#433 – The Money Game: How to Secure Financing Without Sinking Your Amazon Business with Russell Walraven
What if securing financing for your e-commerce business didn’t mean sacrificing control or facing exorbitant interest rates? Russell Walraven from 8Fig joins us to unpack financing solutions that respect your business’s autonomy and potential. We explore the tailored working capital options 8Fig offers to online sellers on major platforms like Amazon, Shopify, and Walmart. Russell also shares 8Fig’s leap into SaaS, crafted to fuel seller growth and success, while addressing the challenges and opportunities in the ever-evolving e-commerce landscape.
Navigating the murky waters of Merchant Cash Advances (MCAs) can be daunting, but we’re here to shed light on this alternative financing avenue. Through personal anecdotes, we unravel the differences between MCAs and traditional loans, highlighting the risks and aggressive collection tactics that can ensue in cases of default. Discover the flexibility of new MCA products designed specifically for Amazon and e-commerce sellers, alongside insights on securing subsequent funding without fully paying down existing amounts.
Choosing between lending and equity financing is a pivotal decision for any entrepreneur, and we dissect this complex dynamic to help you make informed choices. Learn about the advantages of retaining full business ownership through loans with companies like 8Fig, versus the prolonged involvement of equity investors. We also delve into the process of pre-qualifying for loans without impacting your credit score and the importance of building a financial partnership founded on trust and understanding of e-commerce dynamics. Whether you’re in the throes of financial challenges or planning ahead, this episode equips you with practical advice to secure fair and effective funding for your online business.
In episode 433 of the AM/PM Podcast, Kevin and Russell discuss:
- 00:00 – Financing Options for E-Commerce Sellers
- 07:24 – Flexible E-Commerce Supply Chain Solutions
- 10:16 – Alternative Financing Options for E-Commerce
- 16:11 – Marketplace Payment Enforcement Strategies
- 20:57 – Lending vs. Equity in Business Ownership
- 22:31 – Lenders and Stacking Loans Discussion
- 25:51 – E-Commerce Seller Funding Process
- 28:38 – Managing Seller Sizes and Deal Sizes
- 34:08 – No Origination Fees for Financing
- 35:34 – Navigating E-Commerce Financing Options
- 39:57 – E-Commerce Focus in Business Research
Transcript
Kevin King:
Welcome to episode 433 of the AM/PM podcast. You know, one of my favorite sayings is money never sleeps, and that’s what we’re talking about today, money. I’ve got Russell Walraven from 8Fake on the show. We’re going to talk about everything financing, getting money for your business, some of the pros and cons of taking actually lending or advances for your business and everything in between. Enjoy this episode with Russell. Welcome to the AM/PM podcast, Russell Walraven. How are you doing, man?
Russell:
I’m doing great. How are you, Kevin?
Kevin King:
Well, as you can probably tell in my voice and you can see me here I’m fighting a little bit of a cold, but you know, money never sleeps right.
Russell:
That’s right, that’s right. Well, if it’s any consolation, you don’t look like it, you look great man.
Kevin King:
I appreciate it. Yeah, you know it takes a lot to actually get me down. I think I’ve missed one day of work or two days where I had to just lay in bed in probably the last 30 years. I went during grade school and high school. I think it’s seven years in a row. I got a little certificate for perfect attendance. So I’m not one of these guys that just lets a little congestion or something take me down.
Russell:
Yeah, I’m the same way. I, you know it drives me crazy with my kids. You know they’re feeling a little bad and they want to go and lay on the couch or something, and I’m like you know, dudes, you gotta figure this out. You’re not always going to feel good you gotta get through it.
Kevin King:
Exactly, exactly. I mean like I said money never sleeps, you gotta keep going. I think so many people are just, they’re just wimps, they’re just pussy around, they just don’t get it. But when you’re an entrepreneur you got to hustle.
Russell:
You do, you do, always on your toes, always getting things done.
Kevin King:
Now I know your specialty is you’re working with 8Fig and 8Fig’s specialty is money right?
Russell:
That’s right. That’s right. Well, historically we’ve traditionally been only a funding company and we’re now still primarily a funding company. We provide working capital to e-commerce sellers selling on Shopify, Amazon, Walmart, wherever you have it up to $4 or $5 million, right, so we can provide quite a bit of funding. But we recently launched some SaaS apps, right. So we’re trying to really round out our products to help sellers grow and to help them achieve success that they’d like to achieve.
Kevin King:
So how long has 8Fig been around? When did they start?
Russell:
8fig’s been around since about 2020, right in the height of the pandemic. We’re a company, we’re based in Israel. Our founders were supply chain experts, so they did a lot of other startups, a lot of other technologies around supply chain, and then they realized that in that supply chain, people need money, people need funding, whether they need it for inventory, whether they need it for shipping or marketing or whatever it might be. So they’ve developed a product that’s a little bit different than a lot of the other products out there. That’s kind of just in time funding based on those different areas of the supply chain. There’s no limitation to how you can use the funds, but most of our customers, we see, are using it for those supply chain needs.
Kevin King:
I remember when I first started doing FBA 2015, I think it was there was no option for money. I mean, I think Amazon lending was fairly new at the time, but I didn’t qualify because I hadn’t been selling for a year or whatever the requirement was back then. Yeah, and so I started off with about $200,000 between my money and I had a silent investor and I launched five brands and we grew these things and they were just busting at the seams and I needed more money and I didn’t have the resources to dump a bunch more in, and neither did my private investor. So we were out there scraping the barrel trying to find money and I was having to go at that time to these predatory lenders like On Deck and Blue Vine, and some of those guys are charging like crazy freaking rates. Cabbage was another one and I’m having to go to I call them mafia loans.
