Capital and cash flow are essential to every ecommerce business, especially those in the consumer goods sector. But where do you start? On this 144th episode of the E-Comm Show, Andrew Maff interviews Jake Lerner, Chief Revenue Officer for Revenued. 

In this episode, Jake Lerner walks us through the ins and outs of funding and financing for ecommerce businesses, along with the power of knowing your timelines. Moreover, Jake shares valuable insights on how to approach financing and the importance of understanding your business's unique financial needs. If you're looking to grow your ecommerce business and need capital, this episode is a must-listen!

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Maximizing Growth Potential: Navigating Business Cash Flow with Revenued 

Andrew Maff and Jake Lerner 

CONNECT WITH OUR HOST: AndrewMaff.com  |  Twitter: @AndrewMaff | LinkedIn: @AndrewMaff 

Jake Lerner

Jake Lerner has served as Chief Revenue Officer for Revenued since 2020. He oversees all sales channels and focuses on growing our direct to consumer initiative in addition to building relationships with Strategic Partners and innovating new products. Prior to Revenued he was the President of Vantage Capital and spent 4 years with Fora Financial.

00:03

I believe in expertise and honing in on it and hiring people to handle the other side of stuff that you don't understand.

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00:43

Hello everyone, welcome to another episode of The E-Comm Show. Hello everyone, and welcome to another episode of The E-Comm Show as usual. I'm your host, Andrew Maff, and today I'm joined by the amazing Jake Lerner, who is the CRO over at revenued. Jake, how you doing? You ready for a good show?

01:12

Absolutely, man. Happy to be here. Thanks for having me.

01:15

Yeah. I'm super excited to have you on the show, because this isn't a common area that we focus on too much, and it drives me crazy, mainly because, like, I don't know a lot about it. So I was like, Okay, we got to get Jake on this show to teach me more about it. But the other side being the lending side. I mean, in my opinion, with the way that kind of economy is a little wacky right now, it's incredibly necessary. But I don't want to talk like, I don't know what I'm talking about here. So Jake, I'd love to give you a second here tell us more about your background, and then obviously how you got started with revenue, and we'll

01:47

take it from there. Sure. Yeah. So I've been in small business lending or small business funding for the last 12 years. Right out of college, came in, started cold calling small businesses, trying to give them access to funds. One of the things I think we'll discover here is how tough it is to access capital when you're a small business, especially a growing one. And in today's environment with digital e commerce and selling things online, the people with traditional banks have zero to little knowledge about how that business operates. There's not much clarity like, you know, typically with a construction company that's been operational for 200 years, so they have prehistoric data around that. E commerce is such a new area of business that's being conducted. So I think the best route to go, and really almost like the only route to go, is through alternative financing. So that's kind of my expertise and my strong suit. And part of the reason why we built this revenue product is because we think it's a better solution for not only just e commerce, but but all small businesses that don't have access to traditional capital. Yeah.

02:55

So one of the things I was curious about I've had, I had the CEO of butcherbox on the show, and he had this whole concept of how he kind of keeps cash flow coming in, even through inventory and stuff. It was very interesting. He's the only one who came up with this very interesting idea, and I'd have to go back to the episode to figure that out. But everyone else seems to have the same problem, right? So I've done a ton of work in the CPG space. And it's a common thing, specifically in CPG that I find, because usually they're going more retail and things like that. How is that process work? Right? Like, why is it the funding is so important? Because it's, I know it's something with, like, they're getting, like, 90 day terms on stuff, but they need stock for also what they're doing in ecom, like, what's, how's that working? Yeah, listen,

