Bridge Loans & SBA 504 Financing: How Advisors Help Clients Access Capital | Dave Manser

Welcome to the Growth Minded Accountant podcast where our experts will share

best practices on running your firm in the digital age. This podcast is brought

to you by CountingWorks PRO. Let's get started. Welcome back to another episode of the

Growth Minded Accountant Podcast. The podcast where we explore the tools, strategies, and insights that help tax

and accounting professionals grow their practices and deliver more value to their clients. I'm your host, Lee Reams.

I'm the founder and CEO of CountingWorks and our sister company, TaxBuzz. So, today we're kind of pivoting from some

of the things we've been talking about lately during tax season. We've been trying to give you pointers on how to get the most out of a tax interview, how

to position yourself as an advisor, how to ask those questions when you start an interview, how to close an interview,

how to put processes in place, and today we're going to kind of move into still advisory, but we're going to talk a

little bit more about capital advisory. So today's topic is filling the capital gap with Dave Manser. You're a star,

Dave. So just say hello and I'll we'll give you more time to introduce yourself. Hello. it's a pleasure being here. I

appreciate being on the podcast and given the opportunity to talk about some different types of financing and how it

could be a benefit to your clients. Yeah. Yeah, and I think this is becoming more important for advisers working with

business owners and that is access to capital and in the modern way age I

think because of the technology age the ability to get alternative sources of capital people used to think just big

bank traditional banks you know they lend to small businesses but guess what

they've tightened significantly over the past years making it much more difficult approval rates are much smaller I

think they're around 14% and that leaves a massive capital gap for entrepreneurs

trying to grow, right? Whether they're acquiring property, refinancing debt, or simply moving quickly, and that's the

thing, quickly when opportunities arise. And I think Dave, you're you're going to share a lot about that because that's

kind of your bread and butter. So, that's where alternative lending solutions can play a powerful role.

Dave, you are the president and chief lending officer at Business Loan Capital or BLC. So just give us a little, you

know, basically kind of a rundown of what BLC is before we get into it. Yeah, we've been around since about

2010. we had a lot of banks that basically table funded our transactions

transactions initially. So we weren't really building balance sheet in our company. But in about 2017, we raised a

lot of private capital. So we're our fund and we have our own fund that we underwrite everything in house. It's

everything stays in our balance sheet and we service all of our own loans. and we're we're capitalized with high

net worth individuals and we also have some institutional investors in life companies. so that's kind of how

we've we've capitalized, you know, we've closed a little over 800 million since since our existence and we have

about 350 million assets under management at the moment. and that is mainly comprised of short-term bridge.

So we're very, you know, I'm very well verssed in that space. I also know SBA lending extremely well. and we also

we participate in some of those programs as well. All right. And we're going to go into a little more detail about that. There's

certain things as we talked before we started the podcast, there are certain, you know, products that I'm not that

familiar with. So, I'm hopefully going to learn a lot. And before we get into what bank alternative lending is, could

you kind of define it? How is it different than the traditional experience for someone? you know,

again, I think most people, they think banks, they think loans, they think underwriting. They think, "Oh my god,

you know, I have to there's so much work to do here. There's risk, there's fear, you know, is this going to work out? Is

it is it something I can do?" But if you could explain to our listeners, you know, who work with clients who first

go to the bank, they get stuck or they're not hearing, we don't know, am I going to get approved? Explain why this

alternative lending category exists and what problem it solves for business owners today.

Yeah. I mean, you know, non-bank lending or what now a lot of people are just calling private capital. you

know, it it it all kind of the genesis was to fill a void left by banks, right?

and that initially, you know, banks actually did a pretty good job, you know, back in the day and that, you know, this wasn't as difficult to get a

loan. and you know, but that that void has changed over time. Initially,

it was almost predatory. You know, what people call hard money loans. And that's kind of the, you know, it was the people

that had terrible credit or a lousy property or they just they had no the banks were not going to touch them for

many reasons and they had no choice but go to private markets which were, you

know, for lack of a better term predatory. that has evolved considerably in the last 10 years and I'd say in

the last 5 years it's really picked up pace and become a more sophisticated market and a real true alternative to

banks. You know, a a lot of the deals that we do and we close where we operate, you know, we're competing with

banks on the transactions. We're not hard money by any stretch of the imagination. And and you know, the the

devil's in the details, right? you kind of have to look at what is the true cost of financing. But you know it it kind of

you know it it evolved over time because of you know regulatory oversight complexity of regulatories or of

regulations depository requirements is a huge one that I always point to and why we win a lot of deals. you know

and simple economics and lending cycles like what happened with COVID and the impact that had on the office sector.

