’ll make you some offers. And then from there, you move to your closing. We’ll be there in closing to make sure everything goes down, the same way you close with a house.

Justin:                   That’s interesting. So someone comes to you, they’re looking to borrow money for the deal, you’re going to look at the asset, give them some due diligence tips.

Patrick:                 Yeah, I mean, we have to.

Justin:                   If they’re looking at a business, they’re looking to purchase it, and you’re telling them, “No. There’s no way I can lend that much against it. It’s too risky,” gives them some idea on a third party saying, “Hey, maybe I should be a little more careful with my cash in this deal as well.”

Patrick:                 [crosstalk 00:55:20][inaudible 00:55:20].

Ben:                       We’re putting up money into the deal. Essentially if things go bad, it’s like we’re the buyer, right? So we don’t look at it just from a loan, and as Patrick talked about, all those financial metrics and tools and those things, we go through tons of digital stuff too. So we use different systems out there to valuate the traffic. We plan analytics. We go through the screen shares like a buyer would. There’s intricacies between parents accounts and different shopping carts and how that can get structured and all those intricacies are where we kind of live. So as we’re doing our due diligence on it, the buyer is getting a sense of confidence also in the deal. If we’re willing to put up money, I think that’s natural, right? We’re going in it with them.

Justin:                   Can I do a deal where let’s say I want to pay interest only for two years and pay the full loan amount off in two years, can I custom request deals? I mean, are you that open, or is you have a set-

Patrick:                 Yeah, it depends on what kind of deal you have. We’ve done some deals with some startups for really high value domain names who they’ve got a weird cash flow situation going on. It’s like a light cash flow stream, but they’ve got like $3 million in the bank, and they want to protect that capital stack they’ve got back there. And they know when certain amounts of funding are coming in. So they want like interest only in these months, principal in these months, and they want these crazy structures. So we see that all time, and that’s just the nature of these beats, especially with how seasonal some of these businesses are. It’s just like weird transactions that people needed to do.

                                I mean, right now maybe we won’t always be like that. Maybe there will be more firm products in the future one day. But right now we’re very flexible.

Justin:                   You’re testing out the market, right? You want to get a feel for what are the types of products that you probably should offer. I got to say long term I just don’t see that being a good move for you guys. If you’re always doing these custom deals, that sounds-

Patrick:                 Yeah.

Justin:                   That’s a big ask because you guys have to put them together every single time. Over time, you’ll have a better framework for each type of deal, and say, “Look, here’s our box. Anything outside of it, we just don’t do those.”

Ben:                       The funny this is it’s like in life you start to realize that things can be so unique that they turn out to all be the same anyway. So we kind of as we’re getting a feel for the different products for different audiences, we know when to offer certain things versus others, right? So in our offers to a potential borrower, we want to present them with loan options that best fit their situation to most increase the probability of us getting paid back. So even though we can do something or want to work with a specific borrower in that capacity, because we might feel that it’s not a good fit for where they are or something of that nature. So we have some latitude, but definitely we have some core products that we present based on the situation we see.

Justin:                   What am I looking at on the low end in terms of rates, interest rates? Are we talking 5-6%? Are we talking 15%? On the high end, what am I looking at?

Patrick:                 It really varies based on the product, right? So, I mean, I guess we’re pretty comparable to a medium or a higher rate credit card. We did a deal for a guy the other day, it was a two week loan. He had a $210,000 invoice coming in from an affiliate network, and he just needed the money to two weeks. I think it was a rate of 1.2% or something like that. So on an APR basis, it blows out. But you can’t really look at it as … Unfortunately there’s like os many weird types of loans, it’s hard to like use one kind of rate to a fix to all of them. But, yeah, it’s usually like a medium-, high interest rate credit card.

Justin:                   Gotcha.

Patrick:                 Yeah, with a bunch of capacity to it. Obviously we want to offer the lowest rates we can so that it’s leveraging us as a tool makes sense more of the time than it would with a higher rate. But the thing is is that we have to answer to high powers, and depending on how things pan out, if we don’t run our books the right way, then the bigger picture of having this tool in the marketplace goes away. So we don’t want like a few bad apples to spoil the bunch. So we have to plan knowing those constraints on the business as well.

