Brian Ballowe on Fraud, Private Credit & the Future of Specialty Finance

[00:00:00]Welcome back to another episode of In Focus with Havsign Funding, the podcast where we discuss insights, trends, and strategies that drive success within specialty finance. Today we have a very special repeat guest, um, Brian Belaloo with Trade Cap Partners. Um, you know, Brian, some of our viewers got to listen to you the first time you came around.

[00:00:21]We're really excited to have you back on kind of having me back.

[00:00:25]>> Yeah. dig in um into some things that are changing. Um for our viewers and listeners who are not aware, uh Brian Blue is with Tradecap Partners. Uh they are a purchase order financer. They spend a lot of time in the middle of deals working alongside factors, ABL lenders, and banks, which gives them a very unique perspective on how transactions are actually getting done today. Uh it's a it's an increasingly popular product. we're hearing it uh you know myself hearing about it a lot more than it seems like when I first started my career. Uh so that is very exciting.

[00:01:03]But what I'm really looking forward to in this conversation is getting into some of the real dynamics that are shaping up in the space right now. um you know whether that's fraud in alternative finance um increasing competition from PI in private credit and also where deals are breaking down due to whether it's poor uh structure communication you know we're seeing a number of those transactions in the news as well. So really excited to kind of dig in and excited to have you back on.

[00:01:30]>> Super excited to be here. Thank you for having me.

[00:01:32]>> And to my co-host who was also on the the first uh episode with you on. got >> Brian's the first repeat guest we've had, isn't he?

[00:01:41]>> He is the very first.

[00:01:42]>> So, congratulations.

[00:01:43]>> I I will claim that title. I promise you.

[00:01:45]>> You're a charter member of the two-time.

[00:01:48]>> There we go. There we go.

[00:01:50]>> So, I guess, you know, we'll just kind of jump right into it. Um, can you kind of walk us through, you know, who Trade Cap is, how and how you got into, you know, purchase order financing? I believe you've been in the space for almost 30 years now. um kind of share that story with us.

[00:02:08]>> Yeah, so uh TradeCap like you mentioned is a uh focused dedicated PO Finance standalone company. Uh, I've been doing this for almost 30 years and we focus on what we know we do best, which is this incremental funding solution that essentially creates availability well before what the balance sheet can support for companies that are growing really quickly, have chunky kind of seasonal sales, >> but the mismatched of cash flow where they don't have the immediate availability to execute on profitable funding uh business opportunities, sales opportunities with creditworthy end customers.

[00:02:44]So when you have a situation where you've got a a large order where suppliers whether they be domestic or overseas require cash upfront and in customers that are definitely requiring favorable payment terms net 30 net 60 days you've got this gap that exists and so how do you fund that gap and so PO financing over the last three decades essentially has really become a nice tool for companies to be able to execute on sales opportunities but also the dynamic IC of our complimentary financing to existing senior lenders has really gained a lot of strength because we provide a lot of integrity, a lot of deal structure in addition to the profitability of the you know the mutual borrower. So that there's just a really nice fit there.

[00:03:30]>> Mhm. So where do you typically plug in?

[00:03:33]So if you you know maybe to a newer factor asset based lender that you know maybe has a client in it that situation where they're seeing you know an increase of seasonal sales like where do you plug in when you know do you get involved what is the the practical structure and what does that look like?

[00:03:53]So yeah, the the the good thing is there's not a lot the the PO finance space is pretty finite. So there's not a lot of us that have been doing it and are standalone that do it, you know, in my in my opinion the way it should be done.

[00:04:07]>> Um so our reputation has enabled us to really have a lot of good contacts in the industry and so when company when senior lenders factors asset based lenders see their clients say hey we've got this big order do you guys provide PO finance? Well, they say no, we don't, but we know who does. And so, ideally, we get brought in in in in enough time to be able to get in place and to be able to provide the financing so that companies can fulfill deliveries. But, I mean, it can be anywhere, Nolan, in in the cycle. I mean there a lot of our uh referrals come from senior lenders who have had two threeyear relationship with borrowers and now they're just figuring out that hey we really do need PO finance and hey we're no longer will willing to stretch provide the over advances anymore that's just not what we do or the over advance request is getting a little bit too large. So now let's let's hand it off to someone who really truly knows what they're doing, can structure it properly, who has the balance sheet to support our borrower, but yet isn't there to take our borrower away from us. They're actually adding value so that there's more receivables in the back end. The receivables are going to have the integrity that we want.