you know and then also you know a lot of bank consolidation has has has created

inflexibility. So it's like you know as another example is is because of

postcoid and and the impact on office and people working from home a lot of banks just said we will not lend an

office and they just draw a line that's it you know we're small enough and nimble enough and and the private

capital markets are smart enough to my attitude people always say well what assets will you lend on I always say I

want to make every good loan I can find you know we don't really draw a lot of lines in the sand we if we see a good

deal a good borrower and we see a solution, I'll do that deal and and

and I don't care what kind of asset it is, you know, we'll we'll we'll, you know, we'll make that deal. So, you

know, that's kind of, you know, and like I said, you know, it's really the the that market, bridge loans, has

really evolved. You know, we we have we have actually four billionaires in our fund that are borrowers. A couple of

them have come back two or three times to get loans from us. They have obviously a lot of options and lending

you know opportunities they could go for but the the the cost the they

recognize the short-term cost the long-term gain you know they have a strategy and you know short-term

bridge solutions can offer near-term flexibility you know so it's kind of

the the purpose is to match you know that that the long-term goal and capital

needs with you know meeting that the peak efficiency of the business. and

that's when you can really kind of lock in the best best terms and and those don't always match up. So, it's

important to try and, you know, bridge loans can help kind of match that, you know, peak business performance with

long-term capital needs. So I assume there's some sort of specialty too, meaning a bank has a certain mix of

where they want they only want to do so many loans in this category and that their risk tolerance might once they

get close to filling that is that part of the process why someone like BLC exists then. Yeah, a lot of times and

and again they're they're driven by macroeconomic you know cycles and

and they'll make they'll make decisions based on you know we're not doing any hospitality, we're not doing any office,

we're not doing any whatever because they had a problem in a certain area where there are a lot of you know

submarkets and micro markets that are performing extremely well. And that's where we can dive in and go, "Yeah,

well, this absolutely, you know, this this deal, while this is a troubled sector, this deal makes sense."

All right. Awesome. So, I it's a clearer picture for me. So, I want to talk a little bit about the type of clients you

work with and then type of loans and then we're going to get into kind of the advisory role of the CPA and I guess

the win-win for the client, right? So, BLC you work quite a bit with commercial real estate and business

owner financing, right? So, the primary programs, short-term bridge loans, you've already mentioned SBA504

financing. I'd love to hear that's the area I'm like, okay, what is that? Hybrid capital, structure. So,

how, you know, how do you define and what makes it, you know, sense for each borrower, right? So, if traditional

commercial loans take up to 120 days, is that I mean, does that sound about right? That's

fair. Yeah. That doesn't always work for you, right? when you're trying to secure a property quickly or you you know if

you're saying well yeah here's my offer but I can't close till whatever I mean obviously that's where a bridge loan

comes in to help say solve I guess the timing gap so kind of explain to me how

that works and then which type of product you might fit in based on the type of transaction. Yeah. So, you know,

bridge loans, you know, the reason why a lot of people come to us for bridge loans. I'd say, you know, speed like

they they were working with the lender and then the deal fell out and they've got money that's going to go hard and, you know, yes, that is is a service we

provide and we can move very quickly. I mean, we closed a portfolio of transactions on a gas station portfolio

in about a 3-week time frame. So, you know, we were able and that was nine it

was a portfolio. nine different properties across Texas. so that was a you know obviously and they had a

million dollars that was going to go hard. It was a double escrow. It was a complicated deal but we were able to get it done in a you know in a short period

of time. but that's probably I'd say really only about 10% of our deals.

the majority of our deals have some sort of they have transitional challenges. So a lot of times you know what I said

before kind of matching up long-term needs with where you are right now. sometimes as simple as a m a maturing

loan in a period of where a business has seasonality, you know, and and their

loan is maturing at the wrong time of the year and their financials don't look don't look good in the near term.

While that makes perfect sense and is explainable, a lot of times banks are inflexible with things like that.

with regard to like an investor property, all of a sudden somebody has a maturing loan and they have a a big

tenant that leaves. Now it's like, well, wait a minute. We now it's like we we need to fill that space. We need time to

fill that space. so, you know, that's a transitional challenge.

construction being completed, somebody bought a multif family property, something like that, not any

time to lease it up, you know, lease to stabilize. that's, you know, something, you know, we we help out

with. we are I actually get some banks that refer deals to me where they

they want the loan but it doesn't it doesn't quite meet their standards or a lot of times banks will have you know

revenue seasonality requirements and they're not quite there. They've got only 12 months and they need 36 months

or they've only got you know something like that where we can come in we'll look at that near-term and see where they're trending and go yes of course

this makes sense. So we will you know we can provide financing and then now I know that there's a takeout right that

that lender is is there to you know once they once they meet certain hurdles that lender is there to take us out.

