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Leo Kanell – 7 Figures Funding
On the Power of Having a Solid Team: “If you’re going to grow and scale something that is making money while you’re on vacation and sleeping, then you got to have great leaders.”
Money makes the world go ’round. This is especially true in business. As your business grows, you may need to leverage money as a tool. How do you get funding for your business?
Leo Kanell, founder of 7 Figures Funding, explains how the business financing world works.
We explore essential topics like the importance of maintaining a healthy business bank account balance, leveraging alternative lending options when traditional banks fall short, and the evolving landscape of virtual events and content marketing in B2B environments. Leo also shares valuable insights on sourcing and retaining quality employees, the significance of personal and business credit scores, and the nuances of effective incentive structures in sales.
We’ll hear inspiring success stories, such as a beauty salon owner who expanded her business thanks to 7 Figures Funding, and gain practical advice on managing cash flow, fostering a positive company culture, and continuous learning and improvement for business growth. Whether you’re a startup or an established small business, this episode is packed with actionable insights to help you secure financing, build strong credit, and thrive in today’s competitive market.
Listen as Leo explains what you can do to ensure that if and when you need funding, you have the right things in place to make it easy to get that yes from a lender.
Enjoy!
Visit Leo at: https://www.7figuresfunding.com/
Podcast Overview:
05:07 Return on loan matters more than interest rates.
07:14 Helping overlooked businesses thrive financially and succeed.
12:49 Keep your bank account and taxes in check.
14:48 Personal score: 720+; Build biz credit with three.
17:31 Dun and Bradstreet boosts your business credit.
22:49 Virtual events and videos are game-changers now.
26:09 Top performers don’t always make great managers.
30:23 Misaligned incentives made financing operations inefficient.
32:47 Make sure you’re getting quality, cash-boosting clients.
37:55 Pick smart banks for better business perks.
39:37 Fintech platforms make getting capital super easy.
43:04 Cash flow tool helps small businesses thrive.
48:01 Great leaders, keep learning, handle cash flow issues.
Podcast Transcription:
Leo Kanell [00:00:00]:
The magic number is 25,000. So a lot of the time strategically, we’re going to be able to get a client, you know, 4 or 5 lenders who each give them $25,000 And that’s usually the magic number.
James Kademan [00:00:16]:
You have found Authentic Business Adventures, the business program that brings you the struggle stories and triumph and successes of business owners across the land. Downloadable audio episodes can be found in the podcast link found at drawincustomers.com. We are locally underwritten by the Bank of Sun Prairie, calls on call extraordinary answering service, as well as the Bold Business Book. And today, we are welcoming slash preparing to learn from Leo Kanell, the CEO and founder of 7 Figures Funding. I’m excited to have Leo on the show because today, we are talking money in business, which are 2 things that well, they go hand in hand, and they’re a lot of fun. It’s what we’re doing here. So, Leo, how is it going today?
Leo Kanell [00:00:55]:
James, going awesome. Excited to connect with the audience, and there’s no doubt about it. Business is an adventure.
James Kademan [00:01:02]:
I was just reading on your website. It’s talking about cash flow, which is essentially the lifeblood of business.
Leo Kanell [00:01:07]:
For sure.
James Kademan [00:01:08]:
Let’s start out with what is 7 figures funding.
Leo Kanell [00:01:11]:
Yeah. Great question. So, for the last decade, we’ve been, serving small business owners. There’s 30,000,000 of them across the country, and most of the time, banks and lenders ignore them when it comes to the financing needs that they have. And so we’ve created a a marketplace of options with, 0% interest options up to as long as 18 months, lines of credit, equipment, commercial real estate loans, and, even SBA, direct SBA in all 50 states with some unique SBA options. And so our our deal is somebody needs to be guaranteed they’re getting the best option to grow their business, and that’s why we included and built this marketplace with the best options.
James Kademan [00:01:51]:
That is awesome. Now tell me, SBA, I know a lot of well, some banks that really don’t delve into that. So how big of a deal was it to get that as part of your
Leo Kanell [00:02:02]:
It it was a big deal. And more importantly, like the last 2 years, SBA actually started to make programs that were much quicker and easier. I mean, we’ve all seen the nightmare of, oh, it takes months. And and I remember one of the first SBA loans I did was for a a gas station in San Diego. It took us 11 months to get that deal done, absolute nightmare. And that’s typical of SBA. And they have now streamlined a lot of those programs in the last 2 or 3 years since COVID. And so we’ve got a much more what we call the SBA express loan that it can get done in about 4 to 5 weeks.
Leo Kanell [00:02:35]:
And that’s been a very solid program for small business, to be able to get a $150,200,000 loan with an affordable payment. And and so yeah. It definitely been a journey. Haven’t always recommended. But for the right business, it can be a great option.
James Kademan [00:02:50]:
I love talking lending in business because interesting when I’m coaching or teaching business planning classes, I say the funny thing about getting money from banks is that you have to prove that you don’t need the money.
Leo Kanell [00:03:03]:
Sure.
James Kademan [00:03:03]:
You have to give them all the stuffs, collateral stuff, and show that you have good credit history and all this kind of stuff. It always seemed like I get it. They wanna be paid back. But on the flip side, if we really had everything that you possibly need, we would need your funding. So tell me, who is your ideal client with 7 figures funding?
Leo Kanell [00:03:23]:
Yeah. Our ideal client is, is a small business owner probably doing less than $5,000,000 a year in sales who needs financing to grow. That’s probably about 30% of our business, but 70% of it is somebody who’s new. Like, you’ve been in business less than a year or 2, maybe even prerevenue, and you’re looking for start up funding options. And so we work with a lot of business coaches, consultants, and trainers get their clients access to capital, And that’s where 90% of our business comes from is those relationships with those, those who are in the trenches, helping new businesses grow. And so we get them access to that financing.
James Kademan [00:04:01]:
Nice. So tell me a story about interest rates. Those have been on top of people’s minds, didn’t pandemic when they were crazy low. And I guess a year ago when people assume that they’re crazy high, but relatively speaking over the decades, not that bad. Now they’re coming down a teensy bit. How does that affect what you do or what you offer?