Kevin King:
Go to the cash advance guys, the MCA guys, merchant cash advance guys that were charging about 40% interest, but it’s really more like pawn shop rates, more like 120% interest, because they give you 80 grand. You’d fill out some forms If it didn’t go over $100,000, you didn’t have to provide financials. You give them access to your bank account. They look at it and say, yeah, these guys have regular deposits. They’d say, okay, we’ll give you whatever the number was, say 80 grand, here’s a document to sign. Sign this document. It’s basically a default judgment. Go get that notarized FedEx it back to it and then we’ll send you the money. And so they’d send the money the next day. 24 hours, 48 hours later you’d have 80 grand, but they had a default judgment in their hand that was notarized, so that if you, if you missed a payment, they just take that down to a courthouse in White Plains, New York, because most these guys are out of New York because the laws there yeah, some of this has since changed and then they would just file that judgment and then go put liens on your bank account and everything else they could do.
Kevin King:
And out of that $80,000, though you get it two days later there’d be a $2,500 origination charge, a $750 set up ACH account charge. There’d be all this $5,000. And then you’re making daily payments. It’s five days a week. Holidays count too. So if they couldn’t hit your account on Labor Day, they’re going to double up on Tuesday after Labor Day. It was just, it was crazy, but I had at one point, seven of those stacked. At one point I had 16 different loans to run my Amazon business up until about 2017, because I just couldn’t cash flow it and I was trying to keep it growing. It was booming, doing seven figures on its way to eight, and I never missed a payment, but at one point I was paying out I don’t know $8,000, $9,000 a day in payments between all these different things and it got crazy. So I wish people like 8Fig were around back then and some of the other options that are out there now, because it just makes life so much easier for sellers.
Russell:
Yeah, and I guess first of all, to respond to that, I’ll have to apologize because I started in kind of the FinTech lending space at Cabbage right In the early 2010s.
Kevin King:
Oh, you’re the guy, you’re the guy.
Russell:
So I’ll take that brunt from you. But what I will say is, even Cabbage and the Own Ducks and the Blue Vines and those people, at that point in time, and to some degree still today, they didn’t understand e-commerce right. They were funding an e-commerce business, like they’re funding a restaurant or a mom and pop shop or whatever else they were funding through their MCA. So they were looking at them the same way. So they were doing, essentially, you know, checking account funding. They were saying, ok, as you mentioned, the deposits, look good, the withdrawals, you know they’re in the black, they’re not in the red.
Kevin King:
They were in the fund. They were checking last year or whatever.
Russell:
So that’s right and that’s how they were funding those businesses. And then along came, you know, some other folks, 8Fig primarily came along and said look, we, we’ve been in this, this e-commerce supply chain, we know how this works. So we want to create a product that doesn’t only help these sellers grow but it does something in a way that makes sense for that business. Right, it’s going to be much more flexible. It’s going to let somebody get our product, let somebody go in. Once they take a funding product and they can change their remittances, change their payments to the structure that they need while they’re in that product. Right, it’s not a product that is always going to be the same in terms of it’s this much money every day or it’s this percentage of your sales every day. If you say, look, I’m going to do a lot of business over the next two, three weeks, let me go in and pay a little bit more so I pay that down faster and pay a lower cost of capital. Or if they say, you know what, the holidays are coming up, I’m going to take a little bit of a break. My products may not sell that much. They can go in and they can decrease that remittance. So what I think 8fig does is we really understand kind of the e-commerce businesses and we want to support them in a way that helps them grow.
Kevin King:
So how does the funding work on 8Fig? So I mean, there’s all these different funding. Some people take a piece, some people it’s a fixed amount, fixed payment, some it’s a line of credit. So when I come in, if I come to you and I say, hey Russell, I need a 100 grand, you go through your due diligence and approve me and do whatever you need to do to make sure I’m a fit. But you say, here’s okay, we’ll give you up to 100 grand. Do I then have 100 grand line of credit that I can pull from? Or are you wiring 100 grand straight into my account right away and I’m starting to pay interest back on that? The clock starts ticking the next morning, or how does that work?
Russell:
Yeah. So it’s not a lot of credit and it’s not a traditional loan, it’s not a lump sum loan where we’re going to disperse it all upfront, necessarily. And I say necessarily because what’s going to happen is we’re going to create a plan for you and, based on what you say is your inventory needs, from a PO standpoint, when you’re going to need money for marketing that inventory, when it gets there, the shipping or the fulfillment of that inventory, what you’re going to need for that and when you’re going to need that, we’ll create a plan that bases that on. Okay, so out of that 100 grand, you need 70 grand for inventory, right? So we’re going to give you that up front. You’re going to have a plan for the disbursements of that payment and then you say, okay, well, that’s going to get here in two months, you don’t want to pay for the, for the marketing cost, right? You’re not marketing that inventory yet. So in, in a couple of months or it could be in the next month, whenever you need it, we’re going to give you the $20 ,000 for marketing that you said you need, right? And it becomes two, two cycles in the same plan. And then ultimately, as you need to fulfill that, maybe the last $10,000 for fulfillment, when you need that funding, we’ll provide that for you. And you pay that back over time as well.
Kevin King:
Yeah, it’s separate. You have almost like separate little micro loans within a master loan.