So an example here too let's say a real estate property that's coming up for

renewal but interest rates are higher than they want. they don't want to lock in a long-term ro you know rate at

whatever period of time they come to you for a bridge finance. Is this a 12-month or can they roll I I I was speaking to

you before you can roll a bridge into a new bridge perhaps. So that really helps buy you time where you think in two

years we're going to be in a lower interest environment. I just want to get by. I don't want to lock myself in and

go upside down with all my, you know, my properties. So is that kind of how it works? Yeah. And I I'm that's that's a great

point. I'm glad you mentioned it because that's actually, you know, heading into 2024, we made a strategic decision to

kind of go opposite of the market. you know, 2024 was when rates were still at their at their peak. You know, the

Fed hadn't started hadn't started dropping. and there was a lot of maturing CNBS and life company debt

that wasn't being serviced by traditional financing. And so we decided where a lot of people were going

into the double digit range in our in in our space bridge space we went the opposite way and we started offering

deals in the 7 1/2 to 8 12%. And when you look at a monthly payment 8% I

you know interestonly payment is very similar to a a fully amvertised payment

at you know at 6%. So you know and that that's very competitive bank

financing right now in commercial real estate. So from a cash flow perspective, what we were really trying to go after

was those better assets, better borrowers that people that hadn't

previously considered bridge loans because they everyone thinks hard money. They didn't really a lot of people don't

understand how sophisticated the market's gotten. a lot of and that's actually where we added in since the

beginning of 24, we added those four billionaires, people that had maturing debt that were like, "Wait a minute, this makes perfect sense. I'm gonna park

some short-term capital. It's not it's not you know impacting my cash

flow in the near term, but yet I get near-term flexibility. And now I can sit and wait and see what happens. I can

wait, you know, and this also applies to somebody that maybe has maturing debt and they want to sell the property.

but they want to wait and see what cap rates are going to do. They want to wait and see, you know, the impact on on lower rates, the what the impact that's

going to have on values and NOIs and you know, overall market influence. So, yeah, near-term flexibility. And as far

as how we, yeah, we can do 12, 24, 36. I've even done 48-month bridge loans.

and, you know, I always, you know, before determining term, I always

ask, you know, what is their what is their need and when do you think their window is to want to pay us off? And

then we'll match something that matches that that payoff window. Because the way we structure our deals is whatever the

term is, half of it is guaranteed interest. So, for example, if we do a 24-month loan, there's 12 months of

guaranteed interest. So, they could still pay us off in month 10, but they're going to have to pay that 11th and 12th month, but that entire second

half, they have they're free to pay us off. So, so that I I target that

second half of, you know, as their window for wanting to either sell or go

back into long-term financing. before we get into the accountant's role and what this type of capital

advisory let's talk about the SBA products and kind of how that works and

how do you use that with clients? Who are the ideal clients for it? What are the products? What is what does that

process look like? So yeah, the SBA program was really designed you know the SBA or the

government as a whole doesn't lend money. People think the US government has all these lending programs. HUD,

Fanny, Freddy, SBA, USDA, all the they don't lend a dime. All they do is they

guarantee other people. They guarantee the loans that other people make. and

but and and the gen the real motivation of the program is number one, it's a jobs creation program, but it's

also meant to entice lenders to lend in areas that are that are deemed either high risk or or and lend at LTVs that

will, you know, at higher at higher leverage, higher LTVs to entice you

know, lenders and and give owner operators the opportunity to borrow. grow and and build businesses. You

know, small businesses are, you know, the are the driving force of our economy. and so like specifically the

SBA 504 loan, you can get up to 90% financing and it's structured with two

loans. So let's say you have a a $10 million purchase, right? the borrower

can buy that building with as as little as a million dollars down. they can get up to 90% and that's structured with a a

50% first trusted or first mortgage and then the SBA comes in and through a

a group called certified development companies they provide a second trust deed of with of that 40% or up to 90%.

It changes depending on different asset classes. It can drop down as low as 80% for startups and special use properties

but we you know but it's still you know it's still fairly high leverage. And

then the SBA portion, that second trusted is actually typically at a at a

pretty it kind of follows the 10-year Treasury. and I think right now,

you know, it set resets every month. but and that rate, as of February is

5.8. So it's a pretty pretty good rate. so depending on, so for instance,

our capital is typically going to be in that 7 and 12 to 8%. So you're looking at a at a blended rate, you know, less

than 6% mid 6 and a half% range that is at a high leverage, you know, it's so

it's it's very attractive financing. And then and then on top of it, the SBA portion is fixed for the life of the

loan. So it's a 25-year amortizing loan with a fixed rate for the life of the loan. So you can get that 5.8 locked in

long term. And you know the SBA 504 program was there's two main SBA

programs for financing. The the 504 and the 7A. The 7A is really more of a business. It was geared towards business

financing, business acquisitions, inventory, working capital, things like that. It can be used for real estate

financing as well, but it's typically more of a of a floating rate product. The SBA504 program was built

specifically designed specifically for real estate and heavy equipment financing. and it can really only be

used for that. And to qualify, you know, the property needs to be at least 51% owner operated or owner

occupied. and what defines and and your clients will understand this. What

defines an owner operated business is really a tax classification of the difference between passive and

non-passive income. passive income is collecting leases, rent

income, things like that. You're not really running a business. that's not eligible. you know, and that

that would not be considered owner operated non-passive income. So for instance, a hotel, you own a you own a