Leo Kanell [00:04:21]:
That’s a a great question. Without a doubt, if you’re dealing with commercial real estate or or equipment financing or even SBA loans, those are oftentimes tied back to, prime interest rates. And prime interest rates are, you know, around 8%, maybe now down in the in the 7 and, 3 quarter percent range. And so it certainly has an impact on secured stuff. But for most business owners, they’re different than consumers. Right? If you’re a consumer, will you go get financing for your home, for your car? I mean, it’s it’s a place to live. It’s a way to transport yourself, but it’s not necessarily generating you income. If you’re a business owner and you need a loan or line of credit or whatever it is to get your business off the ground, oftentimes, you can turn that into a 2, 300% return.
Leo Kanell [00:05:07]:
So whether you’re paying, you know, 6%, 8%, 15, 20%, as long as you’re making 2 to 300% on that money, which most business owners are, then you’re coming out okay. And a few percentage points here and there isn’t going to make a big difference. The bigger issue is are you generating a return in ROL as we call return on loan, return on line of credit. And that’s the bigger factor for businesses. So businesses ultimately are less impacted by rates. Now you start dealing with monster businesses, you know, big tech companies, companies like GE, and you start talking about financing 1,000,000,000 of dollars, which they need to to grow their business, and it can absolutely be a big deal on their cash flow. If you’re a company like Walmart or Amazon where your margins are much, much tighter, financing rates go up and every big business is using financing, you know, contrary to popular belief. Oh, they just have cash for everything.
Leo Kanell [00:06:04]:
No. They’re they’re all using financing and 60 90 and 30 day windows to be able to stretch out their cash and increase their cash flow. And so even those big businesses, Walmart has over 5, 600 lines of credit at any one time, so they’re much more impacted. You know, an interest rate change can be worth 1,000,000,000 of dollars for them.
James Kademan [00:06:23]:
Got it. So let’s talk about you in this business specifically. How did you end up in the lending business here for small businesses?
Leo Kanell [00:06:31]:
Well, my, background was, was in mortgages back in the day before the 2008, 2009 recession. And so I I had that background of getting homeowners financing and investors financing for single family properties, multiunit properties. And when the recession hit, well, that business really dried up very quickly. Most of the lenders we worked with actually went out of business. And so it was at that point I started to try to figure out what’s the next step here. I was looking for something that would be, quote, unquote, recession proof. And so I I looked into commercial real estate financing, did some deals there. And then I started to realize there was this niche of new smaller business owners that need 50 to a $100,000 in financing.
Leo Kanell [00:07:14]:
And there’s literally millions of them across the country, and they’re ignored by most banks and lenders. And I said, well, that’s that’s the niche I wanna serve where it can make a big difference. And so we build out a marketplace of options for those clients. And fast forward a decade later, we’ve served tens of 1,000 for 100 of 1,000,000 of dollars with those small business owners. It’s been very rewarding, especially when you can see I remember we had a client in Denver, helped her get financing for a beauty salon. She was declined by her local bank. We got her $70,000 I bumped in through her to GrowthCon event. Couple years later, she had 20 employees, was getting her her own building, opening a second location.
Leo Kanell [00:07:53]:
And so that’s that’s when I started realized, wow. I don’t always hear the after story of when you get somebody financing, but that’s when you start to realize what you really are making a difference. They’re creating jobs. They’re creating products and services that improve everything. I mean, that that that girl has over a 1,005 star reviews online. She’s killing it. So that’s that’s, that’s a good case study, I think, in what can happen.
James Kademan [00:08:16]:
That’s awesome. I can’t it’s funny you talk about the that dollar amount, the smaller dollar amount smaller. Right? Being ignored by lenders. I can remember the 1st commercial property I was looking at. I was all excited because I’m like, we’re not gonna pay rent anymore. We’re gonna get this building. The building was a warehouse condo, $120,000 something like that. Yeah.
James Kademan [00:08:35]:
And I went to this bank, this first business bank or whatever it was. And they’re like, yeah, we don’t do anything that small. And in my mind, I’m like, $120,000 is a
Leo Kanell [00:08:45]:
lot of money
James Kademan [00:08:46]:
we could change. Right? Like, we were doing, I don’t know what we were doing. Maybe 4 or $500,000 a year in revenue. Yep. So for newer business, I’m like, what do you mean? She’s like, we don’t look at anything under $750,000. And so I joked, and I was like, well, if I get a $750,000 loan, can I just pay back most of it the next day? Because I only need this little chunk. So it was interesting that I had to find a bank that was willing to do a a deal that they considered small that I had I had no idea. I had no idea.
James Kademan [00:09:22]:
So, anyways good
Leo Kanell [00:09:23]:
point. Yeah.
James Kademan [00:09:24]:
We don’t use that bank. We No. Stick with the bank that that helped us out in the beginning, and you grow, you make money. And it’s it’s weird how a lot of these just industries or vendors, whatever, they just ignore the little guys on the assumption that they’re always gonna be little, but little like, that ladder’s got multiple rungs. As long as you do it right, they’re gonna become big guys. And I don’t know. I don’t wanna work with people that didn’t help me when I was a little guy. So
Leo Kanell [00:09:52]:
Me neither.
James Kademan [00:09:53]:
Move on. I guess Exactly right.
Leo Kanell [00:09:56]:
No. And that’s exactly right. Those small businesses are ignored, and they can do amazing things, become 8, 9 figure businesses. And so that’s where we love to step in and and give them financing access and then education. Like, James, no one teaches us about how credit money financing works. And so, the more we can educate them, everybody that that applies for us, we give them access to our credit college platform, the business funding formula book I wrote just for free. We want them to share it with everybody because if they understand their credit better, they’re gonna pay less interest on business, less interest on their their personal financing options. And and those are things that are just not taught in school.
