Best Practices for Leveraging Financing in Small Business

Join us for an insightful discussion on The Small Business Show, where we examine the significant challenges small businesses face in securing traditional financing and the practical solutions offered by alternative platforms.

We discuss why traditional banks often deny critical funding during urgent times and how businesses can strategically use alternative financing, such as Vox Funding, to turn potential setbacks into opportunities for growth. This episode provides a comprehensive overview of how quick access to funds can make a substantial difference in navigating unexpected expenses and capitalizing on growth opportunities.

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LinkedIn: https://www.linkedin.com/in/adambenowitz/

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Transcript

0:16

And growing a small business. The small business show is the official podcast of Garuda promo and branding solutions. Hello everyone, you're listening to the small business shows. My name is Swire. You can also call me the promo guy. My guest today is Adam Banowitz from Vox Funding. He's known for being a fearless entrepreneur. He is an experienced businessman and venture capitalist with over 30 years of experience in financial services. He's the CEO of Fox Funding, specialized in alternative financing for small business. Previously he had co found coverage Media Group, a talent management and production company. Adam is a founding partner at Excite ventures focused on early stage impact investment in eye health. He mentors startup at Harvard Business School, engaged in philanthropy with organizations like founding for Fighting Blindness and Map for America. And he has entertainment projects including Emmy nominated documentary Q chain. Adam is adamant about creating a corporate culture that's authentic and genuine. In his personal life, he's a Philadelphia Eagle fan, a poker player, art collector, and enjoy comedy club and playing the guitar. Welcome to the show, Adam. Thanks. Thanks for having me. It seems like a lot of hobbies, a lot of ventures and so little time, right? Yeah. I mean, I get bored easily, so I like to do different things. I'm not a big relaxer, you know what I mean? Yeah. Adam, I'd love to find out more about your entrepreneur journey. How did you get started to be in the financial industry and what makes you decided to found Vox funding? I've always been an entrepreneur. I always wanted to sort of run my own thing, even from starting like, lemonade stands when I was seven, my partner Randy and I, like, we've been starting businesses and doing things all the time. You have a great idea and you just want to see it come to life. So I've been doing it since I've been a little kid. What made me want to start Vox? Having been a small businessman myself and around small businesses, like my whole career, I know how difficult financing is. And when we were kicking around ideas for our next big thing a few years ago, a colleague of mine had talked about this and I was sort of intrigued by it because I've seen the problem of cash flow and small businesses needing money my whole career, and we really started, we got together a little bit of money and decided to do some deals just to test it out. And when we started out, it was three or four people working first of all in a spare apartment and then in a wework, and it just, we kept innovating and growing, and now we're about 110 people in soon to be five cities. So. But the same problems persist. And, you know, that's, it's still fascinating to me. Small business all the time. Yeah. Thank you for sharing. And, you know, I really do have a lot of questions for you. And let's talk about money. Right. As a small business professional, a lot of time, as you know, when we walk into a bank, either when in good times, when you go to the brands, they'll say, hey, if you need some money, just come to us. But when you actually need it, when you go to the bank, they will come up with 10 million reasons why you can't have the money. So for the access of capital for small business is actually a very difficult part. When you need it, you need it now. So how does alternative financing, like Fox funding, can help small businesses tackle their immediate needs? I mean, what you're saying is correct. It's so hard for small businesses to get money from banks. Banks really only want to loan money to people who don't need their money. What we tried to do is come up with a system and a platform where you can apply, because many times small business cash flow needs come up quickly. The example I like to use is if you're a restaurant and your walk in refrigerator breaks and you need $80,000 for a walk in refrigerator, you need it by tomorrow, right? You can't apply to a bank or anything. You need fast money and so you need a partner who's able to respond to those needs quickly and efficiently. And that's basically what we've done here. We've devoted ourselves to getting faster, more customer friendly, more convenient for the small business person and give them access. Can you talk about the cost of money per se? Because if we borrow money or even with alternative financing, partner sharing costs involved, if you go to a bank, you pay interest. I've looked at factoring for the business or they prepay you. So how should a business decide if financing is right for them? Because somehow you have to pay that money or make that back to be in the green. So what do you think about the cost of money, that topic? Well, what we look for when we want to fund a business is a guy who's thinking about it in the right way or a girl who's thinking about it in the right way. For instance, you want the capital that you're giving to that business to be additive, to grow, to be multiplicative over time. Because money, not surprisingly, very often the money that we will lend or the money that we will advance is around credit card rates. So it's fairly high, but you should be able to multiply that money and it should be able to, and we obviously underwrite them in a way where we make sure we talk to the merchants, we say, what do you need this money for? And what we want to hear is an opportunity that they have to make their business better. A great example is if you had one guy who owns a mexican restaurant and the opportunity to own a second one in the same city he was, and he had a perfect business plan together. Basically. He had one successful