Fairfield in in suites and you own the real estate and you run the business. That's non-passive income. That's an

owner operated business. All right. So let's talk about the accountants perspective here. Most of

our listeners obviously are CPAs, EAs, and advisors. So you know, before we

get into because you just you talked about a couple different types of clients, right? So, what are some common

scenarios that an advisor might look at their client and they're talking to them and say, "Hey, you might want to talk to

a lender like BLC. You want might want to talk to Dave." An example, commercial property purchase. We just talked about

that refinance situation, transitional businesses, borrowers,

obviously banks won't finance. You know, what tends to trigger those conversations because they can even

identify them and segment their own client base. and let's say they have a 100 business owners and they can kind of

fit, you know, these this section of my clients may be interested in this type of lending alternative lending

process. I can then as a CPA and what CountingWorks does is we actually put

what I'm going to call educational programs around, you know, writing blog articles about this. You know, what is a

504? what is a bridge loan? You know, what is transitional financing? So, if

you were advising and you're sitting there from the lens of the CPA talking to a client, you know, what would be the

things the flags you'd be looking for that could trigger those conversations and and perhaps lead them to an

opportunity they didn't know existed? Yeah, I mean, you know, there's some obvious, you know, there's, you

know, there's some obvious, you know, maturing debt, the most obvious tenant rollover, keeping an eye on that.

I'd say the the biggest thing that, you know, from an advisory

standpoint is timing, right? And it's a lot of people don't realize how long it takes to get financing sometimes. And

and that's where, you know, there in lies the opportunity for us, right? All of a sudden it's, hey, my loan matures

in 60 days. I need to get a loan. And now, hold on. Don't you just don't do a

drive-thru and get that? Yeah. Exactly. Exactly. And so so you know making sure they understand not

only you know the time it takes to you know to get it loan because a lot of times we have people come to us say I've

got I'm facing a maturity default you know it's a technical default it's not a real default but it's a maturity default

and those are very problematic is if you depending on the

type of loan you have you have CMBBS or some sort of big agency debt you're typically dealing with a serer it's not

like you can call me up and say, "Hey, Dave, my loans are maturing. Can you get an extension? Can I, you know, what can we do this, that, whatever." Typically,

I'm calling you in advance anyways and planning for that. But this is the role the C, you know, that your advisers and

your CPAs can play in in alerting them and not just specifically about timing, but about specific asset class issues

like, hey, you've got an office loan. the office market is very difficult to

re to refinance right now. So we need extra time to to execute and get a

strategy in place. so we're not panicking at the last minute and calling Dave and saying, "Hey, I you know I'm

you know my my loans maturing and my you know and if it's CNBS, they're very inflexible. Most lenders, you know, if

you have a relationship, especially and and we'll talk I'll talk about deposits in a little bit, but you know, banks

need deposits. They want deposits. That's part of the regula, you know, the the overregulation they're and overs

scrutinization they're under right now. Deposits are really important to banks. and so if you have a good deposit

relationship with them then and you have a good treasury and your your client is rolling through a lot of capital, then

you're going to have some leverage with that bank. But if it's a CNBS loan, you're dealing with with some serer that

is just is just administering. It's like, well, your loan matures now. You're in default. I I they have no

control to extend it or anything. So it's just a big cumbersome machine. So those are all things that you know the

advisor can play. The other the other more important thing is you know you

know it it's you know they're not just debits and credits right it's it's they can play a key role in understanding the

long-term not the long-term needs of the business and long-term cost of capital

but the true cost of capital. By that I mean you know how we win a lot of deals. a a bank may come in and say, "Hey,

yeah, I'm giving I'm I'm offering you this extremely low rate." And they're they're, you know, the borrowers are are

just allured by, you know, they see that and they want it, but we need 20% of

your loan balance in deposits. Now, to a to a small business, or or an

investor, you know, that, you know, if you got $10 million loan and I put 2 million and holding deposits, say you're

going to pay me 3.5% 3.8, That's kind of where it is right now. whereas if I'm

putting that in business, my irr is 18 to 20%. Now you have to look at what's

the true cost of that rate that I'm getting, right? And that's where an adviser can come in and say, you know,

an 8% loan IIO loan in the short term while you do this marketing strategy

while you onboard this client, what is way better than getting this 5 a 12%

loan and here's why. those are all things that somebody can explain to them

and talk to them about and then you know steer them towards a private

capital or or a different non-traditional financing solution. So I mean and that's

the whole beauty of this is that's where the advisory services come in. We've already talked about statistics you

know you get about 30% higher revenue when you are doing instead of just doing compliance work when you start getting

an advisory. I think capital advisory is a natural extension. And then I mean explain to me why don't you

think it's highway robbery if your CPA is not doing that proactively for you, not looking at your balance sheets, not

doing that kind of comparative analysis. You know, what are I'm assuming you work with a lot of accounting firms now with

the clients and you kind of team together. Is that part of the process? Are you surprised sometimes when people

don't have that backup? Yeah, I mean it's it's there's

I think historically people just go to banks, you know, and and it's

really within the last 5 years that that you know the private capital has really, you know, gotten sophisticated. There's

a lot of very good underwriting. There's a lot of a lot of very good solutions and options for borrowers that

they had never previously considered. And you know a lot of people and it's really matured in the last like 5 years.