[00:05:18]>> Um, so we we ideally get brought in >> on the early side of things, but we can be brought in when an a factor in ABL is trying to win a business, too. They're trying to win a relationship. Hey, do we don't provide PO, but let us provide you a turnkey solution by bringing in someone like Trade Cap where we can win the business from either taking away an opportunity from an existing senior lender that wasn't quite working or maybe the senior lender saying, "Hey, it's time to time to go find another home."

[00:05:45]>> Right. So, I've always found PO financing really one of the more it's just a fascinating area because it's really I think the purest expression of the the meeting place between real like nuts and bolts execution and manufacturing and and wetting that with you know financial structuring. I think there there's just very few places I think there you see really both so that so closely aligned. So like I mean obviously what Nolan was talking about was from the perspective of other lenders you know when they're you know asking about when they bring in a PO when they would refer bring in a PO financ like trade cap >> but if I'm a like if I'm a lender out there who's watch sorry if I'm a if I'm a small business owner out there >> what types of businesses are you really are really kind of the ideal purchase order finance customers for you? Yeah, I I that that's a really good question and the good thing is is that it's become more of a widely accepted better known product. So there is information out there. There are resources for folks to say am I looking for PO finance? Am I looking for equity? So I know that there's a solution out there.

[00:06:50]>> But the businesses I think we're pretty broad-based in terms of the businesses that fit. That's a great thing about purchase order finance. It's not specific to hey, you know, you've got to be a certain revenue, you got to have a certain type of product, you have to have a certain type of margin, although margin is important, but really I think what really enhances the PO financing solution is how many industries it can serve.

[00:07:16]>> Sure.

[00:07:16]>> Yeah.

[00:07:17]>> Whether it be heavy equipment, whether it be garments, whether it be toys, whether it be food, alcohol, you know, whatever, whatever it may be. As long as you are a company that's either manufacturing or distributing a tangible product, >> selling to a creditw worthy in buyer with margins ideally north of 20 25% >> where you can show and demonstrate that you can perform or your suppliers can perform and keep up with that demand.

[00:07:44]That is a potential great opportunity for PO Finance. I think it's probably the industries that are a little bit more challenging are more the commoditized products where the margins are 10 15% some of that high volume lower margin um the construction related aspects of you know of financing where hey I'm selling to a general contractor and the project is not ready yet we've got to be bonded uh and then third party reimbursement medical stuff >> the same thing that are challenges industrywide but other than that it's free game in terms of how we can help Mhm. So, what do you you know, if looking at PO, it's it's a smaller community if you're comparing it to, you know, within the the specialty finance space.

[00:08:25]>> Um, what are some things that Trade Cap does different? You know, maybe, you know, essentially what's your competitive advantage when you're looking at at your competition others in space like um what would you say makes Trade Cap different?

[00:08:40]>> Well, we'll get into some of the specifics. I think first and foremost, we've just been collectively between myself and my business partner, we've been doing this for over 45 years. So the longevity >> of a proven business model through proven structure works. And so I think when companies are looking for a niche solution, when lenders are bringing their clients in to talk to a third party lender, this valued relationship, they want to make sure they're bringing it to someone >> who they trust >> who they know they can execute, who they know they can get a quick answer, a yes or no. And if it's a yes, how do we execute quickly? Hey, we've worked with you guys at TradeCap in the past. We know how you work. We know how the workflow is going to happen. we can provide the solution very turnkey and very seamlessly to the client. So, first I think our our our our our time in the industry I think sets us apart. We've seen a lot of the deals. We are not experts at any one but educated on pretty much everything >> which helps because our clients feel comfortable that we truly understand their business.

[00:09:43]>> Um I think then you get into some of the dynamics. So in PO finance, you've got companies that are either distributors.