Russell:
Correct and I have to say this from a legal standpoint it’s not a loan. We can’t say it’s a loan. It’s funding and we’re technically an MCA product. We’re buying future, future receivables. We don’t do it in the way that the traditional MCA products work.
Kevin King:
I’m not having to do a default judgment in advance.
Russell:
That’s correct. You don’t have to do any of that stuff in advance. It’s just we’re not a regulated lender, we’re not a bank, so we just can’t technically call it a loan. So I just want to make sure–
Kevin King:
Yeah, you’re doing it just like the MCA guys do, because they’re technically not a loan either, because those don’t go in your credit report.
Russell:
That’s correct.
Kevin King:
So like if you because I know this because I ended up purposely defaulting In 2017, I had a huge wedding that was getting out of hand down in Columbia. I’m since divorced, but it know it was a good five year run. But, uh, um, I, I and, and I was juggling all this stuff and I was like this is just ridiculous. When I look at it on paper, it made sense in the beginning, but I was just the amount of interest and money I’m paying. I’m like and it’s so predatory. And so I had, I called up, I found an attorney in New York that knew all these laws, because 95% of the people were based in New York, some in Florida. Because of the rules the state rules. They’ve since cracked down on a lot of this stuff. Yellowstone was one of the big MCA companies that was started by one of the guys at that movie, Boiler Room or whatever that scam movie. One of the guys in that was actually, or one that that was based on, was actually the guy that started Yellowstone. That’s one of the guys I had.
Kevin King:
So I this attorney said oh, here’s what you do. Um, you know, this is not going to affect your credit at all because these are technically not loans. They’re against your future receivables. It’s kind of like an IOU.
Russell:
Correct.
Kevin King:
Um, and so they’re not going to affect you. So here’s what you do you just close your bank account. They’re going to freak out when they’re trying to hit these daily withdrawals. Go open a bank in a credit union that’s like a hundred miles away in some little podunk town, because what they’re going to do is they’re going to do a sweep of like every bank within a 50 mile radius of your bank and any bank that has. Don’t open it in any national bank or a bank that has national branches. So no Chase, no Wells Fargo, no Bank of America, nothing like that. Because they can just walk into New York and grab it. Go open an account there and move all your stuff. I have a credit card company that will not put your name on the merchant ID out of Canada, so they can’t come after that and just sit back and get ready to get threatened. And the mafia is coming after you. I’m like, oh shit. And so that’s what I did. I closed it down. And so I closed it down and they started two days later they’re freaking out, making all kinds of threats, like oh, there’s a $5,000 default fee and this and that and attorney’s fees, and I ended up basically going through all 16 of them. I paid 14 of them back, some of them I negotiated as they had re-upped and re-upped and I’m like you’ve already made all your principal back and more. There’s no way I’m going to pay you what you’re saying.
Kevin King:
So and then two of them just disappeared. They just never came out but nothing ever showed up on my credit. Nothing ever showed up on anywhere. And one of them got for about two, three years, was super aggressive, calling me and say I’m going to go dig through your trash. They were doing background checks and making threats and like making threats and like I’m going to call my parents, you know all kinds of stuff, but they’ve since gone away. So yeah, those, those, those days, I do not wish on anyone. I’m glad that there’s better options now. So on yours. The payback period is how long?
Russell:
The payback period. If you look at it as an overall growth plan, right, an overall plan, it’s going to be anywhere between six and 12 months, right? So if you have, you know, three or four cycles within that, each cycle is going to be around three to four months on average, and the seller has the flexibility to determine some of that, right? If they want to pay back more, it’s shorter. If they want to pay back less, it’s longer. But I would say, for the complete plan the $100,000 plan that we talked about before, it would, as we’re delivering funds as they’re needed that plan is going to end up being anywhere between six and 12 months, depending on how quickly they want to pay that back.
Kevin King:
So if I’ve got a hundred grand that you’ve approved me for and I got 70 of it, like in your example, that just got spent on inventory. I got 30 left, but I want to launch another product or I need some more, do I have to apply for another $100,000 loan or do I have to pay down some of that 70? Once I’ve paid 30 of it back? Now I have 30 accessible again to do something else. Does it stay fixed?
Russell:
There’s no hard and fast rules, right? You can come back to us at any point in time and request additional cycles and additional funds. Now, if you were originally approved for 100, and that’s kind of the max that you could have gotten, it might take you a little bit of time. Pay some of that off before we will give you an additional amount of funds. But depending on where you are, depending on your business, the growth, if you’ve taken that $100,000 and your business has taken off, of course we’re going to look at that and we’re probably going to provide you some more funds. But I know it’s a terrible answer. Nobody wants to hear this answer, but it really does just depend on really the situation. But we do build in flexibility to offer more funds as sellers need it. But it is on the basis. It is based on that particular business. We don’t put a lien on the inventory. We do file UCCs. One of the things that we can do is-.
Kevin King:
Some people that don’t know what UCCs are. It’s the universal commercial code and you file those with the local government, like here in Texas. You file that with the state. It basically shows a priority of who’s owed money so that if and like in my case earlier where I said I had seven different MCA lenders, each one of those filed MCA basically positions themselves in line so that if I go bankrupt or something happens, it’s like who was first, who was second, who was third, who was fourth, and so it’s who gets priority. So I just want to explain that for the audience that may not know what that meant.
Russell:
No, no, that was. That was good, Thank you, and I appreciate you doing that. So the other thing we can do is we work with the marketplaces, right. We work with Amazon, we work with Shopify, we’re starting to work with PayPal. If someone stops paying us, we can then how? If someone stops paying us, we can then freeze their store until they pay us back, right? And when I say freeze the store, it’s freezing the disbursements to them, right? If they’re selling, then those disbursements can then be sent to us, as opposed to the store and those types of things. There’s also some.