James Kademan [00:10:37]:
No. Not at all. I was I remember teaching business class, and I told people wherever you are at personally with your money, when you start your business, just multiply that times at least a factor of 10. So if you’re good with your money, great. It’s gonna go up. If you’re bad with your money, not great. It’s gonna go down. So learn to figure out your personal finances, and then once they get in order, then tackle the business financing.
James Kademan [00:11:05]:
Amen. Because I mean, personal finance, you dig yourself into a hole. It’s tough to get out of. Business holes. Holy jolly. Those commas add up. I’ve seen some people get in trouble. So luckily, I dodged those bullets.
James Kademan [00:11:19]:
But at any rate, tell me what are some of the things let’s just say top 3, top 5 things that you wish people entrepreneurs knew before they came to you looking for money?
Leo Kanell [00:11:31]:
Great question. I think what you’re you’re asking is how do you become fundable and and stay fundable all the time as an entrepreneur because you never know when you’re going to need to access financing and capital. And usually the best time to get access to it is before you need it. And so it starts with that personal credit score, keeping that personal credit score high, hopefully above 720, even above 750. And understanding the FICO score is different than advantage score. That Credit Karma score that you think is good doesn’t mean anything. It’s advantage score. You need a FICO score.
Leo Kanell [00:12:03]:
You can get access to that experian.com. So understanding your FICO score, keeping the credit high, that means making payments on time. That means when you go to apply your personal credit card balances are, you know, below 30% of your credit card limits, that’s a a credit secret that can keep your score 50 to a 100 points higher. And then having a mix of of credit from mortgages to, you know, installment loans with, car loans to student loans aren’t are generally a positive thing. Credit cards are a good thing as long as you’re keeping the balances low. And then you never wanna close a credit card because then that lowers your average age of your account history, which lowers your credit score. So first is credit. Next thing to pay attention to is your business bank account.
Leo Kanell [00:12:49]:
How you take care of your business bank account says an an awful lot about you as an entrepreneur, business owner. And so if you are putting your bank account in the negative, if you have a low average daily balance, it’s always below $1,000 or $5,000. And, you know, you you just you’re taking out a lot more from the bank account than you put in, then those are factors that are going to negatively impact you anytime you wanna get financing for your business. So the business bank statements and how you take care of your bank account is the next important factor you wanna pay attention to. And then, and then the next thing you wanna look at is your business tax returns. If you know you’re gonna need that decent sized SBA loan, then you can’t strategically always write off every last dime on your business tax return. You have to show some sort of net income. Things that you may not know that actually go towards your net income are what you pay yourself in w two salary.
Leo Kanell [00:13:44]:
So if you pay yourself, you know, you’ve got an s corp, you you limit your tax liability, you pay yourself a 50, 70, a $100,000 a year w two salary, you can add that back in. So if your business shows breakeven but you pay yourself $100,000 a year in w two, you actually show a 100,000 that’s they’ll add that back in. They’ll add back in depreciation. If you have a lot of equipment or trucks or vehicles that you own in your business and you depreciate those, that’s not a cash expense. You get to add that back in. So just understanding those things that are gonna be added back in to show that the business is not breakeven, is not losing money. It’s actually generating cash flow. You’ve heard cash is king.
Leo Kanell [00:14:23]:
That’s true. You wanna keep balances in your business checking account and savings. That’s very important. But also cash flow, you’re taking out less than the business is bringing in, is gonna be a big factor. And the way that you are showing some cash flow in the business on your business tax returns will be the next thing they’ll look at.
James Kademan [00:14:42]:
Nice. I love it. Tell me about business credit scores. Yeah. Yeah.
Leo Kanell [00:14:48]:
And so we we know with personal credit, right, we wanna have that 720, hopefully 750 or better FICO score with Experian, Equifax, and TransUnion. With business, the 3 major business credit bureaus are going to be Dun and Bradstreet. That’s the first one you’ll build that profile with that foundation. Next will be your Intelliscore with, with, business, Experian. And then Equifax Business is the 3rd major bureau. And, they are very tied to any type of business credit card or a bank loan that you get in the name of your business. Those three business credit bureaus are gonna make up what’s called your FICO SBSS score, which SBA uses to approve an SBA loan. It used to be that SBA didn’t really, give much credence or, didn’t it wasn’t a big factor into getting approved, that business credit score.
Leo Kanell [00:15:40]:
Now it’s probably the number one reason we see business owners get declined for an SBA loan as they have no business credit. And the issue is when you will go out and get a car loan personally, it reports that next month immediately, sometimes within days, all your payment history. You go and get a credit line at your local supplier store down the street. 9 times out of 10, it will not report to your business credit history. And so you have to proactively build that business credit profile and work with vendors and creditors who report your credit history. So that’s one of the things that we help business owners with is educating them. Hey. Here’s the vendors who actually report.
Leo Kanell [00:16:17]:
You have to, like, actually build your profile. Everything needs to match up from your EIN to your address, to your business phone number, to your website, to the name. If your name doesn’t show up and connect with which on the state website with what the business credit bureaus like Dun and Bradstreet are showing, it won’t report. And so just understanding how to build that business credit is very important to being fundable that next step.
James Kademan [00:16:42]:
That’s so interesting that Dun and Bradstreet thing. I remember when I first started my business, 2006, I don’t know if it was exactly 2,006 when I got this letter, but I got a letter from Dun and Bradstreet saying, hey. Yeah. We got your credit score for your business, and we want you to pay us whatever it was per month or per year. And I was like, wait. What? Who are you, and what do you want? So tell me about paying for something like Dun and Bradstreet.
Leo Kanell [00:17:09]:
Yeah. The interesting thing is just like we we sometimes assume, oh, these credit bureaus are part of the government. They’re not. They’re all for for profit, businesses. Experian itself does 1,000,000,000 of dollars a year in in sales. Even though they’re headquartered out of Ireland for tax purposes, they’re obviously the the biggest credit bureau here in the US. And so with these business credit bureaus, same thing. They are not part of the government.