[00:09:51]>> They're buying finished goods from a third party. They're not doing any work to the product. They're just having it produced, >> delivered to their end customer to fulfill an order.

[00:09:58]>> Right?

[00:09:59]>> Then you got the clients that are truly manufacturing the product, buying nuts and bolts and screws from 20, 30, 100 different suppliers, bringing it into their own facility and producing to fulfill that order.

[00:10:11]>> Right?

[00:10:12]>> We have had a lot of success with those opportunities. Why? Well, because there's a lot of moving pieces and it's hard for a lot of the other PO lenders to really truly get comfortable. And it's understandable. There's a lot of moving pieces. A lot things that could go wrong. Yeah.

[00:10:26]>> But with demonstrated history, with a good team in place that has good real time data with suppliers they've used in the past >> to creditworthy end customers to a product they've produced where they can show you succinct costing and production timelines. Great opportunity. So I think that's what you know I think that's another value proposition is that we really get our hands dirty on those production >> deers >> and I think more than any other type of assetbased lending and correct me if I'm wrong I mean you really are getting out there and visiting walking the the factory floors looking at the inventory I mean that that's really a lot more I mean you're really in in the process >> boots on the ground >> well and and I mean unlike a traditional lender who's lending on a receivable or a certain percentage of cost on inventory that's in a warehouse already produced. Um, you know, I've I'm over and above extended beyond the balance sheet. I'm taking on execution risk.

[00:11:21]It's almost kind of a transactional equity uh exposure. So, I've got to really feel comfortable knowing that with my capital, how are you going to perform? Because if you don't perform, if those costs balloon, if there's delays in production, >> I've got components. I've got whip inventory that ABL lenders, traditional banks don't lend on. It's not a great position to be in. So, I've got to really have that comfort level of being convinced that they know how to execute because that's that's the risk I take.

[00:11:48]>> Right. Exactly.

[00:11:49]>> So, you've been in the space, you know, for quite some time. You've seen, you know, it feels like just about everything. Is there anything that you're still seeing that's new? Like anything new that you're coming across or is it been pretty standard, you know, for the past almost 30 years? you know, as they say, as more things change, the more things stay the same.

[00:12:12]>> You know, and and this business, uh, I think anybody that's been in it long enough, you know, we kind of come in cycles, >> right?

[00:12:18]>> Um, there's always the new hot product.

[00:12:21]>> Yeah.

[00:12:22]>> There's always the new, you know, lender or lenders or subset of lenders that come in that say they can do this, you know, great allfitting product that, >> you know, unfortunately doesn't always come to fruition. you just stay in the course, you stick to your knitting, you you know, you you you try to refine what you're doing. But I really think has there been something that's new that's out there that's really been kind of unique? No. I think there's just the workflow and the I think the expectation, the familiarity of what we provide has helped out a lot.

[00:12:56]Familiarity in the marketplace to borrowers. They know that this product is out there. They just need to know who really truly does it and executes. But then on the senior lender side, the ALS, the factors, the banks, I think they've become more familiar with the product.

[00:13:10]They're more accepting of bringing someone like else like us in which is very helpful. So the the the ease and efficiency of being able to provide this solution, I think, is probably progressed, >> but at the end of the day, >> you still have to do what you know you do best, and that's what we've been doing for 30 years. So changing changing gears a little bit and being an accountant and a CFO this is obviously you know really important to me and and you mentioned the fact that you guys are taking on almost like equity type risk because you're looking at really execution. So if I'm a borrower how do I think about PO financing as part of my overall capital stack? Is it is I mean where I mean because obviously like you said it feels a little bit like an equity type risk but how would as from your perspective but from my perspective how should I view it? Yeah, that's a super question. Um, from a from a structural standpoint, you should really not ideally see any more of a structural constraint than you already are seeing. And and ideally, you've already got best practices in place to be able to source product and deal with those suppliers. So now all you're doing is just essentially just providing that transparency to a lender who's helping you execute when you wouldn't have been able to execute otherwise. So the the the information requirements uh the workflow really ideally shouldn't be any different than what it already is. Um from an accounting standpoint I think the best way to analyze the funding solution because it's transactional because you can use it as you need to which is a huge value to begin with is really looking at the order or orders that you need financing help with and looking at the costs as an additional cost of goods sold. So yeah, it's more like you said, it's not like it's not a a piece of your capital stack that's going to be that's >> it's not permanent.