Justin:                   Yeah. So if I’m a potential borrower, I mean, I can look at my credit card and see what kind of rate I’m getting there. I compare that to you. If I don’t have as many credit cards but I do have this asset, and you guys do quick loans so I don’t have to deal with the bank and taking a long time for the approval process. It seems like you guys definitely have a niche there.

                                Aside from lending, I mean, obviously you guys are looking for borrowers, and I think we probably have some in our audience that are going to check out this offer. Are you guys accepting investors right now? So if someone wanted to invest in your business and add more capital to your pool, is that something you’re open to?

Patrick:                 You sound like a buyer, Justin. I didn’t know you were doing that well.

Justin:                   Buying questions here.

Ben:                       What’s the offer? Let’s get to it.

Patrick:                 Yeah. I want your offer.

Justin:                   Well, here’s the deal, I want to hear valuations, what your previous investors came in at. No, we have some of our listeners are investors in our investor program. So they maybe interested in potentially applying there.

Patrick:                 There’s a price to anything, but luckily we got a really great group of investors, and that’s one of the … actually another big reason why it took us so long is that we wanted to find the right investors, not just any investors. So we’re really well capitalized right now. I mean, as we grow, we’re going to need more investors. I mean, we won’t throw off enough free cash flow that we can do crazy development with our investors in the future, but for the near term, we’re pretty set.

Justin:                   Cool, and based on current cash you guys have, what’s your maximum loan? I think you’ll do up to $100,000. Will you do more than that for a purchase? Where are you at there?

Patrick:                 Yes. So we have a soft cap at a $100,000, and that’s just sort of an internal risk metric we use for ourselves because anything can go wrong. I can tell you being in the lending business when Hurricane Sandy happened, I mean, I had a couple great businesses and portfolios that just blew up. A super perfect storm to take out business. So we just can’t have individual position sizes that are too big. The owner could go get hit by a bus. So $100k is sort of our soft cap. But above that, we have a lot of connections with good financial institutions that participate in some of our loans. So that allows us to get up really high into the millions I guess if we see the right deal. We put an offer out at $500k a couple weeks ago. So if it’s a real value proposition, some of these bigger businesses, they resemble web businesses less and just sort of like tech … What someone would consider like a tech real business maybe more. There’s not really a ceiling.

Justin:                   Cool, guys. So if anyone wants to check you out, and I really think they should, I really like your site. I like what you guys are doing. I think you’re in a really exciting space. People can go over to Lendvo.com/empireflippers. We have a link there you can check out. Get more information about potentially buying a site based on a launch from you guys. Is there any place else you guys hang out? Do you hang out on Twitter, Facebook? Where can people get ahold of you?

Patrick:                 Skype. We’re on Skype. We put our Skype’s in our signatures. If we talk to you a little bit, people are happy to … Welcome to come and give us a Skype message.

Justin:                   Cool.

Ben:                       LinkedIn, email, maybe we’ll see you at a cool conference.

Patrick:                 Ben will Snapchat you because he’s such a good looking guy.

Justin:                   I’m going to put your information on our show notes for this episode. Anything I should’ve asked you or anything else you guys want to say kind of about your business or to our audience?

Patrick:                 I mean, I guess I can say what are you seeing from a lender’s perspective in the marketplace right now, right? I think even since we’ve started, there’s just a lot of money and buyers coming into this space, and I got to tell people, people have to be careful because it’s pushing up valuations. We’ve seen a lot of people who just create businesses to sell them, and they’re not really fundamentally good businesses. So we really care about due diligence a lot, and we see a lot of problems out there. If you haven’t bought a business before, maybe you’ve bought one, you’ve built on, you’re looking to add. I mean, you really got to do your due diligence. I’m sure Empire Flippers has a lot of good resources for helping people as well to figure out what’s a good buy, what’s not a good buy.

Justin:                   There’s a third party company, Insurica, that does-

Patrick:                 Yeah, they can help you out.