Kevin King:
You could put a lien on it too. You wouldn’t be able. Amazon couldn’t send you that money unless there’s actual judgment.
Russell:
Correct. But the kind of the stick in that scenario is look, Amazon’s going to freeze their store. They might not be able to do the business, they might not be able to get listed. Those types of things, yeah, yeah.
Kevin King:
So, like SellerSpy, they took a massive hit. They were loaning money to aggregators and they took a massive, freaking hit and they’ve almost kind of disappeared. I mean, they’re still around, but they’re not their show, what they used to be.
Russell:
They did take a hit with some of that, some of those aggregators. They did also win an Amazon partnership, right. So they’re they’re embedded in Amazon’s platform, um, and they’re still there, um, as well as uncapped uncapped. Recently, um joined that platform as well, but Amazon’s tough. I mean Amazon’s capping their rates, which is great for the sellers, right. I mean they want to keep it in line and not be predatory, as you talked about before. But they have a lot of requirements. I mean Amazon takes a lot of that money. Amazon’s looking for a piece of that right. They want a percentage of the revenue share. They want an upfront cost to be in that program. So it’s tough. And when they take those hits, like with some of those aggregators, it just makes it tough. And then I don’t know if you saw a very short time ago, hb, h, um, hsbc is, um, is, is is pulling out of, uh is pulling out of of Sten. So Sten is no longer funding and and that’s very recent news but that’s another e-commerce lender that’s now going away because they were in default of their, of their, their financing partner.
Kevin King:
What’s the default that about five to 10% probably default.?
Russell:
I don’t know what exactly their agreement was with HSBC, but I’m sure it was somewhere around 5% to 10%.
Kevin King:
Yeah, that’s what it is. It’s around that on credit cards, I think right now In the general lending market just consumer market, I think it’s like 7% to 8% are uncollectible, but I think it’s a higher rate that are behind in default. I think it’s closer to 20% or something like that, of US credit card people are at least a payment behind um. So but you cover that. I mean, if you’re depending on your interest rates, you, it’s a risk profile, you, you basically end up covering that. But a lot of people they say why would I go to 8Fig to get a loan? I um and pay these? You know, I don’t know what your exact rates are. I I’m sure they vary depending on the situations, but to some people anything over 5% is a crazy amount. So let’s just say it’s over 5% and they’re like why would I pay this crazy amount in interest and have all that stress to take a loan? I’ll just go get my rich uncle, or I’ll go get someone to invest in the company and give me the money. Can you explain the difference in those? I think there’s a psychology switch there where people don’t quite understand the difference in those two types of funding. Where someone that takes equity, even if they’re a silent partner and have no stock vote, no voting rights. They just stay out of your way. It’s not another chef in the kitchen.
Kevin King:
If you sell that company for, let’s say, a million bucks two years from now and they own 20% because they gave you 50 grand or 100 grand, that right there, that’s a good return for them. If they own 20% on 100 grand, they got 200 grand and, depending on your deal, they might’ve got their original 100 back. So they might’ve got 300, depending on how you structure that Versus. If I go and take a loan at 100, even if I’m paying 20% interest on that for the same two years and I just slow pay that whole thing, that’s only 40 grand that I just gave up, instead of potentially as much as 300 grand, and I put 260 more in my pocket. A lot of people don’t think about the long-term effects of equity versus loans, even though the loan amounts might be a little higher than what you think they might should be on the interest rates. Can you explain some of that?
Russell:
Yeah, no, that’s right. And outside of just the cost piece of it, right. So somebody puts in one hundred, you give them back three hundred, right, if you calculated the APR on that, it’s going to be outrageous, right. So there’s the money piece, right, there’s the how much, how much it cost you piece. But then there’s also the control piece, right, but then there’s also the control piece, right. So even if somebody gives you money and they buy equity in the company say it’s 5, 10, 20% they get a voice. Right, it might not be a big voice, but they feel that they have that voice. So any decision you make may be second guessed. Anything you do differently, somebody’s gonna think you know what you should have done that differently, right? So there’s pressure and there’s stress in that area. So owning the business yourself kind of alleviates some of that stress and you don’t have to worry about other people’s thoughts, other people’s opinions, because in your example, right, you became an e-commerce expert. You became an Amazon expert. Maybe this person that you borrowed money from didn’t believe in you and they saw the potential in making some money. But they’re not an e-commerce expert. They don’t have all the information you have. They don’t have all the experience you have. So they might have good ideas, but again they might not. So it’s going to be a situation where you don’t only split the business, you’re splitting decision-making. So that’s one.
Russell:
But from the lending versus equity piece until you pay out, until you buy out that equity investor, they’re with you, right. They’re with you for the long haul. Once you sell that business, you have to pay them out if you haven’t before. With a lender like 8Fig once you’re complete with that plan, once you’ve completed with that funding, unless you want to come back and do more, you’re done right. You’ve done what you need to do. You’ve got the money you needed to grow and now you move on and maybe you come back. Hopefully you come back and need more money to grow some more. But if you don’t, you know what. We did our job helping you get from point A to point B, where you wanted to get, and now that business remains all yours. No one else is in your ear about that. No one else is expecting a payout from that. You grew from A to B. We did our job helping you get there. Now you get to decide how to get from B to C.