restaurant. He wanted to make it two. That's the kind of thing we love because the little, he didn't even need that much money from us, but the money that we did advance helped him expand and continue add permanent earnings to his company. That would be there a long time after he paid us off. Yeah, that's a good reason. So definitely not to borrow money to pay off credit card debt, right? No, no, that's borrowing money to pay off other money that you borrowed is a really bad use of money. That's a rabbit hole that people shouldn't go down and we don't want to encourage them to go down. Yeah. I can think in my business in promotional products, sometimes when we get a big order from a bigger organization, obviously they don't pay upfront and we have to manufacture the product and then we have to carry it for maybe 30, 60 day, whatever term that they sent to you. But in the end, if my calculation is correct, I'm able to make some money, but I will need some money upfront. So that would be a good case scenario to use alternative financing. Right. We do that every day, that exact thing. Okay. Basically businesses that really, I mean, particularly in like what you're talking about that, you know, people need the advance money to get the materials. The same thing happens in think about roofing. Okay. When a roofer goes to do a product, a project, he has to buy those roofing tiles upfront before he starts the project and before he gets paid. So he's out his materials cost for a long time. We want to be able to there to help with things like that. Is there a formula after seeing so many small businesses, are there a particular formula that you would suggest listener to do? Maybe if after your cost of capital, you can still make this margin, then you should do it. Or if you think after cost of capital you're not making money, then maybe you should just maybe not do that deal. I think that's very true. You should look at your cost of capital as a cost because it is a real cost. And you have to say now depending on what the industry is and depending on what the company is, sometimes there's an ability to pass some of that cost on to the end customer, as you're saying. But you definitely need to put that into your calculation. Yeah, I think a lot of time small business fall into trap that we have this unicorn company, biggest Fortune 500 company, work with us. If we can service them, they will mean a lot to us. But what they don't know after all the term and then cost of capital, and then maybe you need to hire additional personnel to do that job. At the end, you're actually making no money or even lose money just to get that name. So you have to really ask yourself, do I really want to get into that deal? Yeah, that happens all the time. I mean, you hear that happen with fashion companies all the time. Famously Walmart. When a small company comes to you and says, we have this opportunity to do a huge amount of business with Walmart, you worry actually because you know they may have zero margin on that, on that footprint. Any advice if a startup come to you for questions like that? Adam, we have a big opportunity. We need the financing to do that. Do you also, as an underwriting standpoint, to ask them questions? Are you really ready for this? Because if you take on a huge job that needs you to hire 15 or 20 personnel, are you able to handle that? Do you take them through questions like that at all? Sure. Yeah, yeah, yeah, of course. I mean, because remember, we're partnering with them. We need, we need their success in a lot of ways, an advance is sort of a temporary equity type of thing. You are, you are investing with them, you're investing in their success. So I know that you are really into mentoring. You mentor startups and you mentioned college students. So what do you like most about mentoring and how did you get into mentorship yourself? Well, I think by nature, when you're an entrepreneur, you have, you hire people you think are great people and you are by your nature a mentor to them because they work for you. And with you. And here at Vox, like I said, we started with five or six people. And I'm super happy to say the great majority of the people who've been here through the journey are still here because it's a fun and cool place to work and people learn a lot. That's one of the things is enjoyment of your job and having fun at your job and learning in your job is every bit as important as compensation. And that kind of thing, if not more important. So mentorship is important at all times. Learning. Everybody's way happier when their brain is engaged and they're learning and they're doing cool stuff, then if they're doing an easy job, I think it's more fun to do a hard job than it is to do an easy job. Job that's fun, way you put it, because, you know, we all talk about the younger generation. They're not as motivated and they don't want to stay in one place for a long time. I see, you know, people that I have on LinkedIn, they switch jobs like three times in a year. So you're saying actually give them something more difficult to do so and engage with them so they'll actually stay longer and to keep them easy and, you know, service level things. Yeah. I think that there is a huge problem of people jumping in jobs all over the place and that we're super proud to have. Like I said, like, the overwhelming majority, I mean, 90% of the people who've been here are still here because I think it's a cool, fun, growing place to work where people are challenged. And so I'm proud of that. And mentorship. And the other reason I like mentorship is I like people. It's fun to get to know people. And, and if you, as a leader and a boss, get to know the people you're around, I think it's good for everyone. And another thing that is very important to me is the going to work culture. Over the last few years, there's been a huge rise in remoteness. We generally have everyone here four or five days a week because I think that fosters community, it fosters culture. It's good for the business and good for the people in it. In the debate of remote or workplace work, I'm firmly in the workplace camp and have been there since the beginning and will always be there. So for founders out there or for small business professional, how do we find the right mentor out there? Or should we just go with someone who know, or what are the available resources for small business out there for mentorship? If you run into somebody that you like, get along