Jordan: Hello everyone and welcome. I'm here today with Todd Stichler from Lend Spark. Todd is gracious enough to come meet with us today before his golf tournament, so we have to be respectful of his time. But you know, we want to get him prepped, get him excited, so he has some good energy going into his tournament later today.

Todd, how you doing?

Todd Stichler: I'm doing well, Jordan. Thank you for having me on.

Jordan: Yeah, that's great. So you've been working, you're the CEO and founder of Lend Spark for a lot of years. 14, is that right?

Todd Stichler: 14, 15 years now. Yep.

Jordan: So tell me a little bit more. We'd love to hear more about your background and kind of what got you into Lend Spark.

Todd Stichler: Yeah, so I previously was working with a family business where we designed and consulted for healthcare facilities. So we would build hospitals, design hospitals, work with them on new facilities. And when I got out of that business in 2010, it was kind of right after the financial meltdown. I had a lot of people in that industry as well as other industries that knew me kind of as the operations and finance person, and they started reaching out to me saying, Hey, I needed some assistance. But ultimately what they really were needing at that time was funding. And with the banks having some challenges after the financial crash, this alternative finance space really started to pick up during that time. And so I launched Lend Spark to be an advocate for clients that were seeking money, uh, and business financing, but really needed assistance to understand what kind of financings available and, and what would be best for them.

Jordan: So you're saying trying to serve that, and this is when I talk to people in this alternative finance space, this is kind of like when it was born is after 2008. Yeah. Um, right. It's 'cause the bank, the banks site pulled back. They were super scared of any, doing any of this kind of lending. Um, and this void because the capital was still needed. These businesses were great businesses and still needed the capital. Um, which it kind of sounds like your story too. You kind of came out there and said, Hey, this is something we can do to help. What do you feel like at that beginning, what were you doing different than than other people in this space? Like 14 years. The business is not easy. So the fact that you're still here after 14 years, what do you think has made you successful from that beginning all the way to here?

Todd Stichler: I think a couple things. Um, we really approached it from a, uh, consultation and advisory kind of approach rather than just trying to sell a, a solution to the customer. So we really wanted to, since I've sat in their seats in the past, I've actually been the business owner. I've been the guy that's responsible for 350 employees. Um, you know, it doesn't matter how many zeros you have on your revenue, you still have the same issues, right? Are my clients paying me? Have I invoiced them fast enough? Are they paying me fast enough? Can I cover the, the, you know, the payroll and all the expenses for that month? Um, so approaching it from a consultative perspective, number one. Number two, really understanding all the different, uh, solutions that are available to these clients. So rather than just saying, Hey, I can provide you a working Capital Solutions, or I can provide you a equipment financing solution, we wanted to have kind of the whole breadth of solutions available to our customers to, to fit them into the right solution for their needs.

Jordan: So it kind of came down. Uh, again, you're kind of slowing down the process. I know a lot of people we work with, they're processing a lot of these applications every day, even trying to go through these, um, are you meeting with all these cust, like whether it's a phone call with every single potential, each one of these merchants to kind of assess, understand how, how does that process work?

Todd Stichler: Yeah, we don't really even consider a merchants because I think that kind of slams us maybe into us one particular solution. We do actually talk to most of our customers, if not all of them. Um, we don't run a very large sales organization. I would say we're more of a financing company than we are a sales organization. So, um, one of our team members will traditionally talk specifically to the customer. What is it that you need? Um, gather the information, find out what the solution is, and then be in touch with about what that solution or if there are other solutions available and what makes the most sense.

Jordan: Got it. And what would you say has changed in the last 14 years? So you started this, what, you know, it sounds like that's probably been your creed the whole time. Yeah. Really good customer service talking to them. But certainly things have changed, uh, just with the nature of technology.

Todd Stichler: Yeah, I mean, a ton. A ton has changed, right? It's easy for customers that is really needing, uh, let's say they need $50,000 tomorrow to make payroll, right? It's easy for them to go somewhere and get that money quickly. Um. So I. You know, the amount of information for these borrowers, uh, and you know somebody has a solution for them. You really have to decide if that borrower is going to listen to you and can we provide the solution for them, or a better solution, or one that is going to get them into a better solution long term. Um, so I would say what's changed the most is the noise. I call it, you know, lots of different people who are brokering out in the marketplace, um, that are trying to attract these customers. The ability and the speed of getting the financing to the customers from, uh, you know. From the initial call to gathering the bank statements, to getting them a contract, to getting them funding, that has all been significantly reduced down into hours, if not a day, depending again upon the solution. So, um. What, how else has changed is other solutions in the marketplace. Right? Before it was a true merchant cash advance, as an example, where you had to move their processing and in order to get them to financing, uh, equipment financing has changed. Back then it was still, I don't wanna say it was only faxes, but fax was still big back in the day. Yeah. Um. You know, access to SBA has changed. Um, access to factoring has changed. So I just think that in general there's, you know, technology has been utilized in a very positive manner. Get these, get the solution to the customer.