Kevin King:
What if I already have an Amazon lending loan and say, one of these other loans from somewhere, will you stack? Will you be third in line on UCC, or do you guys prefer to be first in line? Or you give them money and they got to wipe out the other one, so there’s just you, or how do you guys work on that in regards?
Russell:
Yeah. So obviously, any lender is going to prefer to be number one, right? They want to be number one in line if anything were to happen. We don’t disqualify someone if they have other lending products, if they have other funding products. We look at what is your ability to pay, based on Amazon, for example. Here’s how much you sell. Here’s how much your payouts are from Amazon. Here are your expenses. Here’s what you have left. Do you have the ability to pay not only Amazon and lender A or lender B? Do you also have the ability to pay 8Fig and not put yourself in a precarious situation where it’s going to affect the business? So I know a lot of people don’t believe it. A lot of people think, oh, they’re just lenders, they’re just greedy, they just want their money. Look, yes, we want to lend money that we’re going to get back. We do this to make money. We’re not a nonprofit, but we are invested in that company because, let’s say, this company takes money from us and they don’t pay us back, we’re the ones that are impacted. Right, we have financing institutions as well. We don’t have just like a big stack of money sitting in our office that we lend out right. We borrow money from other financial institutions to be able to lend it to-.
Kevin King:
Wait a minute. So you told me to come see you for lunch. I was hoping to get a big stack of money off your desk.
Russell:
That’s me personally.
Kevin King:
That’s not what you told me earlier.
Russell:
That’s me personally.
Kevin King:
Lunch is canceled. Lunch is canceled.
Russell:
Personally, I have a big stack of money.
Kevin King:
Oh, okay. All right, we’re on.
Russell:
At the company. We don’t have a room full of money, so really, we are very interested, invested in the health of that business because if that company, if something goes wrong, we’re impacting as well.
Kevin King:
Do I have to be a US citizen to work with 8Fig or do I just have to have a US-based entity?
Russell:
You have to have a US-based entity, a US-based bank account, and you have to sell on US platform. There are some areas of Canada where we can work. So if you are a Canadian entity, we can work everywhere except Quebec. So you have to be doing business in USD or CAD and then you have to have those other things that I mentioned. But you do not have to be a US citizen. You don’t even have to be based in the US. You just have to have the US entity, the US bank account or Canadian, and be working in CAD or USD.
Kevin King:
And how long does it take? What’s the application process like? I mean, what do you need? Do you need bank financial statements, or if it’s under a certain amount, it or Walmart or whatever it may be, and just take a look and 24 hours, 48 hours later, we got an underwriting decision for you, or how’s the process work?
Russell:
Yeah, so the way the process works is someone comes in, they fill out a short form giving us personal information. Then they connect their store right, whether it be Amazon, whether it be Shopify, whether it be any of these other stores, they connect their store. Within about 24 hours. You’re going to get an offer. It’s going to say you know, you have a plan has been created for you of this amount. Would you like to accept that offer? You’ll also be. You’ll be contacted by one of our sales reps. We are automated. We’re not fully automated, but we’re mostly automated, but we do still feel that that personal touch is important. Right we to explain the explain the offer. Once you accept that offer, you’ll then do some other things. You’ll connect your bank account through Plaid um if Plaid’s not a hundred percent um inclusive of all banks. So if you’re a bank that does not is not provided through Plaid.
Kevin King:
So my country bank, 100 miles outside.
Russell:
Right, right your your sketchy mafia bank’s not gonna to work. Yeah, that shit’s not going to work. So once you connect your Plaid account, we then get a better view of your overall financial situation, right? We then will ask some due diligence questions. It can be based on what we see in your bank account. It can be a few due diligence questions. It can be a lot of due diligence questions, and then, based on how long it takes the seller to answer, that is going to be how long it takes for it to be underwritten. If they come back within a day, it could take maybe another day. So it can be super quick or it can be a little bit extended, but I would say on average, we’re going to give you an offer within 24 hours. We can fund within, you know, five business days.
Kevin King:
So if it’s over typically, if it’s over a hundred thousand dollars, there’s a lot more paperwork needed. I mean, that’s when you need P&Ls and balance sheets and tax returns and a lot of typically right.
Russell:
Yeah, we don’t always ask for all those information. We typically we typically do as much as we can through the bank accounts. If we see other accounts within your primary bank account, we may ask you to connect those as well so that we get a fuller picture. But you’re right, the larger the plan is, the more due diligence we’re going to do, just because it’s more risky, right? I mean not because you’re a risky seller or you’re a risky credit profile, but it’s riskier for us to send out a big lump sum of money than it is a smaller lump sum of money.
Kevin King:
What’s the smallest you’ll underwrite?
Russell:
Well, underwrite as low as 50,000.
Kevin King:
So 50,000. So what kind of sales volume do I need to be doing to qualify for 50,000? How long do I need to be selling? What’s your minimum amount? And then where do I need to be to qualify for a $50,000, the smallest loan?
Russell:
Yeah, so $50,000,. If you’re selling for six months consecutive, we’ll probably look at it. We would prefer 12, but six we’ll look at. Right. You need to be selling for a 12, in a 12 month period. If you’ve been selling less than that, we’ll. You know, we’ll extrapolate the data, but so over 12 months it needs to be $100,000 in sales in the—
Kevin King:
Total sales or per month?
Russell:
Total total sales.
Kevin King:
Okay.
Russell:
In the most recent three months you need to be selling at least $12,000 per month in sales.
Kevin King:
To get a $50,000.
Russell:
To get around to $50,000. Yeah, yeah, sorry, I said loan is advanced. It’s not a loan. Thank you for correcting me.