Leo Kanell [00:17:31]:
They are for profit entities. And their sole job is to be able to make it easier supposedly for banks and creditors to decide if you’re a good risk to give out financing options to as a business owner. And, and so, yes, you can, you know, most of the time you, you can get your EIN, your, your Dunn’s number as it is, as it’s called, you can get that Dunn’s number free from Dun and Bradstreet to build that, business credit profile. And then if you just work with the right vendors who report that you don’t necessarily need to pay Dun Dun and Bradstreet, where it may make sense to pay them is if you’ve been working with a vendor locally who does not report to DNB system, but you have a 10,015, $25,000 credit line with that local vendor, and you’ve got good payment history. Well, it may be worth paying Dun and Bradstreet so that they can verify that payment history and help strengthen your business credit profile because without doing that, they actually won’t do it. And then Dun and Bradstreet is kind of the first one. It’s act you actually can’t get established with business Experian until you’ve gotten established with Dun and Bradstreet. And then after business Experian, now you can actually go and get your profile going with Equifax business.
Leo Kanell [00:18:44]:
And so it’s kind of interesting how they all 3 work hand in hand, but it starts with Dun and Bradstreet. And so it, it only makes sense, I would say, to pay them. If you’ve got a big credit history with a vendor that doesn’t report to them already, that may may make sense. But, yeah, at the end of the day, they’re very much a for profit company. And 9 times out of 10, you probably don’t need to pay them for anything. They’re going to report that credit score as long as you are working with vendors to report their payment history to Dun and Bradstreet.
James Kademan [00:19:15]:
Got it. It reminded me because I’d never heard of them. I didn’t know who they were. It reminded me of those domain network envelopes that you get that say that
Leo Kanell [00:19:23]:
you, oh yeah. Like, oh, send some money. Yes. Yeah.
James Kademan [00:19:26]:
And way fine print says this is not a bill or this is not a legitimate envelope.
Leo Kanell [00:19:31]:
You don’t actually owe this. Yeah. We’re just, we just wanna take it.
James Kademan [00:19:34]:
Yeah. So I’m like, who, what, who are you? So tell me a story about the lenders that you have that are actually supplying the cash. Are these private individuals, their banks, you mentioned SBA, who where’s all this money coming from?
Leo Kanell [00:19:48]:
Good question. So it’s a network of lenders. Some of them online, some of them public, some of them private banks, credit unions, and a lot of us sometimes, has to do with where you’re located regionally. Sometimes we, we establish relationships with really, good regional lenders. If you’re like in the south, east of the United States, or if you’re in California or Washington, like there’s different lenders in different, areas that have different programs for every business owner. So when somebody applies for financing, we’re putting together a custom funding plan of the lenders most likely wanting to work with that client based on the business industry that they’re in, based on where they’re located geographically, and then obviously, you know, where their strengths at. Do they have really strong personal credit, not a lot of business financials? Do they have good business financials, but their personal credit’s not perfect? Figuring out where the sweet spot is, where the strong area is, where they’re most likely to get approvals, and then just presenting, hey, here’s your best options. And and literally, like, if I was in your shoes for my own business, this is who we’d be working with.
Leo Kanell [00:20:52]:
And then we do the applications after we preapprove them, get them the money, and then, of course, they go on their way. And the the real heroes of our business are our funding advisers. We’ve got 30, 30 different employees here at 7 figures and and over a 1,005 star reviews, a plus rating with Better Business Bureau. Boy, if I mean, that that’s important. Right? If you don’t have great online credibility and and you can’t hide from the experience you give your customer in today’s world, then your business is going to be in trouble. So you’ve gotta be focused on that.
James Kademan [00:21:22]:
Fair. Totally fair. So how long have you had this business?
Leo Kanell [00:21:27]:
We started 7 figures, in 2018. Okay. So 2018,
James Kademan [00:21:33]:
1st couple years going, then you run into a pandemic, interest rates going all crazy things. What are some of the challenges that you’d run into that you didn’t necessarily anticipate?
Leo Kanell [00:21:43]:
Well, the interesting thing was James, like, in 2018, 2019, those first couple months of 2020, 60% of our business came from live events. I would send part of our team to these live events. All these business owners would be there. They would need financing options to grow. And so that was where the majority of our business was coming from. And so then the pandemic hits in March of 2020. And, it absolutely destroyed our business up until June of 2020. What we did was we invested in a partner portal so that all these business coaches and consultants and, and training organizations could have visibility to know that their clients were being taken care of and transparency.
Leo Kanell [00:22:23]:
Okay. They’ve got their financing. Now they can work with us. Now they can grow. And so we invested in that portal in that, period, and then we pivoted to virtual events. And then, since then, it, you know, started growing and having record months, you know, in July of of 2020, every month thereafter. And so, yeah, a lot of learning lessons there. A lot of, if you didn’t pivot to virtual, you’re you obviously had a a tough time, so that was important.
Leo Kanell [00:22:49]:
Now virtual events are such a big part of so many, different, b to b businesses. So that was a big learning factor for us. And then just continuing to, evolve in terms of content marketing. And and obviously, it doesn’t matter what business you in you’re in and and you don’t think, you’re great on video. Just identifying and doing short video content on your dream customers, biggest problems and pain points, and how you resolve those and giving freely of those solutions is just so vital and important because oftentimes people be like, okay, they like what they see, and then they’re gonna go look at your content. And then based on your content, now they’re gonna decide if they wanna work with you. And so that was that was that’s been another important factor, I think, is is, you know, producing that content, that value for our customers.
James Kademan [00:23:40]:
Yeah. That’s awesome. Tell me as far as employees go, 30 employees is quite a few. And pandemic time employee well, even now, employees aren’t the easiest game in the world. So tell me, how do you find good people and how do you keep good people?