Jordan: Would you say you, you, I mean, one of the things you say has changed, A big part of it is the amount of noise, which I certainly couldn't understand. You hear a lot more, I mean, we emails all the time, um, for people, like I try to offer financing all the time. Mm-hmm. Like every day. Probably most businesses do. Um, saying, Hey, I can get you $50,000 funded today. A hundred thousand funded today. Uh. That's not great. Probably having a bunch of noise. But it also is good that there's so many options out there. At least that's what it feels like. How do you feel, do you feel like this is a good change, bad change? I mean, are you happy with where it's gone or not so much?

Todd Stichler: Well, I'm gonna answer that question, um, maybe in a little bit of a different way than some of the people you talk to. So Lend Spark is a direct lender, meaning I actually hold paper on my balance sheet. So I am concerned about the health and wellbeing of my borrowers. Uh, I wanna lend them money and I wanna get paid back. Yeah, you want that money back, right? I wanna get the payback. And when there's a lot of noise and people telling the borrower whether it's true or not true, um, or they're telling them, Hey, don't worry, we work with people like Lend Spark, or, you know, no big deal. You're not complicating the contract you have with groups like Lend Spark. Is concerning to me. Uh, so the stacking that happens in working capital, very concerning. Uh, the amount of leverage and debt that I see on these customers is very concerning. Um, but at the end of the day, the, the fact that the market has shifted outside of the bank to a more alternative private credit that provides access of capital to businesses is amazing. What we're doing with it is concerning.

Jordan: Yeah. Interesting. That's a good take. I mean, both sides, right? You're optimistic and also, you know, I don't know about skeptical, but, uh, just concerned, right? Like you said, um, like the stacking we see all the time. We worry, I, you know, we hear about it. Um, and in our business and. That sounds like a dangerous precedence. And so sometimes you may offer them, you know, let's say you fund them on a deal and then they go stack and get a few more. That's very concerning for you, right? 'cause right now you're worried about getting your capital back at all.

Todd Stichler: Right? And again, as a co consultative lender, we wanna know what's going on with our customers. 'cause I may be offering them, you know, I have customers that we've financed 20 different pieces of equipment for. We've gotten them an SBA loan, we have provided them what we'll call an over advance or some additional financing with our own money and. If they're stacking us, the only way I can know is if I'm either talking to them regularly and, uh, accessing their, getting their bank statements or if they default, and then I have to go through the process of gathering the information to see what happened in the default.

Jordan: Yeah. Which is scary. That's the part you don't want.

Todd Stichler: Right. And again, 90% of the time, I would say most people wanna pay back 90 to 95% of the time they're paying back. It's, it's, you're spending 80% of your time on those challenged credits. And a lot of times it's not the businesses that are bad businesses, it's the business owners that have made some poor choices because they have been given access to additional capital. And it sounds good when they sign up. But then they get into a cashflow problem.

Jordan: Yeah, that makes sense. And all the noise being is like brokers maybe that have a little less risk, right? That you are, are, you're holding the paper. So it's a big deal to you to make sure that they are able to pay back. Whereas maybe the brokers don't care. And I'm not trying to sell broker, you know, there's good eggs and bad eggs always, but that the fact that they have less skin in the game probably makes 'em, you're, you're gonna be more careful. It's your money.

Todd Stichler: Oh, it's my money. I'm gonna be a lot more careful. I want a long-term client relationship. I have, I may have multiple solutions into the customer. Um, so yeah, I wanna be a lot more careful. And the brokers, they do have some skin in the game. They usually should have some kind of claw back, but at the end of the day, you know, they get paid their commission at funding. So yeah. I don't blame the broker as much because if the way the system incentivizes is the issue, right? If your incentive is to get paid right at funding and you're not incentivized to make sure that client pays back, that that's a broken system.

Jordan: Yep, yep, yep. So I get, we can sit and blame brokers, but they're just taking advantage of what the incentives are.

Todd Stichler: Yes, absolutely.

Jordan: You mentioned this and I've heard this from other people, um, about banks kind. You know, in 2008, early banks kind of backed off from commercial financing, maybe a little bit just 'cause capital was at risk. It was just harder at that point. But I almost feel as I talk to people like you, that they feel that banks are really not overly not super interested in dealing with commercial financing for, for most of these businesses, the SBA product, which really, um, you know, they're facilitating, right? It's a government run product. Mm-hmm. Um, do you feel that's true where banks are just, that's not the direction they want to go right now?

