What lenders actually require to finance an acquisition

Okay, let's get into it. Okay. So Tre, nice to connect here. So yeah, I'd like to start and get right into it. So if you could introduce the audience, or rather introduce yourself to the audience and then tell them, you know, I guess who you are, what you do, and your line of work.

Yeah, yeah, absolutely. Well, first, my name is Tre Brown. Of course, I work for Raises.com as capital markets, mostly. Really, what I do is we finance the acquisitions and a lot of different activities within also not just private equity, but high net worth activity. I would say a lot of different exotic asks. Some people are asking to buy a company or sell a company. They would like to refinance debts. So it's just mostly financing activities related to private investors and private companies. And that's basically where I specialize. We basically acquire and finance those acquisitions. We negotiate with investors and, of course, partners and strategic stakeholders to get this done. And that's primarily my role here. I don't know, sit in between these people and make sure that things get aligned. And at the end of the day, things get to the finish line.

Awesome. Awesome. The finish line. So, yeah, no, in working with you, we've definitely seen a fair share of different things, you know, I guess good, bad, ugly, everything in between. And I've learned a lot and you've definitely learned a lot as well. And, you know, you've done some great work in some of the transactions that you closed. And that was a really great job that you've done in several deals in supporting some of the clients. So walk me through. So somebody sees Raises.com and they're wondering if they're a good fit for what we do. What do you have to say to them? So somebody watching this and then they're like, oh, can I buy a business? Can I raise money? What do you have to say to them?

Okay. Okay, so now in this environment, obviously things are volatile. Yeah. Before, if it were 2010 and 2015, you could buy a business, zero cash down if you had a network. Now, lenders are asking to see equity. They're asking to see proof of funds. They're asking to see cash somewhere in some way, shape or form, or they're going to take collateral. the sponsor has to have some sort of collateral whether it's cash or equity to get a deal done a lot of what i'm seeing for zero cash down deals are real estate equity um they have a piece of real estate that they have either existing loans or no loans against and they want to buy a business and instead of putting cash down they're going to collateralize their real estate and that's primarily how we're starting to see things get done i'm only in this interest rate environment given that things are, again, volatile. People aren't necessarily willing to underwrite more exotic and leveraged deals. We're also starting to see sponsors that need a higher threshold of net worth to get into the room. A lot of lenders are going to ask that the sponsor has liquidity or net worth equal to the loan ask, whether they like it or not. And we're seeing that in Canada and the United States. so that it's usually Canada that's more draconian in terms of leverage but now the United States is also saying the same thing yeah we're asking for a higher net worth we're asking for higher cash yeah and to get the to deal done and um really what we would ask from a sponsor is that if you have 20 or 10 percent of the cash needed to get a deal done you can most likely get it done without that you're going to have to syndicate the equity to get it done yeah or you're going to have to find the collateral somewhere. That's primarily what's going to happen. Right. No, it makes a lot of sense.

And so somebody looking to buy a, let's say they want to buy a metal fabrication business, something very, very boring, very reliable that has good cash flows. What do they have to bring to the table exactly? You're saying that they have to, like, let's say it's worth $10 million for square numbers. They have to come to the table with $2 million net worth?

Yes. Okay. Yeah, I would say not only a net worth, but that would be the most likely the minimum equity ask from the bank. If the sponsor comes to the table with a $2 million net worth, if they can translate that into equity for the transaction, then a bank may finance like the other 80%. You could get maybe equity investors involved, but usually in some way it has to act as equity on the balance sheet. If a sponsor has $2 million net worth, but they're asking for $8 million, we now have to justify the other $8 million elsewhere, whether it's on the company's books or the other sponsors involved. That kind of ties back to the sponsor's track record. Before, a qualified sponsor without capital could go and get a deal done. Now that same sponsor has to bring something to the table. Okay. So with the $2 million, if they have a $2 million net worth, they could bring that to the table. But now they have to find someone who's going to run the company, a strategic operator with 20 years of experience, so to speak. Yeah. Like putting two and two together to get the thing done. Yeah. No, that makes sense.

That makes sense. So if the person doesn't have that, like I guess let's just cut to the chase and be honest whether the truth is appealing or not. they don't have let's say their net worth is maybe you know so essentially what you're saying is if their net worth is lower than that 20 threshold and they don't have any associates or business partners that have that net worth deal is dead right or do they have any hope oh they have hope

All right there's always hope um you would be able to syndicate it you would also be able to put install someone else right for for the audience what's what do you mean by syndicate

For the audience? Syndication is putting together multiple financing parties,

Typically on the equity side, to achieve your total financing goal. You could either get $50 million from one bank or get $10 million from five different banks, and you're syndicating that five $10 million tranches. In this case, an investor will have to get that finance from someone else. So I would say a sponsor would get that syndicated from an investor for their deal, and they would have to execute it that way because a bank, they're going to have to cash.

There is a deal that you did that's very similar to that. The sponsor was in Vancouver. Could you just tell the audience about how you did that one?

Yeah, absolutely. It was actually an international deal, which made things significantly more complicated because banks are not necessarily willing to finance really small international deals. It becomes really creative. Essentially, what we had to do was find an investor in the United States who was willing to collateralize assets and net worth to get financing in which we used to purchase the company and then move to the United States. That was exotic by nature. We had to get financing for the other sponsor and have it act as the financing for the transaction, bring the company to the U.S. and then, of course, deleverage it over time with the revenue from the company, pay off the investor. and then eventually we could do a convertible structure where, of course, we just get more debt, pay off the investor,

And then have the debt on the company books and then write it off over time Okay and just for those who may not have gotten that so essentially you use the cash flow of the so i guess the person that wanted to buy the business they had an associate and then they went to that associate who had a high net worth uh and then they said hey let's just get a loan get a loan basically to the person who had a high net worth and then they use that loan to essentially fund the business acquisition. Is that what you're saying? That is correct. And that business, so the other person's business was used as collateral? Yes.

Okay. That is correct. Yeah. The other sponsor's business was signed on as a guarantee for the loan. Yeah.

Why do you think, what type of person or clients do you think attracts these types of associates that have this network? Because a lot of people come into us who may be in that situation, maybe they don't have that network? Maybe some do. So why did this person have that network? I would say because

A very experienced sponsor, what you have to have is someone who can get something done. And, you know, if something goes wrong, can think it through and push through it. A lot of sponsors will see something come up and then, you know, they won't really take it very well. And they'll like, they'll give up. I know it sounds like motivation, but it's true. It's true. Honestly, They will give up. For example, a bank comes back with terms in which you don't agree with, or they come back and they say no. Well, one bank may say no to some underwriting terms and another bank may say yes to. But some sponsors, once they get no from three or four banks, they'll just say the deal's done. I don't want to continue to do this. Maybe they don't have enough time or money to continue the deal. But this particular sponsor for eight months, like eight months, like entrenched in getting this deal done, like no matter how hard it was or how long it took, no matter the structure, like right on it. So eventually we went through, I would say through maybe five initial corporate structures and then 10 financing structures. We went to different financing groups, investors. We started with LP equity.

We realized, well, LP equity may not be a fit. So let's go for a debt transaction, so on and so forth.

By the time we got said and done it took about eight months but a sponsor that's willing to get that done is usually a sponsor in which investors are willing to back because they'll see that you're willing to do what it takes to get it done yeah and i find that very nice yeah yeah and when

I when i flew down to meet cody that was exactly the the energy or i guess the behavior that i that he said as well uh and we saw it right like we saw like i'm going to get this deal done with you or without you, you know, one way or another, like there's a lot of determination. So definitely, I agree. But okay. You know, offline, we mentioned different behaviors that people need to have or different things people need to have in place for them to actually have a successful acquisition. So you spoke briefly about the LOI and what type of business should they target? How much money does the business they target have to make for somebody to do a successful acquisition? if you could just break that down for the audience. Okay.

Now, if you're doing a small to medium business, lower middle market, okay. So let's just do $1 to $10 million. You're doing a business acquisition between $1 to $10 million. Let's set it at $5 million. You're buying it for $5 million. The bank is going to ask that the company make $5 to $7.5 to $10 million. Right? Revenue. EBITDA can sit around 30%, 40% of the actual revenue. And the bank is still willing to finance that because some groups will finance like 3x to EBITDA.

So, for example, if you are doing $5 million,

And, you know, let's just cut that in half, $2.5 million in EBITDA, and they're underwriting to 3x that, that's $7.5 million in financing on a term loan alone. That's enough to acquire this thing with debt, but they're going to ask for equity, so on and so forth. Either way, usually between 30% to 40% of the EBITDA margin is what's required to, you know, acquire a lower middle market, service-based business, HVAC, roofing contractors, general contracting, plumbing. You want the trades. Let's do that in one group. You said metal manufacturing. You have your manufacturer's heavy industry. Because they're heavy assets, you can structure it a little bit differently, but they're heavy on assets. You have asset-based

Lending facilities. They're going to do 70-80% of the heavy assets.

From there, you go to a separate group for the revenue. This is like a leveraged file yeah um so on and so forth again it's the business you're looking at is it service-based is it asset-based and from there you pretty much create your financing product for it i would say

Okay okay okay and there's some good things to break down there because basically what you're telling me is so you you're talking about what 30 percent EBITDA margin so that's to be a 30 percent EBITDA margin i guess if i were to uh oversimplify for you know for those who aren't familiar to this business, similar to profit, so in and around 30% profit for lack of better words. I mean, it's not profit, but the purists would say EBITDA and profit are completely different, but just for the sake of simplicity, 30% profit margin, that's number one. And going back to what you said earlier, we're talking about 20% of the net worth of the target business you want to acquire. So that's number two. I guess the backup option to number two is if the person doesn't have, you know, the network themselves, they have to have that in an associate or a partner or a friend that can bring it up to the table. You know, that's a backup option to number two. And then now you mentioned different industries, right? You mentioned a little bit about different industries. What industries, what is needed depending on the industry, if you can go into that yeah yeah i would say um it really depends on you know how defensible the

Industry is yeah well um some groups will only underwrite service-based um again general contracting and trades some will only underwrite like restaurant-based yeah you know you have food and beverages of food related industries you have some that will only do heavy manufacturing in industrial like oil field construction or for example um i don't know well digging Like there's a lot of industrial applications to some of those, let's just say, exotic type companies. I would say sector by sector, the main difference is whether it has assets or revenue, whether it's a defensible industry or sector. Is the IP defensible or is it easily replicated? For example, if it's a software company, AI has made the multiples in software companies significantly lower because you can just churn out what they have. So because of that, the IP in which was valued as defensible no longer can be marked down as defensible. So now some groups are not willing to underwrite to the multiples in which they were on software. But heavy industry is a little bit different because you only have so many tradesmen. You only have so much of a pool of talent, so many machines. it's going to take a certain amount of years to get more machines online, for that period of time, the revenue will stay around the same. So that's a defensible financing facility for a bank to underwrite. And that's what I would say is different

Between different sectors.