Kevin King:
So you said you go up to $4 or $5 million. Have you actually done that?
Russell:
We have. It’s rare right. We don’t do $4 million or $5 million advances every week or every month, but, for example, I saw one yesterday. A plan that went out was just under $2 million, so it is typical for us to send out plans that are $1 million plus. We are working with some pretty large sellers, but we work with smaller sellers too. Obviously, we do more smaller deals just because there are more of those sellers, but we do larger deals as well.
Kevin King:
What do you do to prevent? I mean, some lenders out there they pay the factory directly or they pay the supplier directly, just so that they are forcing that discipline on you to not go and use it to go buy a new Ferrari or to go and pay off something. I know a lot of sellers have made mistakes in the past where they take a loan back to this $100,000 example and they tell you they need 70 grand for inventory and you look at the POs and you look at it like, okay, you want on the 70 grand, but they end up reducing that purchase order to 40 grand, let’s say, and taking $30,000 of that to pay the electric bill, to pay an employee, to make payroll, to do stuff. That’s a non-revenue producing asset and that’s a huge mistake that some people make. Do you have any controls or methodology in place to prevent that, or it’s just whatever happens happens and you cross your fingers.
Russell:
Yeah. So I think it’s somewhere in between, right? I mean, we, we don’t. We don’t pay suppliers directly, we don’t pay um, you know, pos directly to whomever invoices directly. But we do try to do it in a way that we that we line it up based on what they say they need. What we’ve seen their inventory needs are, um, and I think a lot, of, a lot of these other tools that we’re building are going to help us with that. So, for example, the forecasting tool. If someone comes and they apply for a lending product or a funding product, as soon as they connect their store, those tools are running in the background. They have access to those free tools, right? So we can see what their forecasted sales are. And so they come in and they say you know they’re forecasted to do $100,000 in inventory. And they come in and say I need $100,000 in inventory, we can say you know what that looks, right, that looks about, right. This customer is about right. Now If they then say you know what? I don’t want to sell that much, I’m going to say I’m going to do $100,000. We can’t really do much about that, right?
Russell:
But we try to be as accurate as we can and we think by giving them the ability to say what they’re using that money for and then giving them money based on that, we’re protecting ourselves a little bit by doing it that way. Now, can we 100% protect ourselves? No, are we in the contract to say you have to use this amount of money for this specific thing? We do not, but we try to educate people, just as you just mentioned. If you’re not using this for a revenue generating reason, it may be harder for you to pay this off right. So we try to do it through education, we try to do it through data and then we try to do it through relationship building and that’s why, kind of we have those CS, those sales reps that are along with the seller completely through the way.
Kevin King:
What do you do when Amazon shuts down their best seller, that 80-20 rule, that 80% of their revenue is from 20% of their SKUs and, for whatever reason, Amazon just decides this is a pesticide, or they decide whatever, and they’re fighting that for three or four weeks and it’s just crushing them on cashflow? Do you? I had this problem happen with. I had a loan with SellerSpy back in 2020. I had a company that we started up. We put in 330 grand and then a couple other guys put in over a million, but we ended up going to SellerSpy to get some more money. We needed it like two months into the business and SellerSpy algorithm said, no, get lost, you don’t meet the requirements. And then I knew someone over there and they put it through and they said, all right, we’ll give you 150 grand. And then the owner said, no, this is Kevin, give him 300. He’s not going to screw us, he’s good for it. He’s good for it.
Kevin King:
So they ended up giving us $300,000, but we had that problem with we’re selling PPE and we had an issue come up to where we were paying $16,000 every two weeks, or something like that, to pay this thing back because we did a short term and it affected our cash flow. But they worked with us. They turned back around and said, okay, don’t worry, we’ll re-engineer this and we paid the whole thing back and there’s no problem and everybody was happy. But do you work with people like that, or is it like you know? These MCA guys in the past are like we don’t care, just pay me anyway.
Russell:
Yeah, no, no, that’s a great question, a good point. So we absolutely work with sellers in that situation and we take it a step farther right. So in the tool itself, you can log in there and you can make those changes yourself. You can say, okay, here’s how much of a payment I can make in the weekly payment, the bi-weekly payment, whatever plan you’re on. You can reduce your payment in those instances and say here’s how much I can pay over the next two weeks, over the next four weeks, whatever that is, and you can make that request directly into the platform. We then work with that seller to make sure that they can still do that, that they’re, they’re on the right track. And then once, once they get out of that you know bad situation or that, that rocky time, they can then go back in and they can increase it again and say, now—
Kevin King:
More interest on it because of that, kicking down the road a little bit. So it’s going to be a little bit more interest, but it helps me in the current situation.
Russell:
I do want to make that point clear that if someone goes in and says I’m going to pay less and it’s going to take longer to pay that off and you’re keeping that money longer, the cost of capital is going to go up, just like if you come back and say you know what I’m doing, great, right now, I want to get, I want to get done with this this right now so I can do something else. You can increase your payment amount and the cost of capital goes down. So we are happy—
Kevin King:
It’s different than like Cabbage or somebody that front loaded it. When you were with Cabbage they front loaded it when you get a six month payout. The first two months are like 90% of the interest.
Russell:
That’s correct.
Kevin King:
They know that, whatever their steps, say that most people if they’re going to be able to pay it off, they’re going to pay it off in month three. So they front loaded all the interest in those first two months and there’s no break other than a little small fiddly amount.