Todd Stichler: I think it's bank dependent, right? So I, I think in general, most banks portfolios are going to hold an asset like real estate. So commercial real estate is probably one of the biggest assets that are held by banks that they lend against. Whether they lend against it in an SBA product like a 5 0 4, or they lend in on a traditional type of financing, that's where most of their stuff is. On c and i lending, I don't see a lot of banks having the focus be c and i lending, which would be a traditional, you know, line of credit or some kind of term loan associated with that. Um, I think part of the issue is the banks are so focused on the fact that they need deposits that is the gas that goes into the engine. And without deposits, they can't lend the money out that they really have to. What loans are placed based upon the number of deposits that they have, and they're gonna put it in the most or the least risky asset classes they can get to. And they think commercial real estate's the least risky, whereas accounts receivable, um, other types of things like that where they provide a line of credit that doesn't have an SBA guarantee, they're going to shy away from it.

Jordan: So your answer is yes, like you do feel like, and not, again, you're, you're blaming the incentives being that why wouldn't they? Right? Right. They, they want, they need to make sure they have, uh, the loans against the depository. So increasing those deposits are way important. Um, and loaning against them is important, but they're gonna go with the least risky. The right.

Todd Stichler: So if you have a client that doesn't have any real estate and their accounts receivable based, um, they may be eligible for $500,000 loan or less. Uh, the bank has to take into consideration do we have enough deposits to go after that kind of customer? They're traditionally considered a small business, so they're a little bit more risky. They have a loan officer, uh, or relationship manager that may or may not wanna waste their time with a $250,000 loan, um, from an incentive perspective. So, yeah, it's, I think it's a challenge in the banking where the banks want that they're incentivized to, uh, get the, those kind of credits, the CRA credits, but they, they're just having a hard time placing those, those loans.

Jordan: So five to seven years from now, do you see more? Do you think bank seeing a, a bigger role in this? Is something gonna change or you think B Banks will take a bigger role in this space? Or do you feel like they're gonna shy away even more? And this just continues to grow businesses like Lend Spark or other people in this alternative finance space?

Todd Stichler: Well, I think you're already seeing private credit growing rapidly, right? With um, more of the institutional money coming in offering, um, a private credit solution. You're seeing and hearing about it being offered to 401k uh, plans Now, um, as on, on the private credit side, I think the banks wanna do that. In some ways the banks are getting more involved, so in the equipment financing, um, many of the equipment finance lenders. Backed, um, or they have a, a division now that I can sell paper to. Um, I think it's the working capital solution that has so much of a risk profile to it that I don't see the banks moving towards anytime soon.

Jordan: Yeah. So. Regulation has been something that's kind of been in this industry, especially in the alternative finance industry, I would say recently, um, it seems like maybe it slowed down a little bit, um, but disclaimer laws, those things are out there. You know, you're in California, so certainly that's one where disclaimers are required. Um, when you're putting out any of those deals. How do you feel like re regulation is going with this industry? Do you, do you feel worried about it? Is, do you feel like, oh, this is a big deal and this is really gonna slow down all these deals? Or are you happy that it's coming where, where's your stance on regulation in this industry?

Todd Stichler: Yeah. Being a non big government guy in general, I'll lead with that. Um, I'm not a big fan of having. Tons of regulation, but in a very unregulated aspect of certain parts of the alternative finance world. I think it's good. Um. You know, we have to do disclosures in the state of California, and there's other states that are following along with that. When it becomes state by state, that is a worrisome, right, because then there's a lot of time spent on compliance on the back end of paperwork of, okay, what state is requiring this, and then what state is requiring a max interest rate as it relates to something that I can sell, whether it be equipment, working capital, or anything else. Um, so, you know, right now it's a piecemeal thing, which makes it challenging. Um, it would be nice to have some kind of, um, unilateral or universal type of regulation that's put in place. Um, but again, if I'm comparing that to FINRA regulation, SEC regulation, that scares them.

Jordan: Yeah, for sure. That then we're over, we're just overregulated. Yeah. And, and I, I said disclaimer, I meant disclosure. You know what I meant? Yeah, yeah. But yeah, disclosures. Now you said I can understand the frustration with it being piecemeal because certainly it's different state by state. I think there's what, like five or six, maybe seven states right now that have these requirements. Um, but. The other side, like you said, the, the risk of it going where it's unilateral, that's, does that happen without it being federal? Which seems scarier to me. Right, right. But if it goes federal, then you're really worried that it's gonna be just a big pain for everyone. Right.