And then you have high risk, speculative biopharma. Like, that's venture capital at

That point. Yeah, because you have to go public before they make a dime Oh yes Yeah But like what type of assets So okay If a business I guess let break it down So if a business has assets what type of assets are the best assets to get leverage on What trade the best? And then if they don't, then if you could break it down. In personal opinion, I think real estate.

I've seen the most underwriting with real estate because it generates cash. It stays there. It doesn't really move. And from there, the market doesn't really change all that much. So real estate, from my understanding, is one of the best assets to hold on the books. And then depending on your business goals, I personally think holding heavy equipment for depreciation reasons is also a great thing to have. not only can you get financing against it initially but you can also write down the costs so on and so forth i think that um you know industries related to heavy heavy machinery are definitely good ones to hold for assets financing as well as you know for accounting reasons uh outside of that you have like aviation right specialized machinery you have like boeing for example you can get secured notes against uh bonds like you can get bonds against boeing listed in some jurisdiction and it's really financeable because there's only so many boeing's like there's only there's only so many airline companies so they can defend the value of their notes um i would say the the initial question was which companies which type of assets are the best to have to get financing if i'm correct correct um i would say yeah specialized heavy industry assets and real estate if you're holding specialized real estate assets such as airports or you know um assets that generate revenue from the public public investment and private equity type deals where you know you have public involvement in the airport but it may be owned by a private investor and then you use that airport financing i find that's also a great a great means because you have both sides of the deal you have public markets and you have private markets and i find that would be the best if on a large scale and just on your on your regular scale there's equipment

And real estate i would find right right but when we look at um it's funny we look at our activity let's look at our activity and compare it because a lot of the real estate has been um we hear a lot a lot of talk from underwriters and from lenders and from investors about how they're interested in real estate but then when it comes to practice the business deals are getting done you know at a faster succession, right? So why do you think that is? Is it like a sponsor reason or is it just the volume of deals or just more small business acquisitions or what do you see?

I would say the returns are more attractive. Okay. Right. Like, for example, let's take a look at an HVAC deal and a real estate deal. You're underwriting a real estate deal to a 6.5 cap rate. Kind of know what you're getting. Yeah. You're like, okay, over this period of time, I'm going to make this much cash and have 4 tenants and so on and so forth. Unless I value add this thing while I'm doing development, These are my returns. With the business, you can grow it, right? You can increase its staff. You can reduce its costs. There is just, from what I understand, there's operational upside to acquiring and financing a business acquisition. I would find that's why businesses, well, let's just call them private equity shops, would be a little more geared towards it. I assume that they have financing facilities on their end that they're using to lend to us anyway, and they have to meet returns on their loan portfolio, so on and so forth. So they would rather go towards a deal where they can get out of the loan in two years. They're being paid X amount of interest per year, which is quite attractive for them. They have clauses inside in which they're not going to lose money on that facility specifically. And it's secured against over collateralized real estate. I'd find that that's like a great scenario for them. Yeah, no, it's really interesting.

It's really interesting. So let's look at the reverse. Because we're talking about what works and the types of transactions that can get done. But in retrospect, there are a lot of transactions and there are a lot of people that we work with and a lot of situations that at first glance we think would be a home run. But it really is actually completely the opposite. So what are some situations and deals that look on the surface, oh, this is a home run, this is nothing? But then when you take a look at the numbers, you see common repeated mistakes. I remember offline, for example, we spoke about not even, I guess, not even just the deal, but also how people, I guess, act in terms of, okay, you know, signing, you know, PSAs before LOI, you know, just different behaviors that are anti-patterns, right? So, yeah, maybe just take the lead and tell the audience about, like, what are some things that are anti-patterns in this business and things that just never work.

Oh, yeah. Okay. There's a few. Well, one, please do not go straight to PSA. Yeah, and break it down. Tell them what a PSA is.

A PSA is a purchase and sale agreement.

Basically you know you're binding not necessarily binding it can be non-binding but usually they're binding and you're binding yourself into an agreement where you may pay $150,000 for a piece of real estate within 5 to 7 days into escrow it may deduct from the purchase price but it's not necessarily the best

Decision because usually

In purchase and sale agreements you have a 40 day 50 day due diligence period right but an LOI gives you that anyway so why would i put 150 000 just to see the books when i could execute that free with an loi anyway and that that's essentially what an loi protects you from honestly from my opinion an loi is there so you can see what you're getting before you financially commit to it yeah um so that would be like the first first thing and then the second thing like you know about things that don't necessarily get done is uh i'd say biting off more than you can chew um honestly like just because the deal is big doesn't mean it's necessarily executable um if you don't necessarily have a

Track record of running multi-million dollar companies it's going to be very hard to convince

A bank that you can do that and um a lot of cases you are like for example one of the acquisition we did the the bankers flew down and met the guys directly they asked do you run these type of companies he showed them their company he was already running the type of company in which he had to show the bank he was acquiring and a lot of sponsors are going to go to a business in which They'd never run and then say, hey, I'm going to take off this $12 million acquisition. Even though the financing is lined up, the financing parties may not necessarily be confident in your ability to operate at a level in which they need to get their capital returned. If can you operate the business at a rate which you can return, for example, 15% on a loan, 8% to preferred investors, and then outside of that retain earnings to cover any cost for salary. You're not running in the red. like there are operators that have a track record of proving that so a bank like they'll look at the books of your existing company they'll see that you're able to do that and they're like okay let's throw money at this guy you can honestly do it yeah but a lot of sponsors will go and say here's a 20 million dollar acquisition i've never owned anything worth 20 million before but i'm going to take a 10 million dollar loan that you know i have to refinance within you know it maybe a 30 year loan but i have to refinance every five years so you have to renegotiate every five years And let just say the net income on the business is really thin It not a defensible industry Let's just say in seven years, there's going to be headwinds. That's where things get really, really difficult.

And I would say that's where it starts to not work, honestly. Yeah, I can see that. It's such an interesting and confusing business to a lot of people because there's some people that swear by the fact that people can buy businesses with no money down, no experience anywhere in the world on one extreme. And I'm just talking about like things that you just see online. And then there are others that are like, okay, you must, everything must be in place. You must be, you know, super experienced and you must have like, you know, half the cash or more to the table on the other extreme. So I like that you broke that down. So somebody who wants to do a refi because we discussed that a lot of clients that can benefit from closing businesses and buying businesses and raising money, a lot of it could be centered around people that need a refi. Talk to people who may be in a situation where they may need to refinance and how could they look at their – change their situation based on people that just need finance. What should they do about their situation?

Yeah, yeah. I would say take a look at the asset that you have in front of you. Of course, if you have real estate, then go to the correct parties for real estate. And if you have business, go to the correct parties for business. Usually, let's just talk about a real estate case. They did an acquisition with bridge debt. That's very common, right? Bridge debt, 12 to 15% on the acquisition. That's expensive. It's not cheap. And a lot of people do this for development. They have bridge debt for the first two years and they would like to refinance out of it

Before development is finished because they're going to have a huge chunk

Taken out of them. Some people haven't sold enough units to cover the cost. So they're in a position where they don't have enough to make the call. They don't have enough of a sinking fund to make the call within 24 months for the bank. So they would like to refinance out of that position beforehand. I would say that's a quite a difficult situation, to be honest, in development. And I don't necessarily have – it's a case-by-case basis. I wouldn't have an answer. But my ideal scenario is if you have an equity investor already, call some capital from them. take out the debt immediately because you don't want to default on that. Make sure you have enough of a sinking fund to call any of the capital calls from the bank first because you need a good credit rating. That would be like my first payback all the debtors.

Equity investors can come second because you can always, with a good credit rating,

You can always get more debt and then pay off the equity investors. You can continue the cycle, but you should grow the company so you can get yourself out of the cycle. So you're in the debt trap. Yeah. Right. You're refinancing equity to refinance the debt. That's what continuation vehicles are. If I'm being honest with you right now, people are in bad positions with some of their loans and that's what they're doing just to keep the party going. But essentially, that's like one of the main ways I would say to get out of that. And then let's just talk a business. you have a business and you know you're making a million dollars a year you had a bad couple quarters right one of your one of your main sales guys decided to take all of your best leads and then all of your five of your best staff and go right and then you have maybe 15 more staff under you but now your pipeline is dead for three quarters yeah you replace them but your quarters look bad for the first two quarters. After that, you're skyrocketing again. From a financing standpoint, they're going to ask, why did it look bad for those first two quarters? They're going to also ask, how can you defend the company from that again? I would say they have to see some operational confidence in the sponsor to work through something like that. Yeah. It's an exotic situation, but it's true. Right. You might put non-competes. You might put, you know, agreements in where you cannot exit to a target firm within a period of time of working on a transaction with that firm. For example, if the investment bank is underwriting the underside of the deal, you can't exit with them while we're on the deal.

Like, that's just crazy. Yeah. Yeah. Yeah. Because like it's just like, you know, it's like somebody who for lack of better words for the I guess for the masses, somebody is in the fight with their girlfriend and then the friend of the girlfriend takes him as his new girlfriend and then it's like, yo, we're just in the fight. We're not done. So it's kind of like that. It's like you have to have respect for the initial point of contact to that.