03:42

so, so it's very clear, right? Your expenses are, you know, not always fixed. There's always things that come up, and you do have the fixed expenses, but if you're not budgeting for it, it's very easy to lose cash flow and covering certain costs while you're waiting for so for to get a payout, right? So if you're using let's just say you have Shopify clients, and they're batching out on a weekly basis, right? Let's say every Friday they batch out. So you know, the ACH hits over the weekend or something that where they're getting their money from Shopify, right? In that case, they're covering bills Monday through Friday. So if you don't have access to capital that you can quickly draw from, you're going to go negative and start paying overdraft fees, you know, and so and so, that's why, like, cash flow monitoring and budgeting is so important. So we kind of designed this product where it's super flexible, you can draw as you need and in the future, and where we want to go with it, because we're technology driven, is kind of build that monitoring of cash flow, where we're saying, like, Hey, listen, you know you're buying your materials on Wednesday, it usually costs you about 10 to 12,000 which is based off of what we're seeing in the bank statements. And you know you have 5000 in the bank. So click here to draw 7000 to cover that. And then you could pass back in a week when you when you get that, that deposit. But you know it. The age old saying that cash is king, and really, in the small business lending space, cash flow is king, and making sure you have cash to actually cover your costs, otherwise it's quickly. You can quickly get out of hand.

05:14

Okay, so you're integrating directly with the bank accounts to kind of be able to give some insight into, hey, you're gonna probably need X amount here. Soon, you're gonna need Y amount there, then, like, that kind of thing, yeah. So

05:26

we do cash flow monitoring, but our underwriting process, right? So, so we have a simple application process. Simply just fill out your business information, owner information. We do a quick soft credit pull, and then we ultimately connect your bank account via plaid, which the third party. All it does is send us the transaction report so we can see exactly what's going on. We don't care about personal owner, FICO score. So that's another area about you know, opportunity is that you know, if you have below 650 credit and a lot of people do, when they start a small business, they max out their credit cards, if they are even able to get credit cards, and so they're spread pretty thin. So that's because we don't care about that. We care about cash flow. So we connect the bank account and we see, we do a constant monitoring and underwriting on what's actually going on there. And so we underwrite based off of how much sales you have coming in on a monthly basis, but also how much capital you're keeping in the bank account. We want to see somebody that that knows how to handle cash flow.

06:22

Yeah, that's that sounds kind of risky on your end, isn't it, by not not evaluating credit score at all, yeah.

06:29

So, so the beauty of it is, is we have about, you know, we have the 7000 users currently that are actively using the business card and our flex line, and then we have data dating back to 2010 you know, over, call it 50,000 transactions that we've done with small businesses. So we have a really, we have really good alternative data points, which I think is is crucial, if you're you figure, you know, the banks, if they are lending to anybody and and they're lending to small businesses less now, and even more so e commerce, if at all. But so if you're if you're going to lose the top couple percent to banks like anybody with 800 credit score or time in business of five plus years, or they have multiple tax returns that are positive, you know, you really have to find a different data point to figure out who's going if you're going to be able to collect from the people that you finance. So we have, you know, a proprietary call it, you know, hundreds of data points, and we look at a lot of different things, other than the personal Fico. So that's because of that we care so much about cash flow and verifying revenue and making sure that that's real. Hence the name revenue. So that goes into a lot of our I'd like to take a

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moment from today's episode to thank our sponsors. Revenued, unlike traditional lenders, revenue provides working capital to SMBs that is based on your revenue, not your personal credit score. With revenues, flex line draw funds and a click of a button and only pay for what you use. Also, there's no application maintenance or draw fees, applying is easy. Go to revenue.com and get a decision in as fast as an hour. Join 1000s of business owners who choose revenue for their working capital needs. Again, that's revenue.com interesting. So if you're, you know you're, I know every category in business and product line, all that fun stuff are very different. But if you're kind of a, let's just call it a run in the middle, like traditional e commerce seller, right? You've got a chunk of inventory. You've got to order that you're going to sell over X amount of time, that cash isn't going to come in. Then you start to run low, and now you got to do another chunk of inventory. So like, obviously, that's kind of where the lending element kind of makes its biggest play. Why is it like, is there scenarios where lending isn't required? I mean, it sounds to me like it would be a consistent thing. I love asking these stupid questions. No, it's a great because, like, I've been in E commerce, marketing for like, 15 years, but when it comes to, like, inventory and fulfillment, I swear I sound like a toddler trying to figure that out, like I don't understand that element at all. Look,