You could even say in the last 2 to 3 years it's really matured you know the market used to be driven by yield

you know and that goes back to the hard money days. It's like, you know, this is opportunistic. These people, you know,

we're going to we're going to help them when they need it most, right? And that's what I mean by opportunistic as

opposed to providing a real alternative option that is

cost-effective and makes sense. you know and and that's you know and that

takes some planning and some thinking and and it and especially where the adviser can play a role is is like I

talked about before is you know finding you know matching up the peak

performance of their client with their long-term financing needs. Those those

two things don't often match. you know, seasonality I mentioned earlier.

there could be macroeconomic issues that are impacting a specific business. You know, I'll point to right now, every

city that ha every city that is going to host World Cup games. the numbers

I'm seeing on we've got I've got hotels in in Atlanta. I mean, you know, their

their their revenues that they're going to and and and their occupancy everything is going through the roof. So

it's like these are you know that's the opposite you know that's that's the upswing right but there are also you know industries where certain things

happen you know office sector being you know the most most

obvious is you know work from home but but there's some interesting things happening there in that you know office

occupancies dropped dramatically but now there's a lot of inventory nobody's building office right now there's a lot

of office that's being pulled out and transitioned into you a high-end condominium, I hospitality, all sorts of

different things. And at the same time, people are starting to come back to offices, more more businesses are

requiring it. So, there's going to be this inflection point where all of a sudden, oh crap, there's not enough office inventory, right? And there's and

and you know, conversely, there's a lot of smart people out there and a lot of cash that's going, hey, let this this is a good time to scoop up some office. So,

you know, it's all just trying to figure out these cycles and and and where, you know, their client fits into those

cycles and and understanding what the financing, you know, opportunities are

to meet, you know, their client's needs. You know, it's an I think it's an extremely important role. So, we've talked a lot about real estate

and commercial real estate and office and gas stations and things like that, hotels. are there opportunities as

business owners to, let's say they have a liquidity gap for a growth, you know, they have strong revenue, maybe they

have a new client that came on. are people using bridge lending for those

type of things? Or maybe they could acquire a business. It's like a business opportunity comes up and there's a

business that's available, but they want to close. It's a, you know, a fire sale in some way, some maybe there's a health

issue, right? And they want to get someone that can close on that deal very quickly. Is that another role for the

way you work with clients or with bridge funding or how would that work? For for our fund, our current fund were

we we started out I mean the thus the name business loan capital we've been transitioning to BLC lending. You know

we started out yes lending on businesses and that's that's that SBA 7A program. you know that's really meant for

inventory, business acquisitions, working capital, things like that to to you know where they're you you know

UCCC's and they're using personal guarantees and things like that as collateral. Right now we're strictly

lending on real estate. now yes businesses that have and this is where

an adviser CPA can play an an extremely important role because borrowing against

real estate is it's a request I get all the time. Hey, I you know I I want to pay property taxes. Hey, I want to, you

know, this happened and I got behind on AP. I want to It just It's a slippery slope. mismatching, you know, assets

and financings. You know, short-term assets and short-term working capital needs and and matching that with

long-term assets. You know, that's kind of that's kind of how 2008 happened. you

know, a lot of people using their their their house as a credit card or ATM and buying cars, going on vacations,

things like that. And then, you know, once once you're done with those things and you have to replace them, now you're

paying for them twice, right? So, that's where an adviser will play an important role. And but a bridge loan can help

with that, right? As long as you you have the equity in your business and and you have space, if there's something you

want to do, a lot of times what we see is capex. Hey, I'm going to reposition the property to sell. I'm going to put a

new roof, pave the parking lot, paint, you know, put in new HVAC, whatever.

and put reposition the property to sell, you know, those things make, you know, absolute sense. but, you

know, a bridge loan, can help with that because, yes, you're using a

long-term asset, but you're only putting short-term financing on there. So, say you got a property worth $10 million and

you owe 5 million. You need you need, you know, you just got a new government contract and you need to staff up, you

know, as as just an example, and you need a million bucks. So, you refi get that million bucks. Now, you get now you

realize the revenues and you come back and you and you can refinance that out. So, you know, things things like that.

But it's it's you know that's where a CPA there then as an

advisor can play an extremely pivotal role because they could you know if

their client sometimes goes and does things like this uses long-term capital for short-term capital needs. It it it

they're circling the drain. It could ultimately put them out of business. and and most business owners are they

understand their business. They don't understand long-term planning. and that's where you know advisor I think

are absolutely key making them understand what they're doing well and it's from reactive now the

client comes into the accountant and goes look what I did and they're like so versus proactive. So an example here

just to circle this around and tie it up. So an accountant reviewing the balance sheet of a company that has

significant equity in commercial property but when they're so they're asking proactive questions. What's going

on? How's the property? Does it need any improvements? Do you Does it need a new roof? Do you Where's your cash position?