Yes, yes, absolutely. That's like the dealmaker's bro code,

So to speak. Honestly, I would say in investment banking

There are unwritten rules and there are unwritten bro codes. like in in ethics you learn not to steal people's clients yeah yeah right honestly and i would say in investment banking it's kind of like that like if someone knows that you've done something they're like they're just not going to work with you yeah right i've i have picked up calls where i called this one bank and i was looking for another guy and the guy on the phone told me not to call the other guy because they were shady i don't even know the other group but that's the type of thing people will do yeah right so it's very important to maintain a really good reputation honestly just be ethical like just be a good banker get the things done and make sure like the client gets the best terms and if they don't make sure that later they get the best terms because sometimes of course you have to get the deal done and there was real money on

The table in that right because like that was a deal that actually closed and and so it's very interesting because it's like you have to really know and build a i i don't want to be cliche but build a relationship with the prospective financier because I mean if they I mean if we didn't trust him or if there was something like that you didn't trust then that would have been like months and months of waiting until the next transaction closed right yes so because I remember everything in that situation so so so tell me like you've you've been put in really I don't want to say stressful but really kind of like situations where you had to think on your feet and as i say to you privately that's where you shine the most so what are some situations where you know you're you're working with the clients helping them you know raise funds and you had to be put into a situation where you had to think on your feet and what are some things that you learned from that okay um i'll

Use an example uh for example let's just use the acquisition in which we closed honestly uh it's public news so initially one of the financing parties backed out because of x reasons now because of those reasons you're pretty much put on spot because if you wait the deal will die you like time kills deals so you have to get things done immediately um after that phone call with the financing party i just had to find out the why because usually there's a way to work around the why yeah the bank was incredibly interested in the deal yeah but i and we initially found out there were specific clauses in which they didn't like and then we just simply negotiate those clauses yeah um i would say negotiation is like one of the main things in which you have to you know specialize in to get out of those those situations you have to find out the why like why are you actually saying like because usually people say all this deal is not good. It doesn't reach our target for investors. I understand. But may you have, may you give me more of an understanding of your underwriting criteria? Is it the IRR? Is it the Is it the preferred return? What's actually making you say no? And the same goes for the banks. Why? It wasn't the financing, right? So if it's not the, you know, if it's not the return to the business, why is the no?

And can you structure something around it?

When you're put on spot like that, it really shows whether, you know, you're competent or not necessarily competent, but you can think on your feet or if you can't and, you know, the deal would die. I would say also it's like how bad do you want the deal to get done right if you really want the deal to get done if you don't know something you will refer to someone who does you'll ask this is a situation what have you seen in the past to get around something like this um and then you know they'll give you an answer in which they've seen if it's impossible to get around then it's simply impossible to get around but if there is a way then go and find it and then execute it no matter how difficult unless it's of course like the return on investment is lower than what you're doing then yeah make the management decision um but that i would find that you know difficult situations it's kind of like um like goku for example yeah like the harder he trained the the bigger the bigger he got yeah and it's the same for banking like the harder the deals you get you know i initially started with the foreign acquisition i gotta say that was very difficult yeah but that made the domestic acquisitions way easier yeah i already understood the underwriting criteria by then yeah so i'm like okay we can just jump in and do this we no longer need to work with international regulations it's just domestic us underwriting or almost like the

Vegeta like those who know anime know anime but it's almost like the vegeta like uh gravity chamber yes it's like for those who don't know it's kind of like you you train under a heavy gravity and then when you go out in the real world then everything is like oh everything's like so light yeah yeah very light yeah yeah that's what that's honestly what it feels like especially um

I would say during deal crunch. Yeah. When you're like, maybe for about a week, you're locked in making sure that the models are good. The data room is good. That you're reaching out to the correct parties who can actually underwrite the tranches in which you're structuring for them. Making sure the corporate structure is in place. That the sponsor is ready and that they have all their financials. That the sellers have all their financials. Then you coordinate. And then with international, you have time zones. Makes it seem way more difficult. Honestly, that makes it a lot harder. because people are sleeping when you're awake and when you're awake they're sleeping yeah so when you request files it'll take 12 days like not 12 days sorry 12 hours to a day sometimes yeah so it like when you request a file expect it to delay the deal by a day imagine you need five files or seven files or 14 files delayed the deal two weeks just by requesting files so it's like you have to be once you know these things you're very vigilant like initially you ask all the files you need to get it underwritten initially or get initial terms from the bank from there they can get really granular about what they need you can go back to the client with what you need um that's basically

How i would structure it at this time yeah and so speaking talking about it we're talking about initial things that are needed so you know a client's so because you know again you know you're the head of capital markets and you know you you lead some of the clients in the onboarding and making sure that they're set up for success and everything. So somebody has an initial call and you're on board a client. What are some of the things that you see that you think lead to success? And bear with me because, for example, here's an analogy. Ten years ago, I played football for a university. And when you look at a team, you can almost tell if they're going to win by how they present themselves, by how organized they are, by how they show up and how they have an attention to detail to certain things. How do you see new clients that work with us? What are some of the telltale signs that, oh, this is going to be a great deal? Oh, this is going to be a difficult deal? Because I bet for you, there have been times where you thought that something would be easy and then it was way harder at the last minute And then vice versa or what? You tell me. No, no, absolutely.

What have you seen? Again, not only sponsor willingness, but sponsor knowledge to the industry in which they're trying to enter. If they're trying to enter a super specialized industry in which they don't have recollection in, then that's going to be way more difficult, not only to the financing side, but to sell it to investors.

That's what would make it really hard.

If they don't really have anything to show financially. yeah um also like if it if their financials aren't necessarily put together whether it's taxes or personal financial statements that'll also make it significantly harder not only for the banks but but for investors you have to organize your financial life to be honest but this is for the sponsors out there you have to you have to organize your taxes get your personal financial statements in order make sure your bank statements are in order yeah um and and banks because they will be requesting usually six months of bank statements two years of tax like that standard so make sure you have those um and and that's one part of the organization then you have the business right you have two years financials month by month whether it's balance sheet income statement or cash flow then of course you have invoices um usually they're not as important as you know the bank statements because we can just derive from financials and bank statements and then of course if they really want to get granular they're going they're going to want to see invoices and master service agreements with different vendors um they're going to ask for usually the financing side of a business not necessarily the corporate structure you know if kelly is management you know they're not necessarily asking for like an org chart sometimes they will if it's a big company but they're usually asking for the two years of history of financials can we verify this could we build a model off of the files in which you're giving us if the answer is no if the answer is you know i have the yearly financials but i don't know how much it made month by month you know the bank's going to ask well like how can i derive you know how can i derive these figures can i see bank statements you're going to ask for the bank statements in which derived those yearly balances from and if those bank statements don't match the yearly statements then there's an issue so so just to interject is it the so they want to buy an

Asset you're talking about their like the person that wants to buy the business their own business or are you talking about the target business or are you talking about both both honestly um it

Depends on how deep the acquisition is if they're using the business as collateral for the loan then they're going to look at the books of the business of the seller of the current sponsor sorry and of course they're going to be looking at the business of the seller so for example we're working on that that one transaction in texas where the books weren't necessarily put together very well and it was very difficult to get financing because like they're like well we need this this and this but for some reason no matter how much i ask i can't get my hands on those files well the bank is just like we need this we can't proceed well we're kind of stuck yeah so that's why i talk about organizations so deeply because they will ask for the 2012 2026 2023 2024 2025 taxes they're gonna ask for that um sometimes i think now they might be asking starting to ask for the 2026 taxes yeah so if you know start getting your tech like people have to you know, if you're going to acquire a company, they're going to ask for stuff like that from the sponsor and from the business. And then of course all the financial statements leading up to that And then you know organizational If they are really interested then they going to get granular on the organizational structure how does this company actually make money who are the key members so on and so forth they going to ask more detail but overview is this financeable does the dscr reach 1.125 or yeah does it does it reach a threshold in which

They can underwrite yeah for those who don't know if you could teach them oh yeah yeah dscr is dead

Service coverage ratio really does the i assume net income at that point because they're probably going to be underwriting to that does that reach a threshold in which you can cover interest and principal payments over the term of the loan um and usually you know the the multiple is how much so of doing so like for example if it's higher of course you can cover more payments um and you know banks usually look for one one is like the minimum as in you can cover all your payments but like like just cover payments but they need a little bit more than that the company's growing 1.15 there's a little bit of balance accumulating just so in case of a downturn you can still make

Those payments yeah yeah because the thing is like that's i was telling you offline like like somebody they want to raise money and they don't have their accounting done they don't have a money raising problem they have an accounting problem somebody they don't have a you know their organization you know set up properly they don't have like their you know their holding company or are companies structured properly and their franchise taxes paid to Delaware or wherever they're set up, they don't have a money raising problem. They have like an organizational or legal problem. So it's not just about raising money. It's about solving the problems that are preventing you from raising money. So I think it's something that we see. So let's see. So somebody, okay. So we covered quite a bit. So let's say somebody comes to us. we want to make sure that they're set for success. And even those watching this, they basically have to have strong, let's call it, they have to have a certain net worth or they have to know somebody of a net worth of at least 20% of the acquisition price of the businesses they want to buy or raise money to buy or assets they want to acquire. That's number one. Number two is, you know, around, you know, 30% EBITDA margin of the target companies, you know, that's a good safety blanket, you know, in general. and ideally you know they buy something that has some assets some hard assets and what was the term that you used hard um like i use collateral collateral yeah right but the types of assets that oh equipment uh they are usually equipment heavy specialized ip um for example you know you

Have a company it's not necessarily something that's huge like a plane that's valuable in terms of like metal but whether you have the patent to create tylenol yeah i assume that patch is incredibly valuable yeah so so that in of itself the the ability to produce something in which can you know produce cash flow uh as well as something that in of itself uh banks are willing to finance uh there's actually this youtube uh channel called Finance Kid all right and um on that youtube channel he was talking about commercial ip financing and there's this i think a specialist on there and that's why i'm talking about this specifically um it's a very good asset class to get financing against um again against stocks liquid portfolios of stocks bonds etf financial products securities um i would say honestly it's kind of overlooked um in financing structures i believe that if companies put a you know some assets or some cash into you know equities and decided to use that for financing without offloading their equities you could get transactions done significantly. It's a personal opinion, but they could get transactions done significantly faster because banks are willing to underwrite public equities that are easily sold. And

Not only that, that acts as collateral for loans, so on and so forth. I would find those

Are the best liquid, valuable, not necessarily, they don't have to necessarily be easily offloaded, but something that can be considered valuable to a bank in one way, shape, or form.