Justin:                   They’re known in the industry. There aren’t a ton of options. There are some kind of private people that will do it here and there. They’ll do some due diligence for you, but there’s not a lot of options, and I kind of like you guys as a back up option. What’s the key … Just a ton of people to come and apply for loans just as a due diligence test. I mean, you don’t charge any like fees to apply or anything, do you?

Patrick:                 No. Because of that, we don’t let tire kickers. People come, and they’re like, “Will you do this? How much will you lend on this?” I’m sorry. I’m not going to underwrite $100,000 deal with nothing there. So, I mean, we want to see people have a general deal before they come to us if they’re really wanting to pursue it, and then that’s sort of when they get our two cents. But no, if something blows apart, we’re not going to charge you an underwriting fee, even though maybe we should.

Ben:                       More than two cents, for sure. Another thing too is that we’ll ask to hook into your bank statements. We have a technology to do that. We look. If you just want to throw something on our plate and be like, “Hey, what will you lend on this,” the boy who cried wolf, right? It’s like-

Justin:                   So if I come to you, I want to buy this $200,000 business from Empire Flippers. I’ve got $80,000 liquid that I’m willing to put in, and I’d like for you guys to do some underwriting on this. Then you can obviously verify my funds that I have the $80,000, and if I do, then I’m obviously more legitimate than some guy who’s in his mom’s basement Skyping you.

Patrick:                 Yeah. Most of our underwriting is- [crosstalk 01:05:20] Most of our underwriting at that part is going to be on the seller too. You’re coming to us and like yeah, we have to understand some things about you. But we’re putting $120,000 in that case down on an asset. We got a lot of talking to do to the seller.

Ben:                       We work with our partners too, Justin. So just like we would work with you to … If you get an introduction through a partner platform like Empire Flippers or through a broker that we know that works with us like Justin and his team, that’s going to make it, that intro, a lot better than just being like a tire kicker.

Justin:                   Of course. Cool, guys. Well, hey, thank you so much for coming on this show. I think it was really helpful. I love hearing about our story and how you guys got started, couple of college buddies doing some late night chats, all the way to raising a bunch of money to lend to website owners and online business owners and entrepreneurs. So I think it’s great. I think your service is interesting, and I think some Empire Flippers, listeners and readers, are going to be really interested in what you guys are offering. So thanks again so much for coming on.

Patrick:                 Cool. Thanks for having us, Justin. I appreciate it.

Ben:                       Yeah. Thanks for having us.

Speaker 2:           You’ve been listening to the Empire podcast. Now some news and updates.

Justin:                   All right, Joe, let’s do some news and updates. First up, we are hiring, man. We’ve got a content marketing manager position up. It’s on the site over at empireflippers.com. We’ll link to it in the show notes. We are looking for someone to come out here to Southeast Asia and join our management team, and help us scale the business. This person would be responsible for managing our content team we have, our writers for Empire Flippers and guest posters, and kind of managing that process, looking for other people to have on the show, probably helping out with the podcast, and definitely helping out with some of the marketing channels, and helping us grow our content marketing business and strategy. I think it’ll be really, really cool.

Joe:                        Yeah. I’m very excited about this position, not only because it helps you but I think overall we definitely need more help in this category for the company overall. It is so cool to have some more resources available to tap when necessary.

Justin:                   Yeah. It’s just done really well for us. It’s been successful channels for us for years. So why don’t expand that? I mean, we can get into other kind of testing different lead channels and funnels and stuff. But this one works. We’re better to just double down on the one that we were having success in. So I think it makes sense. I’d love to get someone out here soon, but I’d love to get someone out here in February, kind of March at the latest because we have our management meetup in April, right? We’re all going to be in Saigon. We’re going to be working together for a month in Saigon. I’d like to get this person out here before that so we can do a little bit of like I can work with them pretty closely, and then we can have them meet with the rest of the team and kind of get to know us. We can start really working together. I think that’d be great.

Joe:                        Yeah. I’m very excited about it too. So if you know anything who would be perfect for the position or you’re perfect for this position, please let us know.