They might see opportunities before anyone comes to a Dave Manser. Call

Dave. I like that. Call Dave. U before they call Dave. I mean, so that is the role the CPA during this capital

advisory or just their their advisory, you know, due diligence, right? So they're meeting and knowing clients and

proactively saying, "Hey, maybe you should look at X." So is that kind of how you view the the role? Yeah,

absolutely. I mean, you know, it's also it's also, you know,

important to get, you know, I I think the benefit of having the CPA as,

you know, potential for me as a potential referral source is I know where their motivation is, right?

they're they're they're servicing a relationship. They're maintaining a relationship and and you know and

they're looking out for the long-term needs of their client. And we can have on we can have honest conversations about that. A lot of the deals I get are

from brokers. I'm not bashing the broker industry. I don't I don't want my phone to blow up and people get mad at me. But

brokers are motivated Don't blame me. Don't blame Lee. Brokers are motivated by getting a fee,

right? They they get they're they're very transactional. they they get a fee on a deal and and and they move on.

where the CPA is there for the life of their client, you know, if they're good and they do it right. So it they're

different conversations, right? I can have a conversation with a CPA and say, you know, what is the need? What's the

goal? Right? other times it's like I have to kind of I have to get the

information. I have to figure it out and figure out, okay, you know, where where's the where where are the issues?

I always tell I always tell people up front, tell me what the issues are and we can mitigate around them. or

we can't and then we haven't we haven't wasted your time, you haven't wasted mine. and that's where a CPA

understanding the financials deeply, we can we can come to a solution very quickly. and I don't have to worry

about any hidden time bombs that that weren't, you know, initially revealed.

There's a reason CPAs and accountants are the most trusted adviserss. You're correct. They're not commission based

and they're not driven by the same things. They're for a long-term relationship. So, I want to circle back to some things you said about the SBA

504 program. which is layered. It's basically a capital stack of lending, right? But what this allows and from a

CPA's advisory point of view, it allows the client to put less down than they

normally would and that would preserve their working capital, right? So that is a planning strategy. you know, can

you ow, I just hit myself my own elbow. can you add to that? you know

from the advisor's point of view okay this is why I would proactively suggest that and maybe cover that in

certain type of clients meetings you know their annual meetings yeah I don't think you know a lot of

people don't realize you know the benefits of the SBA program and that's really why you know it was designed to

encourage you know two things to encourage lenders to lend in this industry by you know

providing you know my loan is a 50% you know a 50% loan, right? The SBA is

junior to me, so it's it's a it's a relatively secure loan, relatively secure LTV position. And and the and

you know, and the SBA is in that second lean position. So, it's it's enticing lenders to get into the market, but it's

also enticing owner operators to buy real estate, right? It's kind of

trying to grease the wheels of capitalism, right? You know, little bit down. you can get in own a business

and operate that business. And there's a lot of different I don't want to go down a rabbit hole, but there's a lot of different concepts about owner operated

properties. There's a lot of people who think they won't touch it. There's a lot of lenders who who they they think, you

know, do you do owner any owner operated as opposed to investor properties? It's like, yeah, we do. It's like, yeah, we

don't like that. It's like, well, for me, it's it's the complete opposite. And

there's there's data to there's data to support it, but it's a complete opposite in that I've done a ton of SBA lending.

It's how I started my career and I've been doing it for over 25 years. I know the programs very well. it's,

you know, borrowers a lot of times if they have an owner operated business, it's their it's their identity, it's

their future, it's their, you know, it's their livelihood. It's their kids' identity. It's their kids' future. It's

everything. And and you know there's a lot of scenarios where where you know things happen. It's not when if things

happen, things always happen. Economy, business cycles, whatever. People, they'll stop paying their mortgage on

their house before they'll stop paying their mortgage on their business because if they lose their house, that's one. They lose their business, they lose

everything ultimately. So, you know, there's that extra layer of security that I appreciate and I think is is is

really fared out in the data. you know, there's mixed data. It's all cycle like you know right now the default

rates I think are close on owner operated are are are very low and compared to default rates default

rates on investor are almost three or four times right now devil's in the details as always right during co

default rates on owner operated properties was higher why obviously a lot of small mom and pops people

couldn't go to the salon couldn't go to the the here there wherever they just they their revenues dried up. So, but

now postco office which is mainly investor is the one that's that's where the biggest problems are and the biggest

in the you know with regard to default. So, it's it's you know it it kind of it goes back and forth but you

know owner operated properties are always very good bets for banks and for lenders and it's a program that I like

and it's a really good program for for owner users to leverage.