Right. It makes sense. And I'm painting the full picture too, because they also have to have experience. If they're looking to acquire a target, it's best to have experience in that sector. Yes. So, like, you know, Sabrina Media, Cody HVAC, you know, some of the past clients I worked with, you know, I worked with a client called Henry way back in the day. Henry, he was senior home care living, you know, so different people at a did real estate and he also did car washes. So people have to know what they're doing and be have some sort of like vested interest in that sector. so is anything else is that what everybody needs to be successful i would say like that's pretty

Much the general formula you can build off of that in multiple ways for example venture capital are willing to finance companies with zero revenue simply because the idea alone in itself is valuable um so that's also more niche less of an asset class for it yeah i'm pushing me done i'm

Pushing them away though yeah like yeah it's just man like it's either an upfront consulting fee with that type of business because you know even venture capital themselves say a lot of deals

Don't close so with that type of industry honestly you should take upfront consulting fees if you want to take equity by all means because imagine consulting for Anthropic and taking shares when it was at three thirty dollars a share yeah yeah they're about to ipo yeah they just got a 15 billion dollar financing facility it's insane yeah so like i mean i can understand why people do this but it's risky.

And you're not you're not Anthropic. Yeah, exactly.

You know, you're not literally a company that says

They'll be the last company on earth. No, no, it's not. It's going to be rare.

So in the event of that then of course, you know, if that's your niche then no hate at all. It needs to be done to get innovation but I personally find that it's a little bit difficult to get done. I would rather work on industries that are, again, defensible. You have, you know, service-based businesses. You have to have HVAC. We have ventilation right here. We have plumbing in the building. You need that. Those are companies banks are willing to finance. Those are companies that lots of people know how to run, not only run, but actually do the job. Let's just say one day for a smaller company, for example, usually S corporations, you have the owner running the company. And usually for those acquisitions, it's a little bit more difficult because when you buy, you're kind of buying a job. Unless you're able to throw the staff in to run it, they may have clients and then you're rolling those clients into your portfolio. That's understandable. But essentially, you know, if you're one sponsor who's not running a company and you're buying a lower middle market company that requires a sponsor to work 24-7, you're essentially buying yourself a job. So the bank is going to ask if you have the experience to run it, because if not, then the company will do well. Or you're a company that's able to roll into their existing portfolio. so that they're very confident that you just either take their clients, structure an asset purchase agreement, not even stock, and just take the assets and the IP and the clients and just roll into your portfolio, so on and so forth. You can structure it exotically. But I would say you can have a good idea and get a deal done, but it's going to require determination and motivation. And, like, again, even if you don't have the ability to finance it, find someone who willing to and find someone who actually believes in the vision And even if they don want to put the money up themselves then that where you go to capital markets If they have the net worth for it then you can find a loan and then structure the loan as a JV agreement with the company, so on and so forth, and get really granular. That's like determination and motivation are honestly things that will get a deal done. Again, the financing has to work.

I totally agree. It's weird because there's like a group of people, right, that are like, okay, if I already have money, why would I need you? Why would I need to raise money if I already had it? There's this class of people, right?

And then there's this other class of people that are like, okay, if I, so maybe, okay,

They don't have anything. And then they're like, okay, if I had like 20%, then I wouldn't need you in the first place.

And then there's this other class of people that maybe they have even 100% of the cash

Like in their coffers and then they're able to just like do whatever they want right they have enough so where's the gap because the way i'm seeing it i'm seeing it as people that have something that basically want more because no matter how much equity somebody has or how much network somebody has there's going to be some that you know a lot that's out of their their um there'll be there'll be some that's out of reach yeah so who exactly are we speaking to here like people that want to raise money that already have like let's say they have you know six figures saved up and then they have like some associates that are you know ahead of them and then you know maybe they want to acquire more uh or or what like tell me i would say uh asset rich cash poor um you have a lot of assets but you don't have the ability to go utilize them to go and do

Something right i i own a multi-million dollar mansion right you know i have i've like you know i'm paying down the mortgage on it but how can i use that mansion to something useful because just a mansion at the end of the day i could throw parties yeah right and i don't know if that's necessarily profitable but i'd rather take the three million dollars worth of value unlock 1.5 million use that as the cash towards buying a business and then all of a sudden i've unlocked three using three million i've unlocked something that gets me cash right so that's the type of sponsor someone said at asset rich cash poor very well said um that's like a really good subset yeah and i would say another subset you um and a client who has a business but unfortunately again they had bad quarters but they decided to take out a loan but this loan is called merchant cash advance yikes you know the interest rate is not necessarily uh positive right and to pay off that cash advance

They got another cash advance ah scary let's just say that happened uh five hundred thousand they

Put off seven hundred thousand with it but that's another another lender because you know they don't necessarily care they're like you know what you have invoices and of course they love their payments Right. So now that's another scenario of sponsor in which would come to you. They say, listen, we have a ton of expensive debt in which we don't like. Not only that, we've leveraged so much cash advances that banks aren't necessarily willing to lend us term loans because of our DSCR. are. So now how do we get out of the situation? We're not in the ability to grow the company, right? Because that's going to take time. In between that time, we're still going to be making these interest payments. So how do we structure this? And, you know, and in this case, what was done is that it was carried out with equity and equity, you know, took out the merchant cash advances. And then from there, it's not current paid, but rather shares. Then from there, you know, a term loan replaced that, of course, with significantly less debt, because the books look a lot better on paper after the equity takes over the debt of course yeah the company's not doing current pay equity so the dscr magically boosts now now a bank is like okay all of a sudden the term loan works then that takes out the equity and all of a sudden you're in a better position that's one way of looking at it let's just say you took out a bunch of merchant cash advances low on cash but you have a ton of assets well a bank may give you an asset-based credit facility

And then with that credit facility it's at six percent versus i've seen 30 percent merchant cash advances honestly so six percent or 30 well i've seen even 50 percent and that's yeah like that's like criminal it's honestly like tony soprano you went to him and said i would like

A loan please like honestly so like and you would like to take that off your books you get an asset baseline at six percent and then you take them off yes you're paying six percent but that's better than 50 yeah and and that's big i would say those are like two great scenarios um asset rich cash poor or in a position where they would like to kind of restructure and get out of a bad position i would say are great scenarios um another scenario is like of course people get greedy they like to buy things um not only that companies like to expand uh they need strategic strategic talent i would say those are also great scenarios um really we're just helping them acquire a company yeah regular everyday acquisition and you know they have the ability to but they're running multiple companies they don't have the time to they would like to outsource their capital markets activity to us that's also another group um that i would you know i would say it was a really good type of client and then you can get granular from there and very specific but those three i would say alone are very good clients you see that's a good way of looking at things because

Um see the thing is right like you have people and this is more almost like somebody who has a sort of a dead-end job almost like and then they have credit card bills they're stretched out and they max out their credit cards and they're just suffering to pay their interest payments and they have an interest payments of like let's say uh 2k and then they take home like 2k so it's almost like a b2b version of that when they have a bunch of mcas and they have a seven figure per year business and they're paying all these mcas out um but essentially as my grandmother said like the game almost is like quote-unquote uh robbing peter to pay paul type of thing or taking money off your front pocket because if you look at it you're taking you're trying to find a way to raise equity uh to pay down the debt and you still owe people equity but it's structured as uh equity rather than rather than debt yeah because that seems to be like a pattern i'm noticing for the international deal and then for you know refining uh it seems to be just transferring the type of of money because there's this meme where uh like i don't know if you've seen this meme you know i don't really believe it but you know where there's like a guy who's looking at colors and it's like oh like red, blue, green and then there's like a lady on the other side who's looking at colors like fuchsia, salmon, hot pink and then she sees like literally hundreds of types of colors it's almost like the way money works almost because for those who are the uninitiated who don't know about M&A and capital markets they see everything as money or no money but then really you can see how you can have like preferred equity you can have common equity, you can have mezzanine you can have this one and that one so I think a lot of it is just for them to understand that those who are in that middle area those who are asset rich cash poor or people that have business partners that maybe they don't know uh how they can leverage them or use them I think you kind of bring everything together uh because it's crazy how theoretically people can do these deals themselves but why don't they it's because they don't know how to they don't know how to structure the it's almost not even like just illegal and so it's almost like a bunch of capital that has to be in the right place in the right time and then relationships to funders that have to come in at the right time yes and

Then the business that has to be sold for it to be negotiated in the right at the right in the right way at the right time so it just so many things that have to happen at the same time in the right way that it like a it like a 40 jigsaw puzzle you know absolutely absolutely that why it like you you could technically use ai as a lawyer but would you go to court with with that argument like i i wouldn't i would hire a lawyer right because i don't know granularly like like in detail what they're doing i need an expert the same goes for financing i may know how to get a loan from a bank but i don't know the entire capital stack i i did some people don't know you can replace debt with equity yeah and you know equity is not current pay like you're you're not paying it out monthly

Or quarterly they're just asking for distributions whenever you pay out the shareholders which saves

And preserves cash you can retain the earnings as well you're you're the operator you have the decision to do that um and i would say like people simply you don't know what you don't know yeah i if i don't know the law i didn't know that i could have i didn't know the fifth amendment so i didn't know i could be quiet that's what a lot of people say yeah so like if you if you just don't know you don't know and that's why you're going to go to a group in which can help you do so um i would say for you know some guys they run companies they know how to run grow clients sell clients into their company but when it comes down to buying another one they don't have the personal money to do it nor does the company have the money to do it so they're like but i'm making so much money yet i don't know how to go and buy this other company how do i how do i structure this yeah Then you say, well, you're sitting on a ton of assets. You have a ton of cash. You can structure this as an asset purchase agreement. You can go get financing against your equity and then go so on and so forth. You're able to now structure it with them because they weren't aware of how they could do it. It's really just making people aware and advising them on structures and execution, I would say. Yeah, and it's so interesting.