Leo Kanell [00:23:58]:
Well, birds of a feather flock together. And so for us, identifying good people, and then when we’re looking to grow and expand, asking those good people, if they know other good people has without a doubt been, the most effective strategy for us to find quality, candidates to fill those positions, number 1. And then number 2, we have had a lot of success, posting jobs on Indeed and then just making sure that your interview process is asking open ended questions. For me, I wanna identify what are the values and principles that this person believes in that they stand for, and do they mesh with our values and principles? Because if they don’t, it’s not gonna be a good fit. And then is this person a solutions oriented person where if there’s a problem, they take ownership, they find solutions. Or is this person someone who wants to whine and complain, blame others? And I like asking them about, you know, challenges that they’ve had in previous jobs and how they resolve those. And when they can explain those effectively, that gives me an idea, you know, if they’re gonna be a good fit. The other thing is if you have, if you’re hiring for technical skills, like we have a couple of coders and developers here for our Fintech platform.
Leo Kanell [00:25:13]:
And so for them, it’s well, great. I’m glad you have values and principles. I’m glad you focus on solutions, but do you have the skillset to actually do the job? And so in a unique position like that, I’ve got our CTO who will literally have tasks that they have to go and do and then present to prove their skill set that they can do that job. And I think that’s another really important thing is if they if it’s a skill set job where they have to be able to do certain things, give them a task and see how they do it. And now you’ve got a good idea of whether they have the skill set too. So you have, like, the hard skill set and then the soft skills of, you know, values and principles and putting those together, I think, is important.
James Kademan [00:25:52]:
Got it. I completely understand that. We’re doing very similar things, trying to get good people and all that jazz. Tell me, as far as managing 30 people, that’s a small army, that’s decent sized crew. So how do you set up a managerial hierarchy or do you set up a managerial hierarchy?
Leo Kanell [00:26:09]:
I absolutely do. And so we we’ve got a couple of additional, really 3, our got our COO and within we have our director of funding and then we have, our, our funding processor who’s in charge of the entire funding process, and manages, about 4 people in, in her office. And so, yeah, it is key to having good leaders who are good at what they do and can communicate that well to everybody else. And the interesting thing that I think a lot of, entrepreneurs sometimes get confused on is they assume that somebody who is a high performer, high producer is automatically going to be a good manager and a good leader, and that’s just not the case. Right? The ability to manage and to be able to get a lot and and, have rapport amongst the team and help people succeed and teach is completely different sometimes in a skill set versus someone who’s a great producer and a great performer salesperson. And so I think that’s that’s been part of our learning curve as, oh, Just because they did they they’re great. They’re our top producer, doesn’t mean they’re automatically a great manager. And then, Leo, leadership is is all about the 1 on ones and finding out what drives somebody and giving them, you know, not only logical steps that they can do, but, hey.
Leo Kanell [00:27:26]:
What’s that emotional thing that they want to accomplish? Are they working towards buying their first home? Are they working towards, you know, being able to, you know, go on vacation, get married, whatever the thing is. And so it’s important, I think, for them to have emotional drivers as well as logical ones.
James Kademan [00:27:41]:
That’s fair. Totally fair. Are these in office? Are they remote? How does that work?
Leo Kanell [00:27:47]:
We we definitely have both. Some of, it’s interesting. We had some really good, team members who are working in the office, and then we’re we’re here in Utah. And they’re like, oh, we’re we’re moving to North Carolina. And so we said, alright. Well, here’s the parameters. Here’s what you have to be able to do and prove that you’re doing even though you’re not in the office. And they had worked with us for a few years.
Leo Kanell [00:28:09]:
And then moving to North Carolina, they’ve done a a really good job of working remotely. So we we definitely have a combination of both, those who work in the office every day and those who are remote. But I will say this, if you’re in a if you have a sales environment, the more you can get sales teams in the office, I think that’s important.
James Kademan [00:28:27]:
Yeah. Yeah. Yeah. There’s thrive and competition. Yeah. They push each other, I guess, from what I’ve seen, which is very good.
Leo Kanell [00:28:35]:
Definitely.
James Kademan [00:28:36]:
So are you relying on people finding you, or are your sales crew actually going out and hunting for potential businesses that need some money?
Leo Kanell [00:28:47]:
A little bit of both, but most of our business again comes from the relationships that we’ve established with, different, business training, consulting, and and coaching organizations. And and so, so really, it’s it’s managing those relationships and, myself and my partner, we, we manage most of those, relationships. And then we have our customer service team that is always communicating with them and communicating with their clients. We do that through private Slack channels and that’s been, been really effective. And so for the most part, our team is coming in and they’ve got appointments on their calendar that they’re calling and clients that they’re taking care of who have already applied for financing have been approved. And so that’s, that’s really their job is to take care of the client. And then, as an organization, we’re building those relationships, but we always incentivize the entire team to bring in more relationships and, and to incentivize them and pay them for doing that extra work. And it’s funny because the previous, company that I was, I was a owner in, like my other partners thought that was a terrible idea and they were wrong because you should be incentivizing growth.
Leo Kanell [00:29:57]:
You should be aligning those incentives as a, as an organization. And they had everything misaligned, which didn’t lead to good results and didn’t even didn’t even motivate the team to go out and find new referral partners. And so from day 1, we’ve been clear that that’s something that we value.
James Kademan [00:30:15]:
So, just so I understand, this previous company, what did they want to do instead of what you’re doing now?
Leo Kanell [00:30:23]:
Well, it was it was the same setup where you were generating a lot of your financing leads from these different organizations who already had business owners that needed financing. And just the difference was instead of the, the setters, for example, right. In most sales organizations, you’ve got a setter. And instead of incentivizing the setter to be compensated based on the overall income of deals that they generated, they would give them different parameters like, oh, if you just get somebody preapproved or get their credit report, we’ll compensate you just for that job alone. And then that misaligns, you know, instead of working with people who are going to get preapproved or are likely to work with you and compensating them on that overall thing that benefits the entire company, they would just misincentivize them just based on a factor that looked good on paper, but didn’t actually help the company. That was 1, 2, those employees weren’t incentivized to go find clients on their own because they didn’t make any extra money with us. They are, our team is always incentivized. If you go find out, find new deals and it saves us marketing dollars, we’re gonna pay you more for that extra effort of bringing in a client.