Yeah, you went through the rabbit hole. I mean, COVID is a government government created catastrophe when it came to

business owners. that was a policy issue, but we're we're going to stay off of that one right now. So, you had

mentioned something I think is really important is that when an a client comes to you directly that doesn't have

an advisor in the loop, you're figuring out what is the real motivation, what is actually right for you. so what do

you think that changes the outcome if a CPA brings or enrolled agent brings you a client? compared to someone who

calls you last minute who didn't prepare. So these people are proactive. They understand the process. They

understand the products. They understand the reasoning and the cost for this before they ever get to you. I'm

assuming everything is smoother. The underwriting is smoother. The communication is smoother. The

expectations are smoother. There's less risk. you know kind of give me that and then we'll we'll kind of wrap this

up. Yeah, I mean it's

it is totally different conversations. you know CPA's obviously got

access to really good solid financials. a CPA you know the like I said the

conversations are different right? It's it's about long-term planning. You know, I we consider ourselves like our bridge

loan product a true bridge loan, a true bridge lender, which is really meant to take you from, you know, one place and

and bridge you to, you know, another place where you need to be a better place. You can get better, you know,

more cost effective financing or sell a property or, you know, whatever. We're meant to bridge a gap. So, with a

CPA, I I they I'll be able to have that conversation about, you know, what is

the long-term goal? What what do we need to achieve so that at the end of our

bridge loan, they have a takeout? And and I always tell people, you know, we have borrowers sometimes, we say, you

know, again, the the concept of bridge lending is you just look at the property and give them money. you know, we

underwrite our deals and and people are like, why are you asking for so much information? And it's like, well, because I I underwrite the takeout as

much as I underwrite the specific loan and collateral. Like, I want to know, you know, here's where you are now. I

understand where you are now, but where are you going and how are you going to get there? I have to figure that out

with a broker. With a CPA, we will figure that out. Or they'll already have that plan in their head. They're already going to have an idea and they'll come

to me and say, "Hey, I got a borrow. It's got this loan. Here's what they want to do. All right. Here's what we should do. Here's, you know, here's the

metrics and here's what makes sense." Yeah, I think that's awesome. So, let's talk about BLC a little bit and I

know there's when I was looking at your website, there's a lot about fee transparency. you had mentioned the

idea of private money, hard money, the old stigma. It has evolved incredibly a

lot since 10 years, maybe the last 5 years, even more. I consider this very common now. I know people like you that

do this. So, explain how that is different, you know, from a lot of other

alternative lenders. why BLC is different. how how do you price these deals? Is there application fees? You

know, when I'm doing the due diligence, am I paying? Are there commitment fees? You know, why did you structure your

flow the way you did? Well, you know, there's a lot of that.

And so, I'll I'll have a little, you know, warning as well, right? There's a lot of

non-bank or private capital that call themselves lenders and they're really just brokers. They really don't have access to capital. They're going to turn

around and and I get a lot of those deals. I've seen those deals. It's like I, you know, you know, people give

me the deal and then and then they're trying to be pretend that they're the lender even though I'm, you know, I'm the lender on the deal. So, you

know, that's something to look out for. And, and one of the keys to look out for is when they're asking for a lot of

upfront fees. You know, it's not a it's not a revenue model. It's a horrible way to do business. There's

plenty of companies out there that charge large deposits and then the and I've seen it's like people come to me and say, "I just paid a $50,000 deposit

and they work my loan for for six months and they went nowhere." It's like, well, yeah, cuz they're they're never going to give you a loan. It's like and now they

made 50 grand and it's it's it's a horrible business model. It's predatory and and they're out there, right? So,

you know, typically, yes, we will collect an upfront fee, but it's for third-party reports. there are

instances where I'll say it's a it's a non-refundable deposit. And by non-refundable, I mean if we are working

on your loan and I'm dedicating people to it and you're either not being responsive or not giving us information

we need and now we're just wasting our time, you know, you will lose the deposit, you know, less the third we,

you know, we pay all the third party report costs out of there. or if we get to an approval, especially if I feel

like somebody's double apping me, which happens sometimes. if we get to an approval and they go, "Yeah, I'm not

going to take your loan. I'm taking a different one." Well, all right. Well, now, you know, but it's still typically

they're not 5075,000. You know, we'll typically collect a $20,000, you know,

again, non-refundable, but but third party reports will sometimes cost 10 to 12. So, and then any anything that's

unused, they get back or get credit at closing or whatever. but yeah, it's just it's a bad business model. We

don't collect any any attorneys fees. No, no, no, origination fees or

anything like that. There's a lot of people out there that will say, "Okay, we'll start working on it, but we're charging you a 50 basis point origination fee up front, you know, yada

yada yada." We don't do any of that. That's just and and and that also is important whether you're working with

us or somebody else in that is so your interests are aligned, right? I'm not making any money until I close the loan.

So, I want to get to that closing sooner rather than later because I'm spending underwriting, processing, closer, you

know, I'm spending time working on it. so, you know, those all have costs

for me. So our interests are are aligned in getting to the closing table as soon as possible.