And I'm curious on your thoughts on the future because like so it's almost as if – so the thing is like AI, right? Like, you know, when things started getting popular, you would see some people are brilliant at using it. Like, some people, they would integrate it into their workflows. Like, we integrate it, obviously. Everyone should integrate it into their workflows. But the thing is, it's almost as if, like, large language learning models, or large language models, rather, they scrape the entire incident for all this generalist information. And then if you don't, you know, prompted rights, and you don't segment the data properly based on things that actually close, then you're just getting a bunch of average advice. You know what I mean? No, absolutely. Because most people don't have any money. Most people, they don't know what they're doing when it comes to raising money. And so it scrapes a bunch of average advice. And then when you actually go out to people that – these people use fax machines. You've seen this. Oh, yeah. Even when you call them, it's like they don't even know how to read an email. And that's where all the capital is sourced by. a few of these guys yes and it's like the same it's like the same guys over and over again and it's like they're like oh yeah let me shake your hand and they're just like call me on the phone like it's very they're very like low tech and just to the point so it's kind of weird where we're living in this weird kind of like juxtaposition where you see some people that are like tech tech maximalists where like okay yeah like i can do everything but then they haven't been able to raise a single cent so it's weird because it's like the money that you're paying on the tokens it's like if it doesn't translate to dollars raised or dollars made then then what's the difference so i think it's like a combination of like uh some entrepreneur says that like businesses are kind of like cybernetic organ i think even must said it like businesses are these cybernetic organisms where we have to take like the practical aspects of like you know just calling the guy on the phone and just yeah cold calling you know just right and then and then also like the tech aspects and combining them because i think some people they just do one without the other but what are your thoughts like where do you think the future is going you know the way things are going because we greatly accelerated like you know how quickly we're able to you'd obviously get results and move through underwriting so what do you see in the future and what would you know AI yeah

Interesting right um what you have is models that gather context and put it together yeah very successful at that you have models in which are able to do financial modeling you have clawed for for financial modeling as product in which they have right you you can obviously tell that some of the emails and what you get from people are ai generated yeah right you you see certain certain formatting right you have of

Course your classic bullet point list and em dash yes a classic tell that the email being sent to

You is ai and um you know i read through Wall Street Oasis and reddit and people that work in private equity and they're like i'm not very much of a fan of conversing with ai if i wanted to i'd just go ask it myself i'd like to converse with a human when i send you an email i'd find the way to actually get a deal done is to get to the point get to the point be clear don't use ai to fluff up what you're saying and sound smarter than what you are because ai for example people are talking about the tech industry forget finance for a second right they're like a guy's asking an it guy a question about his computer and the it guys like do this the person takes the email those in the ai they said but ai said this well the it guy works for the company he knows the machines in which you have right he he most likely knows what to actually execute the ai is going to give you a long and conversive list of things to do same goes for finance it actually gets a little bit worse because now you're working on financial models in which the the sense matter you have ai creating financial models let's just say a company makes a hundred thousand dollars a year ten thousand dollars per month right um not exactly ten thousand nine thousand nine hundred twenty four month one 9,872 like really different numbers let's just say ai overstates or understates numbers by 50 dollars right what uh a five looked like a nine or when dealing with yeah uh like a huge csv of data like you i do not believe that ai wouldn't hallucinate then you have people taking the output in which they have not checking it and then sharing it with banks banks are underwriting the models in which they're presented they're like why do the models not match the financial statements in what you presented to me. Then they're going back to AI and reprompting it.

Yeah, these are things that you've seen. I've seen this directly.

Not only does it, I saw this on LinkedIn, on Wall Street, it makes you look bad. And it's like when you work in some of the biggest consulting firms, people say, and I don't know if it's true, but if you hand the paper that's warm to the executives working on a deal, it looks bad because you didn't spend enough time actually making sure that the documents were correct the papers should be cold by the time you because you have to make sure that the numbers were correct that's proofread so on and so forth the same goes for the digital age if you're just churning out things that obviously look ai written it's like it's like watching an ad you mentally tune it out the same goals for the things that people are presented yeah you just sent an email blast with two three paragraphs of something oh we would like to acquire the structure because we think it's a really good fit for your firm and your firm did this acquisition before so that's why we thought this acquisition would be good you could say we have a three million dollar acquisition and we understand that you guys do private markets does this fit your underwriting criteria boom yeah like a VP would answer that just say yes it fits our underwriting criteria or no this does not fit our underwriting criteria

Yeah this is this is joke that I saw on LinkedIn where you would see somebody that would take that would talk to AI and then say, make this like short points, a giant paragraph and send an email.

And then the person receiving the email, they'll get a giant paragraph and then they'll

Make this giant paragraph a short point so it's like why not just get to the short point directly

Instead of instead of instead of conversing yeah i i would say that's like one of the the main things and it actually kind of separates the people that are good at their job from the people that aren't because i i would say it shows now because you have people spitting out like i actually saw it on linkedin a lot of the people that were underwriting deals in which i presented to them like on the money side of things where they made a linkedin post where it's like nowadays is here to stay they understand that but when they get a pitch deck in which they know is obviously generated by ai that not a lot of time was spent obviously like tailoring it to the transaction making sure that you know that it wasn't just churned out they kind of overlook it this particular linkedin post went very popular among the groups in which i've shared a lot of deals with and like i looked at the likes and like a lot of them are liking this so in my head my theory it was true people tune out it feels like you didn't put effort into this so why would i put effort into reading it um and that's why i'm like actually human-like interactions get you further

Calling the guy yeah because it's scarce and scarcity creates value then human interactions are getting more scarce so it's it's weird because it's like they've increased the scarcity of human interaction honestly yes by that it's like their human interaction is more valuable right it becomes

It becomes more valuable and you you kind of feel like you're not being sold fluff sometimes yeah i find that that's another thing ai does well someone who's not an expert in the field can now prompt and become an expert in the field yeah but when you're talking to a real expert then it does sound like like fluff so you really have to kind of limit to what you know and i'll say this for example for you're working on a deal but you're working on the accounting and corporate structure you don't necessarily know tax law but are like the ai is telling you that this specific tax clause says you can do this and this specific tax clause says you can do that but when you talk to the real accountant they're like actually that's wrong you're gonna have to pay tax the moment you sell this thing like no matter how you structure it ai is wrong right when you talk to the actual cpa it's like not correct if you went with that structure before going to a cpa thinking that ai was correct good like best of luck you're gonna get audited first thing like and then you're gonna have to get an accountant to fix your mess afterwards so one prompt turned into a ten thousand

Dollar mistake yeah well more than that because like like i've seen like even the um some situations with delaware setups and things like i've seen different uh tax laws one guy is like oh yeah that happens a lot that doesn't happen a lot and it's like i think basically the best way to know if an AI would actually be trusted is if it would have like a like a five quadrillion context window instead of like just a million context window and then it was like a robot that lived a lifetime of experience yes because I do think like Ray Dalio Ray Dalio talks about this a lot uh the the basically you have to rank things based on believability and then believability is how much you can trust somebody or something now now we have things that we can trust like AI right so it's like i guess it's based on it's just based on the truth the probability that what they're saying is true in a like both in the timely fashion like is this recent information and then is this something that the person or the thing has done and gotten the result doing for example an llm gets trained on a bunch of data from reddit and and like google search results right but has it actually gone out and done the thing itself it's like no so it's like okay um But if I talk to somebody that uses that tool and a human that actually did the result and got the end result that I'm looking for, then that's probably the highest probability of me getting the thing. Because what I would like to do is, you talked about those emails. Yes. If somebody had, let's say, even us internally, what if we took all the deals that closed and then we trained an LLM based on that data alone? It still wouldn't be enough to close a deal. It would be way better information that it would output, but it still wouldn't be enough to close the deal because there are just so many different moving parts in reality. I would say there's a lot of different moving parts, and then you have different jurisdictions, you have different regulations, regulations change, underwriting criteria changes.

People that you talk to that worked at firms no longer work there, and maybe the firm is dissolved. I would say outside of that, you have the same general information in which most AI has been trained on. This is the general underwriting criteria of a private credit group. after reading through your emails, let's just say you had an email blast to 10 investors. One says, you know, I'll do 10% revenue-based financing, you know, 10% of the yearly revenue. Another group says, you know, I'll do 20%. I go to another group in Florida, they'll say I'll do 10%. I go to another one in Arizona, they'll say I'll do 17%. Average is around 12. So you can understand that most groups will do around 10% to 12% of your yearly revenue. And that can also be prompted from an LLM.

Yeah, say that again to the audience. That's an important point. Yeah, yeah. 10 to 12% of what exactly? Like your yearly, the yearly revenue of your company.

Like, for example, you're throwing off $10 million. Yeah. Most private credit groups are going to underwrite to 10% of that amount. Like they're going to give you $1 million around 12 to 15% interest. That's for acquisitions. And that's usually sitting on the capital stack as junior capital unsecured. Cool. Probably behind senior than above equity. If there is mezz, then maybe. But you wouldn't. And a lot of structures you don't really need MES if you've got junior, unless it's a really big, big transaction. And then, of course, you need multiple facilities. But in that case, that's basically what we'd be looking for. You know, I would find, yeah, yeah, honestly, that's primarily it. Yeah. It's a good point to add.