with well and who, first of all, you have to find people who care about other people and who like being around people who are up for helping and are interested by your ideas and that, and they're along. But one of the best ways is to say is simply to say, wow, that service seems really cool. Can I take you out for a drink and sit and chat about stuff? And that's a good way to start anything, any kind of thing, any kind of business thing, and then see what they know and see how much it jives with what you want to know. Thanks a lot. So for you. Now, being a seasoned entrepreneur, how much time do you spend on your business and how much time do you spend on communicating with your people? How do you balance it? Well, you mean communicating with the people at my work? Yeah. And then focus on growing the business. And so obviously you can't, if you lop sign on one, then the other would tip over. Every day when you come in, you're prioritizing, because when you're an entrepreneur and if you're lucky enough to be in a growing business, there's a thousand things to do and only time to do, like 30 of them in a day. And so you're constantly prioritizing and reprioritizing. But one of the important things is communication with your employees. And again, going back to my in work multiple times a day, I walk around the floor. I'm still that boss that walks around the floor and asks people how it's going and stops and talks and listens to my employees. That's how you really find out things are going. And if a problem needs to get solved, you can sit down and think it through with them and it doesn't matter. You don't have to have a strict chain of command. I don't have to talk to their boss or the person under them. I want to know what everybody has to say. Gives you a more rounded idea of what's going on in your own shop. Communication is the most important thing because you find things out. You learn about what's going on in your business. If you ask questions and you talk. To people and it seems like different personality can handle different tasks, and how do you find one person is better, more detail oriented, one person is more outgoing, they feel less on the cocoa, for example, you recognize potential employees or someone you mentor and then you kind of guide them through that process. Well, that is in fact one of the most important jobs as a boss is putting people in the right place. As important as recruiting great people, which is probably the most important thing, because for business to grow past you, you have to not be over controlling. You have to get, get amazing people and then help them to be more amazing and then encourage them to be amazing. Don't sit over them and make them do everything your way. That's probably the most important thing. But the other thing is when you find amazing people is listen to them, observe them and put them in the correct place for them to succeed. You know, I've had an instance where we hired a guy and we asked him to manage a department of people, and he was a terrible manager. Terrible. But he was amazing at the specific job that he did, which was a thing. And so we sort of said, you know what? Why don't you not worry about the management part and just do this specific thing? Because he's a genius at it. And it went from a situation that wasn't working to one that's amazingly rewarding for everybody. Yeah. And I think that's the reason why people switch to, especially for young people, because they imagine they were doing a certain things. But when they actually joined the company, they were asked to do millions of different things, especially for a bigger company. You probably have to sit in classes, read the menu for the business, and then I actually know a MBA friend of mine. They sent her overseas to learn the entire manuscript for the company. Six months. And after six months you left? Yeah. I don't know. When I see how big gigantic companies operate, I'm just appalled. It seems so boring and unchallenging and terrible. I've always been an entrepreneur, like you say. Like if I have a spare minute, I come up with another idea to do something. That's just how I am. I can't imagine working at a big company or negotiating the slowness of how things work. One of the beauties of being an entrepreneur is bringing an idea to life in a relatively short time. Yeah, that's a great quote to live by. So what about money? Since you started your journey as an entrepreneur 30 years ago, seeing all the success you're building success and seeing the rise and fall for different company that you help, how do you view money itself right now? What comes with being an entrepreneur is sometimes great success, but also sometimes failure. You know, I've been lucky enough to have a share of success, but I've also had plenty of failures and spent a lot of my life without that much money. What I would say is that money, having enough money to live is super important, because if you don't have enough money, it's insanely stressful on all sorts of things, personally, professionally, on the business, on your life. But when you have enough money, money itself is not nearly as important as the environment you're in as happiness. And I know that sounds like a cliche, but it's really true as long as you have enough of it. When you don't have enough money, money can become sort of all important and take on a huge sense of importance that it doesn't need to have. I do think that success comes in many forms. If you're proud of what you're doing, if you're happy with the people you're around, that means way more. But lack of money causes huge stress. I would say that it's funny because I run a company that makes money and is in the business of money, but I look at it more as a service and trying to help the small businessman of America make it through than as a vehicle to make money. I'm more proud of the team that we built here than I am of the money that we make from it, if that makes sense. Okay. Yeah. Because it's the journey, right? So if your journey, you make a lot of money at the end, but then you end up by yourself alone. And in your mention, it doesn't work, in my view, at least, you know, do you have a lot of friends, you know, people who look up to you and, you know, in your case, you know, you have mentor and you. If you see people who you have mentor having great success, you know that I'm sure that brings a lot of joy to you. Yeah, it's great. I love coming in every day and seeing everybody and