Justin:                   Yup. We got a ton of inventory available right now, Joe, especially in the $10,000 to $50,000 range. You remember a couple years ago or definitely at least a year ago, you and I were talking. We were like, “God. I’d love to know how much business we could do if we had inventory kind of across the price spectrum. If we had one at $10,000, a site at $12,000, site at $14,000, and gave people real options. So not just AdSense or Amazon affiliate sites, but if we also had eCommerce businesses, drop shipping, SAS businesses, info products.” And we’re getting to that point now, man. We’ve got a ton of the websites for sale, ton of businesses for sale, and they’re fairly wide ranging in price, in monetization strategy. I think it’s really cool.

Joe:                        Yeah, I mean, maybe on the SAS side we’re a little weak, but almost every other niche we definitely have something that can suit you. So take a look at the marketplace, reach out to us if you’re interested, and if you’re not, if you’re not seeing something that you want, please let us know too. I’ll try to hunt for that a little bit.

Justin:                   Yeah. So we get some questions about this, Joe, so I thought I’d throw this in. Where are we right now? What are we doing? Where are we at? People come to Devoue Philippines or they’re planning a trip and they’re like, “Hey, I thought you guys were there.” No. Not really. So Joe is stable. He’s chilling in Manila. As I mentioned before, we got our management meetup in April. I’ll be coming over a month at that time. I’m still doing the travel thing. So right now I’m in Tokyo. I’m in Japan. Tomorrow I head off to Taipei for a few days, and then I’m going to Saigon. I got a buddy getting married in Vietnam. So I’ll be heading over there to hang out there and meet up with some friends, and then heading back to the Philippines toward the end of February. So I’m still doing the travel thing. Joe’s settled down in Manila. But we’ll be kind of meeting up again in April to work on some projects and work with our team.

Joe:                        Yeah. I’m more of the hub and spoke kind of guy with traveling. I’m loving having a place here. I can see myself staying here long term. I don’t know about in this particular apartment, but it is a good setup. I can see myself at least for another few years here.

Justin:                   I heard your apartment’s right next to the circle there. It’s got a great view. It’s pretty cool, man. It’s nice.

Joe:                        Yeah. I got a good setup. I get to look out the window all day, and I have a good desk and nice comfortable setup for getting work done. Yeah. It’s nice.

Justin:                   Well, I’m in a pretty sick place. I’m at the Park Hyatt Tokyo right now. Dude, it is baller. So I was like, “I need a place to stay.” I was looking around. I was like, “I want to go kind of high end.” Our buddy’s over at abroaders.com help me get a bunch of credit card points, and basically I’m staying here for free, man. The fucking Park Hyatt in Tokyo. Pretty baller.

Joe:                        Cool.

Justin:                   So another bit of news, this is more of some gossip. Are you ready for some cheeka cheeka as they say in the Philippines, Joe?

Joe:                        Hit me up, man.

Justin:                   All right, man. Here’s the gossip. Spencer Hawes over that nichepursuits.com sold controlling interest in Long Tail Pro. So he got a nice pretty pay day from that one, buddy.

Joe:                        Yeah, I mean, it makes sense to me, especially with the addition of the recurring revenue piece. I’m sure that made it a very valuable sort of target on the marketplace. People are always looking to acquire SAS businesses, and a SAS business that’s profitable and has a recurring piece, those are hard to find. It has great brand recognition as well. I’m sure that he was paid quite handsomely for that.

Justin:                   Yeah. So I don’t know exactly how much money he was paid. I don’t know exactly how much money he was making. Even if I did know, it would probably been said in confidence, so I wouldn’t say anyway. But I know that at one point he was talking publicly like mid-five figures a month for Long Tail Pro, and this was quite a while back. So my guess is it’s done even better. He added a recurring piece after that. So it’s don’t really much better.

                                In a post, I’ll link to it in the show notes, but there’s a blog post he put out recently where he talks about some of the changes. He’s so involved. I think he still owns a percentage. He doesn’t mention who the buyers are. I’m really interested to know how they are, but he did say that they’re changing the model, Joe, from like 97 and like, what was it? $17 a month for the platinum piece. They’re changing it to a flat like $37 a month, and they’re throwing in the Long Tail Academy or something, the course that he created. So it’s basically he’s going to a straight monthly model, $37 a month.