And what you're saying is huge because there's this book that came out. I think you should check it out. It's really good. It's called The Algorithm. it's so elon musk he hasn't been really known as being a tactician and a lot of people haven't really gone to elon musk to learn like uh you know specific tactics uh more just like how he like i guess people study him uh from afar uh like i think walter isaacson studies him and has that book on him but the thing is that he made this video and you should really this is the best one of the best videos i ever watched uh honestly in my life you should we should check it out so he's just like walking by a bunch of spaceships behind him and whatever and then he's just saying yeah Yeah, man, I made so many mistakes, but then I just finally figured it out. Basically, there are these five steps that I – this is basically how I solve any problem. It's like one is I remove all requirements, like any requirements that is – like I question every requirement. I just assume every requirement is stupid. And then two is that I just remove steps. If I'm not adding back in steps that were needed to be in, then I'm not removing enough steps. Just remove as many steps as possible. And then three is I simplify and optimize. So I need to simplify and reduce the complexity. And then four is, you know, I need to do things faster. So it's working, do it faster. And then five is automate, right? It's like, okay, it's working to automate. And then the issue that he said was, I've done all these steps in reverse. I've taken, we had like a weird like insulator mat in the Tesla, in the Tesla Model 3s or whatever he had at the time. and then he's like this thing sits between the battery and like the cabin and the fire department team says that the acoustics team it to lower the sound in the cabin or whatever and then the acoustics team says that oh the fire department team said oh it to reduce the chance of fires But then really they both saying that it does what the other guy is saying and basically it does nothing. So he accidentally went through the process of trying to automate, create robots that can create these like pads. And then he tried to make it do it fast. And then he tried to like simplify how they work because they're like, oh, these things are expensive. And then he's like, wait, wait, why do I even have these? Let me remove parts of this. It's like, wait, why do I even have this to begin with? But had he just gone and said, I don't really need these robot parts. I don't really need this part because it doesn't help with fire, nor does it help with cabin. I put my ear in the cabin and it sounds the same with or without the part. Then he would have saved a lot of problem because he said that the most common issue of a smart engineer, financial engineer, software engineer, whatever, the biggest issue of an engineer is solving a problem that doesn't exist. Yes. Right?

Yeah, absolutely. So the issue of a lot, yeah, and then bringing it back to the AI thing,

Is like the issue is that the AI is great at automating and great at speeding things up. But, like, you should be speeding things up and automating things that are supposed to exist. So I think the fundamental issue is, you know, and Pareto Principle says it, is that there are a lot of things that exist that you don't know what to focus on. And that's why, you know, many people are stuck. They haven't raised money because they're doing a bunch of things and they don't know what direction to go into. So if they just focus on a few things, they're the most valuable things to do. And then they automate those things, then maybe they can get, you know,

They would get way further success. It's like, I don't know, they're sending out email blasts for to, you know, before or like after they've put tons of money into getting the structure up. I think like, for example, you should have interest before you go and, you know, somewhat targeted company. yeah example like yeah you know i should go to investor and say hey if i were to target this company would you be interested in coming in no then i'll go to 10 other investors get the same answer well if i decided to if i got the same answer great if not let's just say three of them

Said yes yeah if that's enough of a percentage for me to take the risk then i'll go to the company

And start targeting it i'm not going to sign a psa because i don't want to get financially committed until i see the books yeah but let's just say i like the books and sign the psa then go back to the same investors because i already had them circled yeah but people will do it backwards they'll go and they'll spend tons of money targeting this company getting it ready so on and so forth now they're ready but they don't have the financing ready yeah you don't have the main component to get it done ready why do people make so many people make that mistake

Yeah like they they go and try to raise the money before they know where the money's coming from and they're like okay let's get the money in three days yeah no no it doesn't make any it

Really doesn't work like that anymore a lot of investors are no longer blind pool um so you can't Just say, oh, I have this fund and I'm going to go target five companies and give me 30 million. They're like, no, not necessarily no. It's unless you exited from one of the big firms. Not many people are willing to invest in blind pool funds unless they see, of course, a history track record. Or you've exited from a firm where you have connections in that firm where they may lend to deals in which fit the underwriting criteria, so on and so forth. About who you know in some cases. um but but in this case um you know it has to reach specific criteria to to get done yeah in

A lot of cases yeah yeah yeah no i totally agree and people make that mistake so okay um segue because we spoke about that 10 financing thing right 10 of the revenue so we know what somebody needs to come in you know again you know 20 like usually 20 net worth either in you or somebody who you know, get those people together, find a business with 30% profit margin or EBITDA margin, for lack of better words. And then from there, you also want to make sure that you get people in place that are in that business. Because you don't want to be somebody that doesn't understand that business, because then you're just wasting your time twiddling your thumbs when a person comes around and then tries to help you close the deal, right? Because it's like, oh, I want to buy an HVAC business. I'm a plumber. So that doesn't make sense. And then let's talk about, so we have those requirements in place and obviously being determined. Yes. So then let's talk a little bit about the actual deal structures really briefly as well. Because as we start to wind down here. So deal structures, because the one that we saw success in is seller notes. Almost always a seller note. And then there's this rollover equity thing. We can get into that. you know there's obviously like the loan that we get to buy the business yes and then barely any sponsored down payment we barely see that because usually people just get loans these days in this market but yeah just maybe just break down like how a deal actually gets done yeah yeah absolutely

Um well i would say the most common financing structures are of course you kind of said it out loud yeah yeah and break it down like sort of you know uh you're buying a company the seller is showing confidence in you right they're willing to say you know what pay me back over a period of time because i believe that you can either maintain the company to keep it as is or grow it so i'm willing to give you a percentage of the company 20 million valuation we'll give you a 10 million dollar seller note so 50 you negotiate interest i'm going to do zero percent interest for easy calculation and um that's basically what a seller note is it's just a seller you know it's like a seller a lender a seller's acting as a lender for the transaction and you know portion of the cash they're essentially putting up on paper for you um i I would say seller notes are a great way to create synthetic equity on transactions. Of course, you know, SBA underwriting guidelines allow seller notes to take place. As a matter of fact, but the difficulty is SBA guidelines discount seller notes like, you know, up to 50%. So, you know, a seller note may not always work for an acquisition structure. Just because, you know, some the difference between government and private conventional loans, some will look at seller notes differently than others. um and then and then you have like of course you need 10 to 20 of the equity now i say sponsor equity but that is in of itself something that you can kind of manufacture and engineer sponsor equity on a transaction can be from the firm in which the sponsor owns sponsor has an llc the sponsor but the sponsor can be a gp and a gp can be an entity so let's just say the sponsor isn't necessarily cash rich but the sponsor is able to get a loan that could like a $300,000 loan on another acquisition that $300,000 acts as equity even though it's debt financing some financing parties would like that disclosed others don't necessarily care for a lot of the data center underwriting it depends on the groups some have taken a little more risk and don't necessarily care where the down payments are coming from but if you're looking at more heavy industries like trucking they really do care where the down payment comes from like trucking for some reason is like they're really strict on that so sector by sector that's sector by sector yeah i would say i wanted down payments coming from yes i mean it's also on this i think it's also on the um super quick tangent which is important are you going on a platform or are you

Going on like do you have a long-term relationship with the seller or asset because i find that a lot

Of these deals like biz buy sell deals three ndas and you don't forget the financials you know you

Have to send a million proof of funds tons of proof of funds cash and bank accounts or they I even look at you So I find that there like a little bit of cloak and dagger with the platforms

Or if you don't have a relationship with the seller, what do you think? Yeah, yeah, absolutely. I mean, I would say the best things get sold privately. Yeah. Right. A lot of the best offers are private offers, honestly. Usually the seller knows a guy who's in the same industry and they're willing to just sell it to him because they know the guy and they're going to continue running businesses and they're confident that this person can continue to run their business quite well. I would say a lot of the businesses that you see on Biz by Sell, of course, the rare exception, there's a good company, are sales where the broker that the seller initially went to wasn't able to find a qualified buyer. They usually go to business brokers for the sales on Biz by Sell. So the broker, if they don't have anyone in their network, they're just going to go to Biz by Sell and list it. If it's confidential, that's why you see some of them or it's like a confidential listing here, here, and here for $5.9 million upon signing an NDA, we'll give you more information. I believe the deals that get to BizBuySell are the ones that not necessarily no one wants, but the best deals are already filtered from there. Yeah, and then the issue is that they wouldn't even do a seller note

Because why would they do a seller note when the buyer wants to make – tell me if I'm missing something or would they do a seller note because I don't think that it's in their best interest to do a seller note on BizBuySell because it's like, doesn't that lower the value of the...

In a lot of cases, you know, sellers aren't necessarily looking to do that. I don't know, people aren't creative, right? A lot of people are looking for a complete cash buyout. They're not necessarily willing to do rollover equity or something creative and, you know, seller notes and warrants and buyouts and earnouts and so on and so forth. They really just want, hey,

Pay me a million dollars for this right now.

A million dollars today is better than the next day. I'll be honest, you're a creative guy.

And that's why I think you've done well in those situations because finance requires like a lot of like linear thinking for like the numbers and the books, you know, but also requires creative thinking to get out of the box to close like a deal that's really hard to close.