Russell:
That’s correct. That’s correct, but we’re not that way. I think Cabbage is really the only ones that that. Another thing that you mentioned earlier that I haven’t gotten to address is origination fees. We origination fees. We do not charge origination fees. I know there are some people that do, some other lenders that do, but we’re a financing company that does not charge origination fees, so factor that in when you’re doing business with some of these companies.
Kevin King:
You’ve got a lot of experience in this space, from Cabbage to 8Fig and in between. If you’re advising somebody that’s looking to get money for their physical products business and of course you want them to come to 8Fig but if you’re just giving them general advice, if you didn’t work for 8Fig, what would you say? Some of the big things that they should look out for? What are some of the red flags that when they start talking to different lenders that they should be like, I don’t know. This doesn’t sound like something that would make sense for me.
Russell:
The first thing I would say is not necessarily a red flag, but it’s just a piece of advice I would give a seller is have a relationship with a financing company and a lender beforehand. Do your due diligence before you need the money right. Don’t get into a situation where it’s like I need the money today. I got to go find somebody to give me the money today. Do a little bit of research. Have a relationship with a financing company before you think you need it. I think that’s going to be super beneficial to sellers when they do need that money.
Kevin King:
What do you mean? Someone like you. I should go ahead and apply. Someone listening I don’t need money right now, but who knows, six months from now, a year from now, I might. Should I go ahead and apply with 8Fig and you run me through the system, say, oh, you qualify for a hundred grand or whatever, and I say, that’s nice, I’m going to put that on hold for right now, but you’ve already established a base relationship and everything. Is that something that would be a wise thing to do?
Russell:
I think that’s one way to do it, and the reason I say that is because there’s no impact to your credit score to apply. Right, you can come in, you can apply, you can connect your store or stores and you’ll get a plan that’s. You know.
Kevin King:
Here’s what here’s you want to qualify for it so that you could actually go. Well, maybe I couldn’t launch another product, because I know I can get this.
Russell:
That’s right, as of today, that’s what you’re qualified for, right? And then and most people don’t disconnect their store, right, we don’t do anything to that store other than visualize the data. We view the data. We don’t change the data, we don’t update the data, we don’t do anything with it other than understand how your business is performing and as you grow, the day you came in, you might be qualified for $100,000. In six months, if you’ve grown a lot, then we could go back to you and say that you know what now you’re. Now you’re qualified for 250,000. Right, so it would. It would kind of make that process a little bit simpler for you. You know some of the, some of the red flags I would look for. I would look for, look out for people that are asking for information that that maybe is not financially related. Some people just want to get a lot of information, whether it may be a social media information or some of this other types of information. I would look out for that because chances are they might be looking to do something different with the data. Maybe it’s sell the data, maybe it’s do something else. So anyone that’s not strictly focused on your financial data for your business, I would say that’s one red flag. Another red flag, I would say, is people that are just willing to stack on top of stack on top of stack and giving loans and loans and loans. They’re not really looking out for your best interest, right? If they’re giving you money without any regard for if you can afford to pay that back, that’s going to be a red flag, right? If someone comes to you and says you know what you’ve already got three of these loans, it’s probably not the best for you to take another one right now, then I think that that may be a red flag.
Russell:
But I also think that goes back to you know, build that relationship with someone that you trust, right? Whether it’s 8Fig or someone else. I think 8Fig is a great choice, but build a relationship with someone you trust and build a relationship with someone that is going to be there for you, right? So, like Cabbage, for example, when I was at Cabbage and I don’t know that it changed at all through their life cycle a salesperson never worked with a seller. It was all completely automated, so it was just, you know, there was no relationship, there was no one looking out for that seller. It was the information that was in. There was what the outcome was, whereas you mentioned you had a relationship with a financing company and it helps you get money when maybe the algorithm said no right. So I think that was all relationship based and I think that’s the biggest thing I would say is build a relationship with somebody you trust and then I think it would be beneficial for both parties.
Kevin King:
You’re talking about these. The one of the red flags is the additional information. When I got some of these mafia loans, I remember Everest was one of the companies and they actually sent somebody out to my house to actually take my garage and my inventory and everything. I was like what the heck? I was like, all right, whatever, I need the 80 grand and to this day, it’s been. I think 2016 was the last time I took a loan and I still get calls eight years, nine years later. Hey, we have your 100 grand ready, thanks for applying. And they’re just selling my information left and right to these boardrooms. They’re just blowing up my phone all the time sending me emails and stuff. I’m still on databases.
Russell:
Yeah. While you’re doing the research, make sure that the company that you’re working with is e-commerce focused, right? Because, as you know better than probably anybody, Kevin, these e-commerce businesses, they’re different than traditional brick and mortar businesses. There’s different information, there’s different data, there’s more data available, right? So make sure that that the organization you’re working with is focused on e-commerce and is focused on some of the channels that maybe you sell.
Kevin King:
I remember when I went back in the day, I went into the bank to try to get a loan at Chase and they just looked at me like e-commerce, that’s not a business, correct? No, we don’t. We’re into real businesses. You’re working in your underwear in your house. You have to give $100,000. What? No, I don’t think so. Right, right, and it helps that, like you said, the owners come from the supply chain and come from e-commerce and they understand that whole the cash flow cycle.
Russell:
Correct.
Kevin King:
The cash flow cycle that it takes to actually do this. So what do you see happening with a new president coming in? Do you think interest rates are going to slide down? Do you think prices are going to go up? You’re going to see more people needing money because of these tariffs that may get implemented and cost of goods are going to go up, and so there’s going to be additional needs for capital. What are you guys projecting, or what’s your best guess on what may happen?