talking with them. You know, building a great, fun culture is super important at a company, and money will follow. If you are smart and thoughtful and are good at execution and treat people well and you train a great team, money will follow. So let me ask you a specific questions, you know, for the listeners out there. So if a small business wanted to, I guess, to dress ourselves to be available to alternative financing, what would be your suggestion? What should they take care of first before go to you? Because obviously they want a yes for the financing. What are your recommendations? I would say show yourself to be an organized, competent person who isn't just saying, I have a great idea, give me some money to follow this idea, the execution. Knowing your business experience is very important to us. Okay? It's very important. If you have a guy who's been running a business for 20 years, it doesn't matter what it is, or a woman who's been running a business for 20 years, and they know the ins and outs of that business, and they come to you and say, look, I need $300,000 for this. This is the reason I've done it. I'm experienced. Here's the opportunity. We really want to talk to a prepared, smart, experienced person because they've been through ups and downs and they know how to negotiate them, you know, an inexperienced person who says, you know, oh, I've owned this restaurant for a year and now it's not doing well and I could use some money. That's not really, you know, a great argument to us, but like, know your business. That's really that, you know, what about. For startup or for younger entrepreneurs? So what should they have present to you for you to more convince that they are up for it and they are maybe on the way to grow the business for younger generations? Well, obviously at Harvard we mentor a lot of startup businesses. What I look for in the startups is, first of all, that they have a good idea, second of all, that they've thought it through, and third, that they brought together a group that can help them succeed. Not one person or two people that they've thought through. Where is their money going to come from? If they've just thought a little bit through and they're like, oh, the money can come from you, you want them to have thought it, you want them to have skin in the game, you want them to put in their own money to a business to show that the great thing about startups is there's so many amazing ideas that you get hit by when you're exposing yourself to that. The other thing is people are not committed. Again, time in business, people who've put some skin in the game and grown the business themself, bootstrapped it for a year or two. I like that person a lot more than a person who comes to me with a PowerPoint and says, look at this awesome idea, give me a million dollars, because they're not committed. But SOmeBODY who says, I had this awesome idea, I only have $125,000 to my name, and I put it all into this business and I advanced it to here. That's a person I want to talk to. What other pitfall do you see from mentoring students and startups and to talk to small business? What are some of the advice that you could offer them to get the growth that they're looking for? Well, I often say this, and it's, you got to think things through. There's a billion pitfalls you're not going to see. Try to avoid ones that are obvious. Think through. Don't rush. Grow a business organically. If you come to a person and they say, oh, I'm doing X and such, and I did $200,000 this year and next year I'm going to do $3 million, I'm inherently suspicious of that. Projections that are too high. Person who seems to have thought out the steps to get from here to there. And especially because the type of businesses that interest me, I am not, if you will, like a high tech guy. We sort of, here at Vox, we really invest in the backbone of America. We sort of try to help construction, restaurants. These are the, the less glamorous, less fancy parts of our economy that have an even harder time getting money. A tech entrepreneur with a good bitch deck and a really good idea can actually get millions of dollars from a vc. And if it's a good idea, we're really looking at people who want to build bread and butter businesses. The sort of, like they say, small business is the backbone of the american economy. And what we really are, what we really view ourselves as is problem solvers to help those people grow their businesses and help their businesses. Yeah. Thanks for sharing. And I think those are really good advice. Really. Your projection, are they really, truly can be done or you just tuning up the graph to make it look nice? So there are ways to do that, even for a construction company. I meet a lot of them here in LA. So if they are able to get the right equipment, or like you said, find the right roof tile to do an order, that could mean hiring more people for themselves and then also to build on their portfolio so they could work on better orders. Exactly. The roofing example is that. Exactly. If they are only using their own capital, they're going to buy roof tiles and do one job, get a crew and do one job. If they can get some advance money for the roof tiles, which is something like we do, then they can hire more people, do two jobs, three jobs at the same time, better their business, and frankly, create jobs and help the economy while also bettering themselves. And that's the kind of thing that's our mission to help. Thanks for sharing. So, Adam, if listeners have individual question and want to find out more about what Vox funding can do for them, what would be the best way to reach out to you? We'll put some information together. You can always reach out to us and our team here. We'll get you the information to reach out and you can publish it out. Okay. I'll definitely put the information on the show notes. Adam, thank you so much for coming onto the show today. Thanks a lot for having me. It was great. And if you like the show, please like, share and comment. And until then, see you next time. All right, thank you so much. Thank you for listening to the show. If you enjoyed this episode, please subscribe to the podcast and share with your friends or colleagues. Who might benefit from the conversation. Any questions or feedback, feel free to reach out to me on LinkedIn. I'd love to connect with with you.

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00 p.m. pacific standard Time. I'll see you next time.