Yes but go on please please uh no absolutely it's like a seller may get a lower cash consideration if they're selling something for cash because the investor or the buyer may now justify how much cash do i need to throw off to get the money back in which i sold this for if the buyer is is financing this thing they're gonna ask for a lower purchase price if it's all cash yeah if it's rollover equity right you could say at 12 you can get 10 million dollars in cash today and then 10 million dollars in cash over five years but just by saying it's worth 20 million instead of saying i want 10 million dollars in cash today you say it's worth 20 million and then you say i'll give me 10 million dollars in cash today and i'll just take 10 million dollars worth of rollover equity in your new entity and then you can create even value of course comes with underwriting 409A evaluations so on and so forth but that's another way to do it you can get a higher valuation just by being creative honestly um yeah literally but i mean in terms of

Closing the deal though because uh okay so we have the seller note where the lender or the the seller of the business acts as a lender to lend some of the money so let's say there's a 10 million dollar acquisition i use 10 for square numbers uh you know they say hey uh we'll lend like 1 million you know and then get paid on notes on the profits of the business or the cash flow of the business there's another 9 million dollars that somebody has to raise uh then let's say there's like he agrees to like uh 3 million rollover equity so correct me if i'm missing something but you know he seems to basically basically he kind of retains that equity you know over an extended period of time um in one shape or form so that the the person buying the business needs less money down you know it's put into the deal exactly yeah exactly okay yeah okay so then now that's four million already raised just from talking just what i'm talking yeah you

Negotiated four million into equity by doing nothing yeah and it's real equity so this is

Very important like so really you know put this in in your mind for those who are new and then the other six million it's like okay you know um really really mentioned that 10 percent is basically quote-unquote guaranteed you know like let's say 10 based on the the revenues so let's say it makes not profit just revenue yeah usually revenue based financing yeah let's say it's valued on a 1x multiple it's a it's a it's a business that doesn't use any tech just all humans one x multiple that's another one million there basically guaranteed um so we have to raise five million pretty sure a lender and if that one million is that like where does that sit in the capital stack is that a senior lender um if it's a if it's a revenue revenue facility

Usually junior unsecured capital so it sits right below like senior uh senior secured and then maybe if they're senior unsecured if the junior agrees to subordination to the senior lender usually never but if there is that then you know junior would sit below it but senior and then junior would most likely sit below the senior security got it yeah the editors are going to draw like a

Fancy diagram as we're speaking but and um you know for those who don't know you know unsecured it just means that it's not secured to the actual target business so that's where the word security comes from like security as in the selling the security it's just like like unsecured means that it's just based on cash it's not based on like i'll take over your business if you don't pay me back with my interest payments so that's good and then the rest is like hey uh just find a loan for five million and make sure that the lender thinks that this guy isn't crazy and then deal done no

Um usually that's honestly yeah yeah the the lender likes the management team they like the company they like the collateral honestly usually term sheets are signed okay yeah so we know we

Know so in this entire video we know the type of person that is needed we know how you know I guess one easy way to raise a deal and if for whatever reason the bottleneck the way I see that's the thing preventing progress bottleneck or think present printing block preventing progress could either be oh you find a deal that they're not open to rollover equity or they're not open to seller notes or oh maybe the sponsor doesn't have a net worth at least 20% of the value or they don't know anybody open there over 20% of the value so they they're not able to get some of that loan. Then we go into that whole equity thing, right? That whole equity thing, the dreaded syndication, equity syndication. And it's not dreaded in the sense of it just moves slower. Cambridge Wilkinson, an investment bank I spoke to, I told you before, they closed with $3 billion. I can't remember the amount, but billions a year. They said, hey, equity moves slower than debt. So I've adopted that internally, and it is what it is. But I think if you find the right private equity, because it's kind of like the private equity version of the quote-unquote sexy startup that raises money is like a family office. Everyone likes talking about that, but people don't like talking about the boring deal mechanics that you just mentioned. But anyways, so my question to you is, you take that capital stack that we mentioned, all that. What's the thing preventing most founders from just getting that done? It seems really simple in theory, but why don't people just do that?

I would say, again, they don't know. Some people don't know that they have a capital stack. They understand they can just get a loan and usually secured loans. Yeah. Or they'll just go extend it with some personal and secured loans. Yeah. They don necessarily know how to even structure a capital stack So that why even some big firms will go to investment banking teams uh to raise money for these these projects uh simply because they they just don know how to do it themselves i would i would say another thing would be you know some people aren't necessarily you know willing to take the risk for example if you know it looks overwhelming to be honest some people like you have four investors to pay two banks to pay and that's before you pay yourself but you did this acquisition so you can make more money um so on and so forth like it's um they dread the risk as well i would say they they see what's in front of them and they're like do i want to go through this to get my end result some people the answer is no um so they're not able to get the transaction done yeah which is another thing about motivation it's like um it's not only when you get the deal and close the deal but post the deal you still have financing yeah you still have to pay them back you still have to run the company and all of that takes energy and time and I would say you need that to actually execute the deal. From a financing and capital stack standpoint, what most sponsors do not have is a first loss cash equity position needed to satisfy a lot of equity requirements, whether it's co-GP or JV equity. Yeah, break that down for the investors.

Oh, yeah, yeah, absolutely. What do you mean exactly by that?

What I mean is JV and co-GP really sound the same. In my head, they're kind of the same. But co-GP, general partner.

A general partner is usually the general partner of a limited partnership, usually the manager of the limited partnership.

Co-GP equity is a co-investor with that general partner. Some firms have a financing product that state if the investor, the GP, well, let's just say sponsor in this case, brings 10%, the investor, co-GP investors, will bring 90%. That is 100% of the financing equity stack. And that's a specific financing product. What I mean by co-GP and JV is that product, like a JV investor coming in with a percentage that you can't come in with to fulfill the full equity need for a transaction. And I think that that's something, in my personal opinion, the financing product that people should come up with would be like, you know, a product for that first loss position in exchange for management fees. Yeah, I've seen that. But usually they're only underwriting new funds, sorry, existing funds, not necessarily new funds. So I believe that, you know, it would be a great product to to underwrite first loss cash positions on new acquisitions with new funds, provided that they have security interest as well as the sponsor surrenders to management fees. But yeah, that's basically the structure and the product and usually what investors well sponsors or I should say investors depending on how they're doing it Don't have is that first loss position to leverage the rest of the capital to get it done

Yeah, well, I mean because they're getting that stack but then I mean in that like I guess that stack was kind of like Best case scenario the one that I mentioned here That's that didn't have any equity though, you know, I mean maybe they need like closing like maybe like okay like, you know 20k bucks you know just for legal or whatever and services and things like that but that thing that example so you're talking about the example where they need some there's some gap somewhere yes okay yeah okay and and i agree because when you say fund it's almost like a broker between uh the targets and then the actual cash yes it really it's like a fund manager is almost like

A broker but on the buy side yeah honestly they're acquiring or divesting assets on behalf of their investors yeah uh just brokers at a bigger scale i would say honestly uh they even call it m&a

Yeah mergers and acquisitions like it m&a brokers and they're really just but they get the operational

Side of course they're running the portfolios and then they answer to investors with capital calls and so on and so forth and yeah um oh yeah yeah i think um i think that's like the main thing that people are missing um just the either the track record or the ability to say to investor hey, I can put in the percentage to get this deal done. And if the answer is no, then prepare for a period of time to either source it from someone else or to convince the bank to extend the debt past what they should to get it done, or some creative way to find the capital to get the actual transaction done.

I totally agree. And I have one more segue, and then I guess we can do the rapid-fire section and then call it a day. But when it comes to people who just... like so somebody they pay thousands of dollars they're working with you and then you're helping them you know you know in raising raising millions of dollars um it's crazy that i'm even able to say this but this is actually reality so um but in doing that what do you want them to know so what do you want somebody who's working with you i mean you i guess like at a time of the recording you did have that conversation of somebody who seemed to be a really reputable guy really really good He seems like really, you know, he organized and seems like he knows what he wants. But in general, though, somebody's working with you. What do you want them to know? What message do you have for them?

What I have for them is really know what you would like to do, what you would like to execute. Don't necessarily pick an industry in which, you know, you can't find joy in. I would say it would make it a lot harder to just maintain the actual portfolio afterwards. I would also ask bite off what you can chew um if you don't have at least 10 to 20 percent of the ask don't necessarily target that particular business even though it looks good unless you have the ability to syndicate from other investors in which they would go to capital markets exports for I would really ask that you like the industry you're targeting you have at least 10 to 20 percent of the ask in your either net worth or liquidity both is even better and honestly have motivation and confidence that you can execute it and you you really just put the work into to executing it the humans are pretty strong and i believe that like humans are smart i believe that even with ai if you don't know something you can somewhat defer and especially when you're running a company and you have you have income you can hire consultants to come and help you run this thing um so you just have to put the energy in so that would be i would say another third step really really put the energy in um banks are going to notice it investors will notice it and if you can like prove that and show that to them not only in your past track record but in in the present in front of them there people will honestly be more willing to say yes i would say

Yeah absolutely okay and then let's say that they're working with you things are getting tense things are about to close they're not sure if it'll close or they're kind of in this like tense moment yes what is one message that you have to them um first breathe in and breathe out

It should be okay um in a lot of cases people are either sleeping at lunch or underwriting on pretty much taking at the taking a look at the deal themselves what i would say is if everything has been communicated and you're still stressed definitely just relax a little bit because usually um the grass is greener on the other side for transactions if the bank is taking a deep look at it they're interested it's not going to waste their time on something they don't want to underwrite. So that alone should instill confidence in you. Outside of that, I would say gearing your mentality towards that you are going to get this done. And in the event I don't, I have a backup plan. That would also release some of the stress in related to transactions. And if you don't have a backup plan, if you're in this, you've financially committed and you're underway, things are under underwriting and you're stressed. Well, then I would say just stay in communication. Make sure that, you know, your phone is on, that your advisor's phones are on, that my phone is on. So when a sponsor calls me, I can answer them. And if I don't have an answer, I can call the bank. Honestly. So that all, like, communication is very, very important for transactions. And I would say a sponsor who's stressed really just needs either someone or something communicated to them to ease their stress, I would say. Yeah. Yeah, well said, well said.

I definitely do think that I do want to double click on you actually have to believe that the deal will close and you definitely do have to have that belief and act in accordance because it makes all the difference rapid fire questions what is one thing that you didn't know about capital raising that you're surprised to have learned over the last few years how much leverage there is

Like honestly i i had no idea you could get up to like 90 financing or 95 financing i didn't think that was feasible like i i knew there was 10 20 but like how much leverage there is was the first thing um the the second thing is like how much money there is out there um there's banks don't really consider you like i didn't even know that first lower middle market was a thing right like 10 million dollars is considered small that was another thing i learned about capital markets which was insane. I didn't know how much money was just out there and what's considered big and what's small. That's something that kind of baffled me. And honestly, those are like the two main things I would say about capital markets that I really enjoy.