Yeah, I think that's awesome. So last question, just talk about market trends or any other perhaps lending structures

or products you see coming out here in the next year or two? is there anything you would share? Anything that

people should be aware of or is it, you know, perhaps my last question, where do you see interest rates going here in the

next one, 12, 12 month, 24, maybe 36 months? It's a good question. With the new Fed

chair, I don't know. I you know at the beginning of the year I would have

said I think we're probably looking at another 100 basis point reduction. I

don't know if it's he's going to be that aggressive. You know I I I don't know enough about him. so I think

but I I think at least a 50 basis point reduction is reasonable. do I

think rates are going to go go back or get near where they were? No, I don't

think I think I think those days are gone of free money are gone. I think it's reasonable for prime, you know,

Prime's at 6 and 3/4 now. I think it's reasonable for it to settle in the high fives or near six. and kind of and

stay there. it still creates an opportunity, you know, for some for some good borrowing and reasonable cash

flow on properties. but yeah I mean the the there's you know as far as

macroeconomic cycles you know I think office is making a comeback. it's slow. There's certain markets where

you know certain markets where it's going to be a little more difficult and they still h they still have a little circling of the drain to go through.

but you know hospitality again because of the World Cup is going to have a banner year in 2026.

and that's going to feed these businesses for a little while, you know, post, you know, after that.

you know, retail is still strong. I think everyone thought retail was dead after, you know, during COVID when

everybody was ordering and having everything delivered and the reality is people still like doing business with people and going and picking things up.

And so retail is still doing all right. you know, and and again, it's all it's all, you know, submarkets, right?

you know, some areas are doing terrible, some other areas are doing great. and and that's also within specific

asset classes. as far as lending trends, you know, I think the I,

you know, there's there's a there's a there's a conference that I go to every year called structure finance conference

and that conference is a very interesting conference. It's a conference that you know it's a lot of the funds that buy other you know buy

pools of loans and things like that and and you know in the past it had always been conversations about yield.

everything's yield driven like what's yield what's yield what's a yield and we've always like id said earlier we went the opposite direction in rates and

went lower to chase asset quality as opposed to chase yield and and you know

people always ask me what's your biggest challenge in in in getting investors in our fund and I always tell people it's

it's convincing people that asset quality is more important than yield the the term I use for our fund all the time

is we're not a get-rich fund we're a stay-rich fund and and that defines the type of clients and the type of

borrowers we're looking to add to our fund is, you know, we're not a loan

to own shop. That's that's a that's a famous term, you know, a lot of people talk about. It's like, you know, you

know, you trying to steal my client's property? Absolutely not. If foreclosure is probably how I'm getting paid back,

I'm never going to make the loan. you know, it's it's what's the strategy?

If it is a bridge loan going to be my take, you know, I'm a bridge loan. Is a bridge loan going to be my takeout?

probably not a deal for us because that means there's not really a plan. there's hope, you know, and hope is

never a strategy. It's, you know, you got to have a plan and it's got to be mapped out and it's got to make sense

and, you know, and that's where, you know, dealing with CPA advisors for their clients. I think it it's just such

a great match. Yeah, your house is different than mine. All I have is Amazon trucks lined up and

big I had the other day I had six boxes sitting there and I still haven't broken down. One of the boxes was as big as the

front door. So, I I still have to break those down. So, Dave, this has been incredibly helpful. I I appreciate you

sharing your thoughts and your insights today. You do work as with referral relationships with accounting firm,

CPAs. I will include that link in the description of this podcast if you're interested in reaching out to Dave and

his team, having kind of a discovery, get to know each other, and then you can talk perhaps if there's a good fit.

Hey, I have some clients that I think I want to send your way, how that will work out. So, I have one final thought

and that's for my audience. You know, as accountants and adviserss, we often see

or you see the financial picture of your clients before anyone else does. and if you're in an advisory mindset, not

compliance, that puts you in a really unique position to help them not just manage their tax liability, but also

make smarter decisions around capital and growth. That is why I've been pushing this capital advisory now for

the last few months. And if it's something you want to explore further, we've built, as you know, if you're

accounting works pro client, we have what we call playbooks and we have capital advisory playbooks. We'll even

develop some I think around the 504s, Dave. so I think that's even educational. and these run

automatically on autopilot through our system. So we personalize what we do is we use Max, our AI tool. We feed it

prompts, we feed it data about these different programs. So we have highly accurate information that's created. So

what is that? It's a blog that's posted automatically to your website. It's a social media post. It's an email that

goes out perhaps to certain segments of your clients. And what these playbooks do is they help educate your clients

around financing options and surface more importantly situations where a

client might benefit from a conversation like we're talking about today. So, you may not have had that

meeting, but there might be a life event happening at that client's site that now, oh, you know what? Lita just sent

me this newsletter that actually completely applies to me and that's how the advisory growth really compounds

itself right so I hope this was a good topic this is I think Dave this is great a lot of insight a lot of

details things that I didn't totally understand how the alternative at least the bridge lending worked I think this

is awesome option for a lot of people I feel that you're right there was a stigma on it and obviously that is not

really earned so again thanks for listening Dave is there anything that I missed that you wanted to bring up today

before we close this out? No, I this is fantastic. I appreciate it. And again, anybody have any

questions? Happy I'm always happy to be a resource. All right, perfect. Thank you for being a subscriber of the Growth Mind

Accountant as we've passed 7,500 subscribers. Hopefully Dave will get over 20,000 views like we did on one of

our last advisory. You know, we'll see how that works. I don't know how excited people are going to be with bridge lending. A little smaller audience, but

an important one. All right. Thank you very much and until next time, we'll see you guys next

week on the Growth Mind account podcast. Thank you.

‍