09:04

I believe in, I believe in expertise and honing in on it and hiring people to handle the other side of stuff that you don't understand. So, so trust me, I don't think it's a dumb it's why you're here. I think, I think if you're the creative, if you're designing the T shirts that you're selling and stuff like that, the odds are you're not going to be able to manage cash flow well, right? So, so that's just remind me what the question was. Sorry, I

09:27

lost four there. So basically, you know, you've got your traditional kind of E commerce sellers. They're always having, you know, order inventory ahead of time before they get the cash in, etc. Especially if they're retail, they're on 90 day terms, typically, like that kind of stuff. So is there really any situation where an E commerce seller, like doesn't need some form of lending at any given time? I don't

09:49

think so. Because I think if you're never going to have net one day terms, right, you're never going to have cash in your hand, especially digitally. You know, when you sell something, you. The day you buy inventory is not going to be the day you sell it, and the day you sell it is not going to be the day you receive it, right? So there's always these gaps. So you know, if you're self financed, if you have, you know, parents that are, that are billionaires, that are that are foot in the bill in between, then maybe you don't need it, and you can float your own capital, so to speak, you have some savings. But ultimately, you know, what I think is, is just like in the in the real estate game, use, use someone else's money to benefit and grow and right? And so what we do, I look at it more specifically, close to like margin lending, right? So, or margin financing. So, if you know that you're buying a shirt for $10 you're selling it for $20 you have 100% margin there, right? If we're charging, call it a total cost of capital over a 12 month period of, let's just say 20% right? So you borrow $10 you pay back $12 over an estimated term of 12 months, right? So $2 20% cost of capital, if right there. It already makes sense for you, because if you take it up a full term, because now instead of making, you know, 100% margin, you're making 80, it's still net positive, and you didn't have the $10 to cover the the initial cost, right? But with our product and what we developed, is a way to pay it back earlier, once you actually receive that and get steep, steep discounts, which most people don't offer, to actually have a cheaper cost of capital over that time, right? So if you know, and the one thing you really got to know, if you're taking financing, because it can be risky as a business owner, but you really have to have your business down to an expertise, and know your timelines, right? So if you know, look, it's going to take 10 days to actually make the shirt, you know, someone's going to buy it within within another 10 days, and I'm going to get paid out in 10 days. So I really had this 30 day lag time, right? I'm going to borrow that $10 and know that I'm going to pay it back in 30 days. Worst case, 45 days. If I use revenue, you know, rather than a cost $2 it might actually cost 50 cents, right? Or it might cost 20 cents over that time period. So in that case, now I've upped my margins to 96% 98% instead of 80 that I would if I was borrowing the capital for the for the full outstanding period. But ultimately, to answer your your original question, I think, you know, lending is crucial. I mean, you see, it doesn't matter how big the companies are. You know, fortune, 500 companies. Everybody is taking capital, because no one has just liquidity to cover all of not only expenses, but inventory supplies, everything that comes up. There's always need for capital and so and so. That's why the, you know, that's why the the economy works like it does.

12:39

Yeah, the What about the competition side? Like, you're not the only lending company out there. There's so many of them, and it kind of becomes like, you know, a struggle. And then you've obviously got, you know, the big behemoths where, like, you know, Shopify capital, for example. Like, I've heard some pros and cons of them. To me, it kind of sounds like Shopify just was able to slap their name on it. So most people like to lean into that, but like, what are the big differentiators there? Yeah.