James Kademan [00:31:37]:
Got it. Okay. I was just reading a book. Oh my gosh. I can’t think of his name. The guy that helped with, lean manufacturing and all that. Oh my gosh. My brain.
Leo Kanell [00:31:49]:
Not Anyways the lean startup, though?
James Kademan [00:31:52]:
No, not the lean startup. Okay. We manufacturing, like he was a consultant for Toyota and Honda and all that kind of stuff. Oh,
Leo Kanell [00:31:58]:
very cool.
James Kademan [00:31:58]:
Just in time inventory and all that.
Leo Kanell [00:32:00]:
Yeah. Yeah. Yeah.
James Kademan [00:32:01]:
Cannot think of his name. At any rate, he had something I read a different book of his that was more about how to essentially pay people. And he was talking about how incentives when you get incentives going, people try to gain the system. You just put stuff out there that’s attached to this metric. And instead of saying like, hey, we’ll make the company better, they’re gonna tackle that metric. And it was one of those, like, man, every time we come up with an incentive with we’re hoping to grow the company, we gotta come up with a way to avoid it being gained. So that’s a that’s a challenge, which I imagine that’s a challenge for any business. But especially in sales where a lot of it’s commission based, I imagine.
James Kademan [00:32:45]:
Right?
Leo Kanell [00:32:47]:
Well, yeah, as long as it’s tied to actual cash that’s coming into the business and you’re making sure it’s a quality customer, you know, as long as those two factor those two boxes are checked, then I think you’re good to go. But you’re exactly right. In my previous company, it was metrics that didn’t actually for sure and oftentimes more than not led to customers and clients who are not a good fit that did not lead to actually generating cash for the company. So that’s exactly what you’re pointing out. As long as those incentives are really aligned properly with the entire mission of the company, bringing in the right customer client who’s gonna stay with you, who’s gonna bring cash into the company, who you can serve at a high level, that’s a win. But if it starts getting outside of that, then it’s pretty easy to just let them know, hey. That that’s not gonna work. It’s it’s gotta be the right our customer, our client, our strategic partner we wanna work with.
James Kademan [00:33:40]:
Tell me how what kind of metric do you use to come up with the because you said quality client. What is the metric that you use to objectively measure that, or can you objectively measure that?
Leo Kanell [00:33:52]:
Well, generally, it’s somebody who knows they have a purpose for the funding in in our business. Right? If it’s a tire kicker, I’m just curious what my financing options look like. Then that’s somebody who’s not going to be nearly as motivated as somebody who on their purpose for funding says, I need this piece of equipment. I need to hire people. I need to run a marketing campaign. I need to buy this new, coaching or training program that’s gonna take me to the next level. If they don’t have a need right now, then that’s probably not someone who’s gonna be a great customer.
James Kademan [00:34:27]:
Got it. Okay. So very easy, very black and white there. Tell me a story about so we’re recently coming out of some hurricanes, maybe even jumping into some new ones. You got a business in Florida and hurricane comes along and let’s say takes out your office building or takes out your restaurant or something like that. So now you got people to pay because you wanna keep them fed. You need some money and maybe insurance will come up, but insurance is pretty pokey. So can they come to you? Something where they need money pretty quickly?
Leo Kanell [00:35:00]:
Yeah. Yeah. We we we’re we’ve got different options that they can access, loans, lines of credit that can fund in quickly as as 24 to 48 hours to be able to take care of things. But especially in a disaster area like that, there is a government backed program that you we’ve all probably heard and and remember from COVID, the EADL, the economic injury and disaster recovery loan. And that is actually what that loan is build out for to be able to give loans and financing to businesses who are absolutely negatively impacted by a hurricane or a massive storm, something like that. And so those loans are specifically very affordable with very affordable monthly payments and low interest rates so that they can get back on their feet. And so that would be another option that we would recommend, and we don’t always recommend options that we actually make any money on, and that’s fine. We just wanna help the client.
Leo Kanell [00:35:52]:
So if you need money right now, here’s an option. And then the longer term option, you should probably look at this, and and that would be what I would I would definitely look at. And then, of course, the next tricky piece is then, of course, then some of the property insurance and the insurers all all start to leave the state. I know because I’ve got some, Airbnb properties in Florida, and all of a sudden I’m getting notices of, oh, we no longer offer, you know, property insurance. You’ve gotta get new, insurance for your properties. And so then you make that adjustment and go find the the next insurer. Right?
James Kademan [00:36:23]:
Yeah. Right, man. I’ve heard a lot of horror stories about that. I don’t have anything in Florida. So but I we’ve answered phones for places Airbnb places specifically Yep. That are in Florida. And yeah, they’ve gotten some, some letters to me. It’s funny because you’re in the insurance business.
James Kademan [00:36:41]:
This is Florida. It’s an expectation of what’s gonna happen. They’re like, oh, we didn’t know we’d actually have to pay out. What? No. We thought we just collected. This is a one way street here. So anyways, let’s talk about the lenders that you have more. I don’t know how difficult it is to get a bank to work with you.
James Kademan [00:37:04]:
Is that something that you have to reach out to them and say, hey. We got these programs. We got these people. We got these customers. Or banks coming to you say, these are kinda small. You do the paperwork. What is the, tell me about the relationship there with your vendors?
Leo Kanell [00:37:18]:
Yeah. I mean, we always, we always help with the paperwork, because that’s just part of our, part of our service is, is consulting and getting those applications filled out and filling them out the right way, because there’s a wrong way to fill them out. So so that’s number 1. And and understanding who’s lending. Right? Because everybody has certain, numbers, targets that they wanna hit for the quarter. And so when certain lenders hit those, then they kinda pull back their lending. So we’re always keeping our fingers on the pulse of who’s lending right now, who’s not, and then shuffling those lenders around based on who is lending. But there’s a few secrets, that you can start to follow.