What is the, I guess, who's the, you don't have to say the, obviously the individual, but I guess, what have you seen in the smartest client that you've ever worked with?

I would say the ability to work through a difficult situation. One that's inherently complicated and revolves understanding multiple sides of a transaction and their industry, I would say. Something I would understand from the best client is knowing that what we're doing is difficult and results aren't instant. but also knowing that it will take determination to get it done. I think the best client is one who's determined but also knows how hard it is to get done because then they don't necessarily take your advice or knowledge for granted. And some people think there's instant results, but there sometimes isn't. I would say that's one great thing I see in a lot of clients. They can see the other side of things.

And that's why they came to you. They didn't know it themselves.

So it must be its own segment in which you have to understand. And just a client who admits they don't know something is honestly a client in which can be easily worked with sometimes, rather than telling you what to do. And then you have to do it, which is completely fine for a client to do that. But if it's not necessarily the best decision and yet they're dead set on it, sometimes it can work against their interests. Usually clients who can admit, I don't know about this. Can you advise on this? And then you give them the correct advice and then they move forward with it are obviously clients that can really, really succeed. It's a good point.

It's almost as if people don't know that they can be smart and not know something at the same time. I don't know if you're familiar with the Dunning-Kruger effect where it's like the more you know about something, the less you realize that you actually know. So good point. A client who wants to do a bunch of deals or a client that just focuses on one deal, what have you seen? Because there one client in particular like a lot of different deals How is that Which one do you prefer So obviously the deal flow is great Deal flow is great especially the deals that you can necessarily get on this buy

The deal flow is honestly great to have. However, your attention isn't necessarily focused on a transaction long enough to actually finish it. If you're rapid-firing deals within 30 to 60 days, I recently just talked to a private equity group,

And they said it takes 90 days to underwrite one transaction.

But they've shot over four to five within 30 days unless you have quite the large team and the sponsor has the financing capability it would be quite difficult to execute all of those transactions in a period of time yeah you you will have to hone in on the ones that you can do or that you believe that you can bite off with your existing expertise network or financing capabilities and I would say I would prefer a client who kind of not necessarily one or five but maybe one or two or one or two because usually they're related usually they're similar size similar sector they're like well if this doesn't work then we'll just do this one and then you can kind of

Work with both smart smart no very smart answer I like it okay okay so if I could this more of on the marketing side if there was one question that if I could ask it to somebody who wanted to be clients, what question would that be? And how, like, because, like, let's say it's an open-ended question. You can ask them anything that you want, and it has to be a short question. If they answer that question really well, you know that they'll get their deal funded. I know there's no, obviously, that's kind of a ridiculous expectation, but in the perfect world, you ask them this one question, and based on the answer to that question, they have, like, the best amount of success. What would that question be? That's a really good question.

I would say it would revolve, what are you looking to achieve? Because then you can understand not only what they're looking to target, I feel like they would look into their capability to achieve that as well. So I would not only get qualifications, but an understanding of their target within that same question. So I believe what are you looking to achieve here can kind of dissect not only the knowledge they have within their industry, what they're looking to do, and the qualifications of the client to execute the transaction. That would be like my question. If I was like cold, completely cold, that would be my main question. It's a good question.

Yeah. Yeah. Because from that, you can get so much and drive so much. what is the um what is the biggest high and i think i already know the answer but what is the biggest high of your entire experience in raising money oh you call the deals of course of course

Actually closing the transaction and banks saying yes term sheets being signed oh that's great feeling i must say that that's great um it's honestly great i would say another thing is just being able to um finally like not necessarily finally but being in contact with a lot of other dealmakers, like a lot of people who close deals, financing groups, brokers, that I find really interesting because you get exposure to capital markets activity that's going on everywhere. And then eventually you'll see it on the news and you're like, oh, wow, they ended up closing that transaction. I find that really cool as well. Honestly, I believe that just capital markets exposure in and of itself is quite interesting. Yeah. What is something about

The industry that you wish you can change, but you think that you'll probably never change?

I wish that there was a white label program for equity, whereas with debt, you have underwriting criteria for equity investors Equity investors can basically line up and say hey if the transaction tranche reaches this underwriting criteria and we have maybe a pre relationship with you we can lend to this deal. Or you can set up a program where you have a fund, you can go to equity investors before you call capital from them. You're able to go to clients and then set up a structure

Where you're able to reach a certain amount of return

For your investors and then you can immediately go and deploy it into deals. I find that would slow down a significant amount of underwriting because now you give brokers the power to do the underwriting that the banks would have done anyway. If the banks, by the time they get the underwriting, they don't have to do much of it themselves, the brokers will be doing it. And also brokers are making significantly more money because they're involved in the deals, the closing, they're involved in the portfolio management. I believe that that's one of the things. I know there's only one thing, But the second thing would be regulation reform around the securities industry. I find that it's a little bit gatekept. Series 82, Series 79, Series 7, you need to be sponsored by a member firm. You can't just get the Series 7 yourself as you could do with the Series 65. No, sorry, Series 63 from what I understand. You don't need registration for it, but it becomes active with your 7. Anyways, I do believe that we should pull back some of the regulations. So independent advisors, smaller firms are able to conduct transactions themselves without the backing in need of another member firm. I don't know if we'll ever see that. But with that alone, I believe capital markets activity could significantly boost and increase. Yeah. What is the worst deal that you've ever seen? um i saw um this incredibly speculative tech deal where before um a single cent was spent on actually getting something done 60 million dollars was paid out of management fees like after i did the underwriting i remember that yeah yeah i'm like that was like scary yeah i'm like i completely i've said we won't do this yeah yeah that was scary that was insane to me yeah A good memory. Yeah. Yeah. I remember there was one.

See, well, I guess we improved as a company because back in the day, like, there was one where somebody wanted to raise money to, like, I guess dig up sunken Nazi U-boats at the bottom of the ocean. Yeah. No way. And they were serious. Yeah. And the person, I looked at their profile, it was, like, they were serious. They had a bunch of, like, Cornell, all this stuff. Like, this is actually a real thing. So I guess we've improved if, like, somebody's just – but I guess it's still, like i mean a scam of 60 million is still pretty terrible right yeah it's pretty it's pretty bad

Um no matter how it's structured i mean some groups would maybe take it on but um like this is a bad deal for investors for us i i don't really want our name on that so on and so forth i was like i don't know if this is even a real deal to be honest so that's great yeah yeah that's

Fair maybe a bit of a personal one like where do you see yourself in um in 10 years in 10 years i

Honestly see myself managing most likely a family office with my own funds nice um i was thinking uh personally getting into my own financing activities down the line of course as net worth increases my goal is to kind of like remove the friction that i see from banks yeah i would provide if there's no other private equity group willing to do this the first loss sponsor capital in exchange for management fees we would get so many deals done like honestly and then making sure that the operational teams are expanded, pretty much acting as a strategic private equity office would be, is honestly where I see myself in 10 years.

Yeah, there is this firm, I like what you said about going back to white label equity, there's a white label debt lender, Civo, I think I've mentioned it before.

Oh, yeah, Civo. Yeah, so I mean, maybe we should do the equity version.

I mean, that's really cool. So I guess okay I guess my last question is if there is one thing that you want people to remember about you specifically from this conversation but from you in general and are watching this what do you want people to remember?

What I want to remember is that you don't necessarily need to go to a target school to understand the mathematics, the financials, to get a transaction done. I would say what I would like you to remember not only about me but in general is that if you put the work in to understand like really the math and understand the legal and regulatory side and get your licensing and certifications that you can execute transactions. I'm saying this as like an entrepreneur from an entrepreneur standpoint you don't necessarily have to take four years of your life and then stop it to execute transactions and even so there are people that exit university go to a firm and they still do not close a deal because they simply don't have the deal making energy in them they can work accounting they can work books they can understand administration but sales and structuring and creativity and problem solving are a completely different thing, which requires some sort of entrepreneurship like abilities. And honestly, all I would say is, kind of believe in yourself. I know it sounds cliche, people say it all the time, but believe in your own abilities and really take the time to understand what you're selling others and the structures and the legal and regulatory, you know, aspects to your transactions. And I believe that the sky's the limit at that point.

Yeah amazing and psych i actually have a last one uh that's actually one more after that so if you were to go back you know i guess when we first met like uh it was like almost two years

Year and a half or whatever let's say we go back um what is one thing that you would tell yourself back then uh based on the information you know now um pick up books on security like i i did that initially um but i didn't really dive in i started doing the work before i really really knew um so the first thing i would tell myself is understand the knowledge and then of course get get if i got licensing earlier on transactions could be done significantly faster so one thing i would tell myself is get the knowledge before diving in because some of the structures in which i presented looking back what I know now I wouldn't have presented it as that because I now know that I would have not primarily not at work so had I had the knowledge beforehand I wouldn't have even presented it so I would say looking back just tell myself dive headfirst into the knowledge but at the same time I'm glad I was working on the job because I could gravitate towards what I need to really know to execute rather than just reading everything and then not having to use certain aspects of what I'm reading. So, again, it's great that it happened to be this way because the transaction still got closed. But that is one thing I would tell myself. Got it. Well, listen, like, Tre, so, yeah,

Obviously I credit you with, you know, you've done amazing work, Tre. And, you know, you've closed several transactions, you've raised millions, and you've done a really good job at, you know, rapidly picking up the information and moving at a rapid pace and helping us grow. So, yeah, no, you've done a really good job. You've closed several transactions here, and you're definitely somebody that I can trust and rely on here with Raises.com and what we're doing. So, yeah, you know, VP Capital Markets, Tre Brown, you've done an excellent job in supporting these clients. And going forward, hopefully these clients trust you the way that I trust you. So, Tre, you've done a hell of a job here.

Thank you. Thank you. I'm glad to be here, and I hope to continue to do so. Cool. Absolutely. Good job. Thank you. Cheers. Cheers. Boom.