13:06

So, so let's go. So I think the two main competitors, one Amazon, they stopped lending recently. I don't know if you've seen that. I think it was about a month or two ago. They totally paused. So if you're an Amazon seller, you no longer can get capital on that platform. Shop. Yeah, absolutely. We've seen a nice uptick there. Shopify. Listen, they have a great product, but ultimately, there are a lot of disadvantages of it, and especially for, like, a growing business, right? So for starters, you have to be a Shopify user, right? So you can't access that unless you're on the platform. Makes sense, they do an invite only, and it's really a take it or leave it offer. So there's no negotiating. There's no like, it's basically, hey, we think you're approved for $50,000 you know, loan, so to speak, or advance. This is it, take it or leave it. There's a fixed cost to it, right? And so for them, they have a disadvantage of a fixed payback. And like a they call it flexible, because you can take it when you need it, but it's really this fixed, finite payback structure, right? So they, they ultimately, if you're borrowing, let's just say, $100,000 right? And they determine we're going to collect 12% of your future sales until we get paid back 120,000 right? So the estimated payback on a monthly basis is 12,000 if you're paying that back, right? If you keep, yeah, you're doing $100,000 a month. They're taking 12% of your sales. They're collecting 12% they're collecting $12,000 each month, until they get back, paid back $120,000 right? Yeah, it's pretty, pretty simple terms. In that case, what happens is, if you're a growing business and you ultimately double sales, let's just say, you know, you use that capital to get more inventory. You did good marketing. Now you've doubled sales. You're paying. You're doing $200,000 in in sales. You're now paying them back, because you're still paying that. 12% rate, you're paying them back $24,000 a month. So now your cash flow has been depleted because you're ultimately paying more back over a shorter period of time, right? And on top of that, you're not getting any savings for paying it off earlier. Figure, if you double in sales, and they're collecting a percentage of sales, you're going to pay it back in half of that estimated term. So now that estimated 12 month term is really six. So now you pay $20,000 cost of capital over six months. Effectively they've doubled the APR, double the cost of it. So if you're a growing business, that's a disadvantage, right? And then let me just paint a quick picture of how revenue stacks up in comparison, right? So on the same $100,000 line to pay back 120,000 if we're collecting 12% of your future sales, right? What we do is we establish a fixed payment. So we're collecting maybe $3,000 a week to pay that back over an estimated term, right? So if sales increase or decrease, we're using that initial underwrite of 12% of your future sales. In that case, if you double in sales, you're still only paying us $12,000 a month, which is what Shopify forecasted you on. So you don't increase even though your sales increase. So now you have two options, right? You have the standard option, which is, now you still pay it back over that estimated 12 month term, and you get an extreme influx of cash flow, because now you, rather than paying 24,000 you're paying back 12. That's an extra $12,000 that's going into your bank account. So now you're beefing up the cash flow. The other option, which I find to be a better option, is now that you have that cash flow, you could pay it off in half the term and cut basically half the cost of capital. So now you've lowered your total cost of capital from $20,000 to, let's say you pay us back in MONTH six, because there's so much cash that you saved up with the cash flow you're paying it back, it's going to cost you $10,000 so now you literally cut your cost of capital in half and increased your margins down from what it was 100 down to 80, right, and increased it back up to 90, just by using it the right way and paying it off early. And so the biggest benefit for us, if you know, you have a 30 day window our prime product, it costs 1.9% total cost of capital to use our financing for a month. So if you're drawing $100,000 to buy inventory, you know, you have a 10 day period to get it shipped to you, the bill shipped to you. You're selling it within 10 days. You're getting paid in 10 days to get the capital. If you pay it back in the first 30 days, it costs you 1.9% cost of capital. We have zero fees. So we have no fees. We have no setup origination fees, which I think Shopify might there's no draw fees, so if you want to draw to your business bank account to cover the cost. There's no fees there, there's no maintenance fees, there's no setup fees, there's there's nothing. So you're really only paying that true 1.9% cost of capital over that, you know, 22 business day period.

17:52

Yeah, that's very interesting. I mean, I know you're on the show, so obviously this comes off bias, but the the Shopify side sounds to me like it's like you're constantly chasing your tail, because if you, if you get the lending so that you double your business, but they're just going to take more off the top, you're going to have to get another loan from them and continue that kind of process. And it just seems like it's just a Yeah.