Leo Kanell [00:37:55]:
I mean, number 1 is obviously being very, judicious about where you have your business bank account. If you have your business bank account at a lender, are they going to be able to give you a line of credit in the future? Can they give you a good sized business credit card? Do they have cashback rewards? What benefits do they have? And if you can take really good care and keep a decent amount of money in your business bank account, then nothing’s going to make it more easier for you to get financing the future, than that. As an example, Chase can be really good to work with where, we’ve got some clients who maybe start out with just a $10,000 business credit card limit or line of credit. And if they take good care of it, and that means they use it and then they pay it down to 0, use it and pay it down to 0. They’ll literally take that $10,000 limit, expand it to a $100,000 without you even having to ask for it because of how you use it and pay it down to 0. And so those are some strategies that we always recommend the business owners look at.
James Kademan [00:38:54]:
Nice. That sounds cool. I am curious as far as the the banks go. If I’m working with a bank, is it better to go through someone like you, or is it better to ask that bank and then if they say no, come to someone like you? Or how does that work?
Leo Kanell [00:39:10]:
That that’s how most of them do it. Most of them ask their bank. They’re told no, and then they come to us.
James Kademan [00:39:15]:
Gotcha. Okay. And you have a bigger pool of lenders, all that jazz. We do. Yeah.
Leo Kanell [00:39:20]:
Opportunity. We for sure.
James Kademan [00:39:22]:
Alright. Got it. What where do you see lending going? I guess crystal ball here. Where do you see lending going in the next 3 to 5 years? Is it gonna be easier to get cash or more difficult to get cash?
Leo Kanell [00:39:37]:
Probably easier, and the way it will happen is through Fintech platforms. So we’ve just invested a decent amount of capital into a platform, called myfigures.com. And, in that platform, there’s one funding application. You connect all your bank accounts up, you manage your cash flow, your your business tax returns can be done through the entire thing. But in there, it automatically connects with the top 100 lending sources, provides 4 or 5 options without you even having to speak to somebody. And so the more integrated these, Fintech platforms get, the easier it will be to access capital. So you just wanna make sure you’re at a a platform that has access to all of the different options out there. And it’s, it’s getting much more detailed because they’ll read what you’re doing with your bank, bank accounts and and how your cash flow looks.
Leo Kanell [00:40:27]:
And, you know, they’re they’re checking credit with a soft credit check pull without even needing, you know, to do anything hard and official and automatically giving you options. And so, yeah, the more technology continues to advance, the easier it will be where you probably don’t even need to speak to anybody to be accessing capital.
James Kademan [00:40:45]:
Oh, interesting. That’s very cool. Tell me a story about personal guarantees on business loans, and what is your recommendation for that?
Leo Kanell [00:40:55]:
Yeah. Good good question. And so whenever you’re dealing with with, SBA, it’s always going to be personally guaranteed, whatever you’re dealing with an official bank, it’s going to be guaranteed personally. And that of course means that you are risking, you know, your personal assets, equity and properties, bank account balances. You’re not ever, risking a retirement account. That’s in an official 401 ks or IRA because those are, are usually exempt, even, in cases of bankruptcy. So that’s how personally guaranteed the magic number is 25,000. So a lot of the time strategically, we’re going to be able to get a client, you know, 4 or 5 lenders who each give them $25,000 And that’s usually the magic number where if it’s below 25,000, then it’s not a personally guaranteed.
Leo Kanell [00:41:45]:
And so if you think about a business credit card, that’s generally not personally guaranteed. If you default on it, are they going to report negatively to your personal credit and business credit? Of course. But they’re generally not going to be getting a judgment, against you because it’s not a person guaranteed. That’s what it’s called unsecured. And so unsecured financing is a lot of the times what we’re specializing in and getting customers or clients access to is unsecured financing. So, yeah, if you do anything with SBA, anything that is with, a bank loan and generally over $25,000 then 9 times out of 10, it will be personally guaranteed. At the end of the day, though, if you run into trouble, nobody wants to be in the collection business. They don’t wanna write the loan off.
Leo Kanell [00:42:31]:
And so just communicating and continuing to make some kind of payment and working out a payment plan, you can almost always do that in today’s world more than ever with pandemics, all the crazy stuff that’s gone down in the last few years. So if you get in that situation, you just wanna communicate and get payment plans put together and then focus on the number 1 in your business, which is sales and cash flow.
James Kademan [00:42:54]:
Fair. Totally fair. With oh my gosh. I forgot what I wanted to ask here. Where do you see your business going over the next 3 to 5 years?
Leo Kanell [00:43:04]:
So our business, I see I see our fintech platform as being this, this new way to be able to reach more customers and make a bigger impact. And as we’ve served small business owners, we’ve noticed that the number one issue most of them fail is they don’t know how to manage their financial numbers. Like, they just kinda look at the bank account and like, oh, I think I can do this or I think I can pay myself or I think I can, you know, buy this, expensive piece of equipment or put a bunch of money in marketing. And so the ability to unlock cash flow insights to make good decisions in the future is what we’ve seen as the key to success versus failure. And 82% of small businesses fail because they don’t know how to manage cash flow. So that’s why we built this cash flow platform to help these small businesses be able to manage it and know, well, based on my current financials, this is where I’m going. And if I do this, this is what happens. If I do this, all this bad thing happens.
Leo Kanell [00:44:01]:
And so that’s what we’ve really invested our time and money into it. And the biggest way we feel like we can positively impact these business owners moving forward is using these finance, platforms that we’ve built out. Because if you don’t know your cash flow, you can’t make good decisions. And the problem with most accountants is they’ll tell you, Hey, here’s what happened. But what you need to be able to do is what should I do moving forward? And that’s the bigger issue.
James Kademan [00:44:26]:
Oh my gosh. I have learned that lesson so many times. Yeah. Me too. So many times I just had that conversation. I shouldn’t say just. It’s been almost a year. I didn’t realize it’s already later in the year now.
James Kademan [00:44:38]:
But I had that conversation with my accountant about taxes last year.
Leo Kanell [00:44:42]:
Yep.