Russell:
So you know, there’s a lot of posturing right now around tariffs and around prices and around interest rates and those type of things. I think, going into the election, I think everybody was thinking if one thing happened, interest rates would stay the same or go down. If one thing happened, interest rates will go up and I think everybody at least everybody where I’m from expected interest rates to stop and prices to fall once the election results that happened have happened. Now, with all the posturing around tariffs and those types of things, I think everybody’s just kind of in a wait and see mode, right. What’s really going to happen? Are the tariffs going to be imposed? Are they not going to be imposed? What’s really going to happen? What’s posturing versus what’s going to be actual policy? I tend to think there will be some tariffs.
Russell:
So I think e-commerce businesses are going to have to be ready for that in whatever way that is. So I don’t think there’s going to be a need for more money in terms of lending until prices start coming down just a little bit, because what we’ve seen at 8Fig and I think what the market has shown, is that there was a little bit of a softening in the market because of the election and people not knowing. I think it’s going to be a little bit slower recovery from that softening in the financial industry just because there’s still a little bit of an unknown. So I think there’s going to be opportunities for funding. I think it’s going to be the due diligence that’s being done now because of companies like Sten having problems because of companies having a lot of defaults is not going to get any easier. I think financing companies are going to do some pretty tough due diligence for the next period of time, but I do think second quarter of next year I think there might be a little bit of easing of some of that difficulty.
Kevin King:
There’s still a lot more new players coming into this lending or advance system for e-commerce. All the time there’s I hear every few months there’s a new one that pops up I haven’t heard about. So I I guess a lot of people are still seeing massive opportunity in the space, just like there’s tons of people doing refunds for sellers, you know, and grabbing a piece of that pie. There seems like more and more lending options of various degrees are coming out.
Russell:
Yeah, yeah, and I think I think the the pandemic was kind of a a big uh, a big driver that. But just because e-commerce, with the boom in e-commerce, with the pandemic, um was, was, was huge, I think the trajectory of e-commerce was up and to the right. But then when the the pandemic hit, I think that hockey stick kind of kind of took effect and I think it’s going to continue to do that. And with all these new and bigger e-commerce sellers, there are going to be people that want to provide funding to them. So I think you’re going to continue to see that. But I also think the ones that get into trouble are going to get into trouble pretty quickly and I think that’s going to be something to watch too.
Kevin King:
Awesome Russell. This has been a very fun, very insightful. If, if people need some cash and I want to consider 8Fig what’s the best way to do that?
Russell:
Yeah, the website is www.8fig.co . You can type in .com. It’ll take you there too, but the you there too, but the website is 8figco. You can reach out to me on LinkedIn, Russell Walraven. You’ll see the bald head. You’ll know it’s me and I can connect you to the right people. But we’re going to be out and about more this year. Right, this past year, we didn’t do a number of events. We didn’t do a lot of awareness building things. We’re going to do that a little bit more in 2025. So, if you happen to run into us there, introduce yourself and let us know. You heard us on Kevin’s show and we’re. We’re really, we really appreciate you letting us be on the show and I appreciate it. I listened to your show and I always, always enjoy it, so it was fun for me to be on.
Kevin King:
Well, I’m glad to have you on. Glad we could talk a little shop here. I’ve got a little bit experience in this. So it’s even fun.
Russell:
That’s right. Well, stay off those mafia loans, stay off those.
Kevin King:
Yeah, I haven’t had one. So I’m done with those guys. I don’t have to worry about waking up with a horse’s head in my bed. That’s right. That’s right. I’m glad of that. Appreciate it, man, thanks.
Russell:
All right, thanks.
Kevin King:
I hope you make lots of money and have some good ideas about what you might be able to do now going forward to grow your Amazon business and some of the options available to get the cash you need to buy that inventory, to do those ads, to really scale your business up. We’ll see you again next week with another awesome episode of the AM/PM Podcast. Until then, remember life is to be spent, not saved. Life is to be spent, not saved. See you again next week.
Enjoy this episode? Want to be able to ask questions to Kevin King live in a small group with other 7 and 8-figure Amazon sellers? Join the Helium 10 Elite Mastermind and get monthly workshops, training, and networking calls with Kevin at h10.me/elite
Make sure to subscribe to the podcast on iTunes, Spotify, or wherever you listen to our podcast!
Want to absolutely start crushing it on eCommerce and make more money? Follow these steps for helpful resources to get started:
- Get the Ultimate Resource Guide from Kevin King for tools and services that he uses every day to dominate on Amazon!
- New to Selling on Amazon? Freedom Ticket offers the best tips, tricks, and strategies for beginners just starting out! Sign up for Freedom Ticket.
- Trying to Find a New Product? Get the most powerful Amazon product research tool in Black Box, available only at Helium 10! Start researching with Black Box.
- Want to Verify Your Product Idea? Use Xray in our Chrome extension to check how lucrative your next product idea is with over a dozen metrics of data! Download the Helium 10 Chrome Extension.
- The Ultimate Software Tool Suite for Amazon Sellers! Get more Helium 10 tools that can help you optimize your listings and increase sales for a low price! Sign up today!
- Does Amazon Owe YOU Money? Find Out for FREE! If you have been selling for over a year on Amazon, you may be owed money for lost or damaged inventory and not even know it. Get a FREE refund report to see how much you’re owed!
- Check out our other Amazon FBA podcasts including the Serious Sellers Podcast, as well as our Spanish and German versions!
- You can also listen to the AM/PM Podcast on YouTube here!