Joe:                        Well, what can speak to the success of Long Tail Pro, I’ll give you a personal anecdote here, is we were checking a lot of our accounts and reorganizing our revenue on the backend of things here at Empire Flippers. We haven’t mentioned Long Tail Pro in probably more than a year. We definitely haven’t sent out any affiliate offers or anything like that. Yet, to this day, we still get paid a monthly affiliate check from them regarding some software that we sold a long time ago. So people buy it, they hold to it, and they keep paying. So it must be a valuable tool.

Justin:                   Yeah. It is a cool tool. I think it’s interesting that the new buyers are going in the full on SAS mode. I think that’s probably a smart move. I think this is probably a buy and hold piece of software that people are using. So yeah, really, really interesting. And congrats to Spencer. Man, that is awesome. He crushed Market Samurai. He came out just the right time, and I think he’s got a great tool. I wish him all the success in the world. I think it’s really cool.

Joe:                        Yeah, me too, man. Great. Way to go, Spencer.

Justin:                   All right, man. Let’s do some listener shouts, also know as the indulgent ego-boasting, social proof segment. First off, on Twitter we got Vincent, “The old marketing apprentice, Empire Flippers hiring again. These are the guys that taught me most of everything I know,” and then put a link to the content marketing hiring post. Thanks, Vincent. Appreciate it. Do you know the levels guy, Joe?

Joe:                        I don’t know him, no.

Justin:                   Okay. So this guy basically he runs Nomad List. Have you heard of that?

Joe:                        Yes. Of course. Mm-hmm (affirmative).

Justin:                   Peter. Okay. So he runs Nomad List, and it’s a great kind of life expat, entrepreneur kind of meet up group. He was asking about valuation. He was wondering how much his business is worth. It’s making about $200,000 a year now. So he’s saying, I’m guess … I told him he had two-three years or something, and he said so probably $480,000. I think he’s got a nice business there. I think it’d be an interesting sale opportunity. But I think that he’s looking to hold it for another year or two. He wants to build it up, see if he can get that million dollar payday. So congrats to him. I think he’s doing really well there.

Joe:                        Yeah, I think keep building it. If you make it into a mostly hands off type of business, that would be a very attractive sort of listing that would sell quite quickly.

Justin:                   Jeremy Roger had a question for you, Joe. He said, “Hey, is it possible to transfer IE and asset sale?” While all the sales that we do at Empire Flippers … Everyone that we’ve ever done so far has been an asset sale, so that is-

Joe:                        Yeah, I mean, we’ve looked into this, and it can be done. The thing is is that in some regards, in some situations, the seller has a reason to hold on to his account, IE there are products that are not included in the sale that he’s selling from that account. In those types of cases, we can contractually protect the buyer and make sure that the new account gets set up correctly and that revenue and sales are floating to that new seller account before the seller gets paid out and make sure that the buy is confident that the new account is working properly.

                                So either way we do it, we’ll make sure in the end that the buyer is getting what he paid for.

Justin:                   Cool, man. We got another couple of submissions. There’s an interview with one of our that lights the details about that. I’ll put a link in the show notes over to dignity marketing. And then we have … Selling his website with us for $40,000. I particularly like his, even though it’s in the YouTube video from Ben. You can see how fired up he is. He started this business and it turned out to be a nightmare apparently. And then going through eight or nine months, he still can’t believe he did it.

Joe:                        Yeah. I watched the video. It’s incredible, and very happy for him. If he wants to make a factory of making these little drop ship sites and us selling them, I’m all for that.

Justin:                   Be happy to do it. Yeah, definitely a good one to check out if you’re looking for a motivation and kind of that’s a great one to watch.

                                That’s it for episode 151 of the Empire podcast. Thanks for sticking with us. We’ll be back next week with another show. You can find the show notes for this episode and more at empireflippers.com/lendvo, and make sure to follow us on Twitter @EmpireFlippers.

                                See you next week.

Joe:                        Bye, bye everybody.

Speaker 2:           Hope you enjoyed this episode of the Empire podcast with Justin and Joe. Hit up empireflippers.com for more. That’s empireflippers.com. Thanks for listening.

 


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