James Kademan [00:44:43]:
And I realized that there’s a difference between a tax preparer and someone that does more anticipation or you give them the numbers for where you at to help you understand where you’re going to make some strategic moves. Instead of saying, you know what you should have done or even me asking them, what should have I done to avoid this? It’s a interesting game.
Leo Kanell [00:45:07]:
To say. Yeah.
James Kademan [00:45:07]:
It’s a very interesting game. I always think of it like monopoly, but the instruction manual is about 18 huge dictionaries deep. And you gotta figure out which part of the instructions that’s pay attention to here.
Leo Kanell [00:45:20]:
No. A 100%. So
James Kademan [00:45:22]:
it’s rough. It’s rough. Leo, we don’t have a ton of time here, but I wanna ask you a little bit more just deep in it getting into the business side with you personally as the owner and all that jazz, what are some of the challenges that you’ve run into over the course of time since you started that you didn’t even see coming?
Leo Kanell [00:45:41]:
Well, the interesting thing that always happens is anytime you have, you know, more than maybe even more than 5 employees, you might think that, oh, you know, the culture is doing well and everybody’s enjoying their job. And then you’ll find out from, you know, one of your employees that you’ve got a really good open communication relationship with will actually, you know, a good portion of staff’s not happy or we’re dealing with this issue. And so those are some of the things that you you you would think that people would just be very straightforward about, you know, how things are going for them. And so those one on ones are are really important. And so for me, those have been problems where I’ve run into and I didn’t anticipate because I thought things were going well, morale was high. And so just constantly monitoring, you know, values and principles, what does the company stand for? What is important? What is acceptable and what’s not. And then at the other part of it too is is holding people accountable. Your job as a leader is to hold them accountable, and that’s not always easy.
Leo Kanell [00:46:49]:
And so just the more, you know, clear you can be, the more upfront you can be. And then of course, 1 on ones, like I said, is is really important because then people can set goals when they don’t achieve them. And you can point out that, well, the the work effort, the work ethic hasn’t matched what you wanted your goals to to be achievable. And so those, those things have been, important. Those were challenges that I, I thought if we were communicating well, that, you know, the culture would be good. And so that’s, that’s been something that’s, that’s been a, a, a constant, learning curve and, just having good leaders, you know, on your team, the sooner you can find and develop leaders, the sooner you can grow and scale your business significantly. When my business partner agreed to come on full time, we literally tripled our business over the next, 18 months. And so that’s a, that’s a powerful, growth factor that I knew was pretty certain was going to happen, but seeing it actually happen, that was, that was eyeopening how important leadership is and leaders, not just you thinking that you need to lead and manage and do everything.
Leo Kanell [00:48:01]:
No, if you’re gonna grow and scale something that is making money while you’re on vacation and sleeping, then you’ve gotta have great leaders. And so teaching them and sharing content with them is important. The other thing that, that I’ve realized is the more that you can get people reading and learning new skills, the more they’ll continue to, to progress and be productive and actually be happier because they’re learning those new skills. And so giving them the chance to present at company meetings, I think is important. And then at the end of the day, again, the, the number one issue the business owners face is cash flow. And so the crazy thing can be, you know, for a a long period of time, things can be going well, and then all of a sudden, something will change in your business industry. And all of a sudden, instead of having these super profitable months, now all of a sudden you start breaking even and figuring out what you need to do to change and get back on track with that has also been something because, you know, when when you’re having success month after month after month, you sometimes, can just think that that’s going to continue, and it’s not. If you aren’t continuously evolving and improving, it’s, one of my mentors, put it like this.
Leo Kanell [00:49:15]:
He’s like, you’re you’re either on, the escalator that’s going up or down. You’re never in the same spot. You might think you’re maintaining the status quo, but you’re not. If you start flatlining, you will start going down. And so it’s that need to always be improving. And that means improving the technology and the team in your business. I think those are the 2 things that you’ve gotta always be improving.
James Kademan [00:49:39]:
True story. I remember in, 2,000, I don’t know, 2009, 2010, I had a guy tell me that plateau is the new up, and I’m like, no way.
Leo Kanell [00:49:51]:
No. That’s the new down. That’s the same down.
James Kademan [00:49:53]:
Or die.
Leo Kanell [00:49:55]:
Yes. That’s exactly right. 100%.
James Kademan [00:49:58]:
Yeah. Leo, how can people find you?
Leo Kanell [00:50:02]:
Easiest one. Very active on, LinkedIn. Leo Kanell, k a n e l l. So I I do a lot of posting there and very active, with LinkedIn. The other ways are are one of our simple websites is 7figures.com, just the digit 7figures.com. I bought that, from, the previous owner of vodka.com. He sold it to the Russians for, like, $10,000,000, and he gave me a great deal on it. So 7figures.com is is where we’ve got, a lot of free content, and information to help entrepreneurs.
James Kademan [00:50:34]:
The irony of 7figures.com costing 8 figures. Holy cow. That’s a lot of cash for domain. Leo, thank you so much for being on the show.
Leo Kanell [00:50:45]:
My pleasure.
James Kademan [00:50:46]:
This has been Authentic Business Adventures, the business program that brings you the struggle stories and triumph and successes of business owners across the land. My name is James Kademan, and Authentic Business Adventures is brought to you by Calls On Call, offering call answering and receptionist services for service businesses across the country on the web at https://callsoncall.com. And, of course, the bold business book, a book for the entrepreneur in all of us, available wherever fine books are sold. We’d like to thank you, our wonderful listeners, as well as our guest, Leo Kanell of 7 Figures Funding. Leo, can you tell us that website one more time?
Leo Kanell [00:51:20]:
You bet. It’s, 7figures.com, just the digit 7 and then figures. https://www.7figuresfunding.com/
James Kademan [00:51:27]:
I love it. Past episodes can be found morning, noon, and night at the podcast link found at drawincustomers.com. Thank you for listening. We will see you next week. I want you to stay awesome. And if you do nothing else, enjoy your business.