Todd Stichler: And I, and I think that, you know, again, there's. I think there's five or seven states right now where you have to be licensed in it. So then you have to be part of the nmls, are those states? Um, working with the nmls, that makes it easier for lenders like us that are licensed to get reciprocity in those states versus going state by state. Um. Disclosure laws. Each state has a different disclosure law that have adopted them right now. Making sure you know what those are so that when you send out the documents that you're complying with that state, it puts the onus on the lender and that's great. Um, but at the end of the day, when you're getting referral partners and brokers out there that aren't very versed in that, it creates a challenge.

Jordan: Yeah. So it sounds like overall you're like. Your, your stance is regulation too much. Regulation not good, but maybe when it's the wild west is maybe not so good when it's just completely unregulated. Yeah. Yeah. Okay.

Todd Stichler: And again, I, I want to take care of the borrowers. At the end of the day, we're trying to get, we're trying to get, uh, borrowers and small, medium sized businesses access to capital that they don't have, right? Mm-hmm. That's a good thing that, that keeps our economy going. It keeps things growing, it keeps people employed, um, and then it keeps the wheels turning. So access to capital is important. Restricting that access is a concern, but when it's, when there's not certain, um. Let's call it rules to govern by that are consistent. That's a challenge, right? It's kind of like bowling lanes, right? You're on some lanes. I don't have any gutters. And then on other lanes I have gutters and in other lanes I have the bumpers on the gutters to deal with. Yeah.

Jordan: So trying to figure that out and navigate, that's where the problem comes in. Yeah, yeah, I can understand that. Um, now again, 14 years, technology has changed significantly. Kind of hinted at this. Where do you feel like technology is, is now and ai, how do you feel about that coming into the business right now? How, how it really is making big changes already, uh, in this every space, but also alternative finance, um, so technology and where it's going. How do you feel about that?

Todd Stichler: Yeah. Um, I love the technology. I think it's phenomenal. Um, I think there's some pros and cons with anything, right? That we have to be cautious about. The pros, the ability to glean information on a borrower very quickly with, you know, companies like yours providing the service that you do, uh, whether it's the, you know, secretary of State to the credit polls to. Use existing data to determine SIC code performance, zip code performance. Um, those things are phenomenal. The ability to move all that into loan docs, get it out, signed, even third party inspections, even video recording of customers taking the money. Those are all phenomenal things. I think the AI concern that I've been seeing right now is I get calls probably four or five times a day with somebody who's ai, you know? Yeah. We have your information, you've been approved, we need to get you in touch with our underwriting, um, department. And it's just the noise, right? Mm-hmm. Um, so I, I think again, with anything, you know, it becomes the wild west and then it gets to a place where it's very usable.

Jordan: Yeah. So right now, especially as this first starts, I, I get those too, right? Emails, phone number, phone calls, and they sound like they sound better than they've ever sounded before.

Todd Stichler: Oh, they sound like a, they sound better than a salesperson without doubt, right?

Jordan: Yeah. But it is so much noise now, the decision, understanding what's real, what's not, um, that's a little more scary.

Todd Stichler: It's, yeah, it's a little more scary and you know, it can, again, we're trying deceive. That is not why I got in this business. That's not why I'm Right. No, of course, you know, a business owner myself. Um, and so I think those are the, the pitfalls that we have to be very cautious of.

Jordan: Yeah. Well, Todd, I I appreciate your time. So I have one final question here. Um, almost 15 years. I, I probably know the answer to this, but if you were to go back in time and talk to Young Todd and be like, Hey Todd, you're about to start Lend Spark. You see this opportunity, what would you tell him?

Todd Stichler: That's a good question. Um, I don't know. I may not tell him too much 'cause I don't know if you would get started in the business, you know? But I think that's, I think that's true. I think that's true with anything, right? You have an idea, you get started, and if you really knew the path that you were gonna go down and the pitfalls and the challenges, you probably never would get started. So, uh, naivete in some ways is a blessing on the beginning. Um, what I would probably say, um, is. I'd probably be a little bit, maybe more specific on a certain type of product type or an asset class, and really build a book around that and become a specialist. Um, then we started as an advisor and then started funding and then. You know, we still have multiple solutions. What they think is still great, but if I was building a lending company it would be very asset specific. Very product specific.

Jordan: Just so you can specialize and become really good at that one.

Todd Stichler: Yeah, very good at it. Um, and then you have long-term history with it, which gives you better access to the capital markets to get the funding to lend it out. So.

Jordan: Yeah, that makes sense. Well, Todd, like I said, I appreciate your time. Um, thanks so much and good luck in your golf tournament today.

Todd Stichler: Thank you very much. I appreciate your time as well, and good luck with your business.

Jordan: All right. Thank you.