18:19

So I, hear that, and I know, you know, maybe I'm just good at sales, and came off as getting our product better, but, but the ultimate reality is, because Shopify is product is structured that way, they are able to get a little bit cheaper on the on the total cost of capital, right? So, so they, so we're, we're pricing at like a 1.2 factor rate, which, which breaks out that 100, 100, I pay back 120,000 they're looking at anywhere. They're probably at the 100 and a 1.15 which breaks out, they're like 15,000 cost of capital. But ultimately, if you're paying it back, if you're growing and you're doubling or tripling, it costs way more than ours over the full term, right? And then, even when you talk about like, our advantages is we have those prepayments which they don't, which completely lowers the cost. So it goes from 20 down to 1.9% right? So cuts in, you know, call it 6% or whatever, it breaks out to total cost, 6% of the total cost there if you pay it back within the first month. So there's major advantages with our product, but Shopify is definitely a good product. It's and it is seamless and it's easy to use. But you know, if, like, I'll put it this way, the other advantage is, if you slow down in sales, right, then you pay it back slower, and it's still the same cost. So it does become cheaper from that standpoint, so that that's a positive for them, but ultimately, no one takes capital to slow down. That's not like a thing. So if you're forecasting that, then you're you're in the wrong, you know you're looking at the wrong financing to begin with, and you're probably in the wrong business if you're looking to slow down. So yeah,

19:54

is there like, like, a specific, like, good fit, like. Is there, you know, maybe x categories, or, you know, companies doing over X amount of revenue. Like, where do you say? Like, hey, this is where it makes the most sense. Yeah. So

20:09

for us, we're, we're not, we don't let, we don't finance small sole props, right? So sole proprietorships, if you're just like, you have your own, and we need a business bank account, right? So if you're just like, your own, you know, call it T Shirt Company that you're, you're doing like, $5,000 in sales. You don't have a business bank account yet. You're not fully ramped up, like, we're not the product for you. That's, that's, that's for sure, we require at least 10,000 a month in revenue. And partly because we want to see some, some standard, like it was success, and some a track record of actually doing legitimate business over a longer period of time. But our minimum time in business about six months, though we typically look to we typically say like nine months to a year is the minimum. And then we need a business bank account. You got to be doing at least $10,000 a month in sales. But we do not care about your personal FICO score. We're pretty industry agnostic, meaning it doesn't matter what you're selling if it's a positive, you know, if you're if you're making money on a product, we're happy to figure out a way to finance you. So we're definitely fluid with that. We're pretty industry agnostic, especially on the E commerce side. We kind of group that all into like one industry, so to speak,

21:20

that is significantly lower than I was expecting. That's very interesting.

21:24

So we do go, yeah. I mean, look, that that's, that's the bottom tier, right? So we fill up, we finance companies doing a couple, you know, five to $6 million a month in sales on a consistent basis. We do go up to $500,000 on our flex line. So it's it's all determined based off of the cash flow that they're doing. And yeah,

21:46

beautiful Jake, this was awesome. I learned a lot. I really appreciate your your time here. I'd love to, obviously, give you the opportunity to let everyone know where they can find out more about you, and, of course, more about revenued.

21:56

Absolutely. So I don't know if there's anywhere to find out more about me. I guess the revenued, which is the same way to apply. But yeah. So you go to, you know, revenued.com click the Apply button. One of my team, one of the guys on my sales team, will reach out and walk you through the process, help you get through and then ultimately explain the product and tailor it towards, you know, kind of what you guys need the capital for. So that's probably the best way to reach us.

22:22

Beautiful Jake, appreciate your time. Obviously, everyone who tuned in, thank you as well. Please make sure you do the usual rate review, subscribe all that fun stuff and whichever podcast platform you prefer, or head over to the ecommshow.com to check out all of our previous episodes as usual. Thank you all for joining and we'll see you all next time.

22:41

Thank you for tuning in to The E-Comm Show head over to theecommshow.com to subscribe on your favorite podcast platform or on the BlueTuskr YouTube channel. The E-Comm Show is brought to you by BlueTuskr, a full service digital marketing company specifically for e-commerce sellers looking to accelerate their growth. Go to bluetuskr.com Now for more information. Make sure to tune in next week for another amazing episode of The E-Comm Show.