[00:14:57]>> It's not permanent. It's it's a transactional piece of the capital stack.

[00:15:00]>> Okay.

[00:15:01]>> And and and the great thing about that is you can isolate those opportunities internally from a costing standpoint, but you can also isolate those opportunities with the sales team saying, "Hey guys, look, we've got a solution here. We are well capitalized.

[00:15:17]let's focus on these opportunities that we know we can execute on that really brings that incremental revenue that really drops to the bottom line after a certain >> and talking about like it's a cost of goods sold that's something that's an perspective I hadn't thought of and that's that's a very interesting way of thinking about it >> and and it's again it's not a permanent cost you can look at and say I'm I'm using trade cap I'm using PO Finance for a defined 90 120day window knowing that once this transaction is delivered once the goods are are delivered once the invoice is generated Once the senior lender advances and takes trade cap out, the fees that I've incurred for that finite period of time, I can equate as a additional cost of goods sold and I can understand what that meant. Yeah.

[00:15:58]>> Yeah.

[00:16:00]>> Well, jumping um around a little bit more, >> one big topic that keeps being talked about, fraud. Um, really curious, you know, what are you, you know, what you're seeing right now? Are you coming across it more often, less often? I mean, there's stories out there. Is there stuff in the news? Um, just curious from your perspective what your side on it is.

[00:16:28]>> Yeah, I I I I love talking about this, but I'm also like >> scared to because as soon as I talk about it, am I going to get hit with something? you know, I I I think what is going on out there is yes, there are always going to be the bad actors that are trying to figure out the newest game and they're smart, >> very smart. And with obviously this whole onset of artificial intelligence, the ability to replicate and duplicate documents and you know uh uh hide and replicate voices to confirm orders and and and and replicate bank statements.

[00:17:08]All the things that we've been able to as lenders take as standard to be able to verify and validate >> is kind of fair game now. So you have to keep that in your mind. It is a different dynamic. I think that the amount of capital that is out there that is unstructured that is chasing deals that is trying to be deployed is created this environment that is ripe for fraud to be effective.

[00:17:38]>> Why? Well, as we've seen with some of these large cases, the uh the the the requirement and the need and the desire to provide loose capital quickly and to take people's word for it because if you don't, you have a fear of missing out and then you compromise your structure.

[00:17:57]Yeah. So, I think the very competitive nature of what we as lenders, we as funding sources are feeling the pressure of is creating the environment for fraud to be effective. I think um if as long as the lenders are still taking a deep breath and saying, "Hey, look, we need to still stick to verifications. We need to still stick to, you know, documentation. We need to make sure that we're dotting eyes and crossing tees and checking boxes. We can need to be a little bit more efficient how we're doing it >> and quicker to a decision, which is ideally what a lot of these tools are allowing us to do. But to compromise the very essence of what has been proven and has worked over the years is just absurd to me. Um, and you know, we just won't do it and there's really no reason to do it. So yes, there's been fraud out there and there's a lot of it going on, but I truly do feel that the lenders themselves are as much to blame in certain situations.

[00:18:54]>> Yeah. So what do you think? I think you said, you know, what's creating the ripe environment is, you know, the the excess capital that, you know, is trying to go in quick deals. Um, move it. What do you think is like the driving force, the underlying drive behind like all this additional capital in the space, groups that are popping, you know, up left and right, trying to scale, you know, overnight? Like what what do you think's causing that type of environment? You know, I I I wish I was a a macroeconomist that could speak probably more validated as to what's going on, but I mean there this whole concept whether you are a borrower having access >> to these funds, whether you're a employee, a stakeholder uh of these funds that are providing this capital or whether you're just an investor who are you looking for other means of you know trying to find yield above and beyond the stock market, there is this desire, there is this nuance, there's almost this, you know, you want to brag about how you're investing in these, you know, private credit funds. Yeah.

[00:20:04]>> And we expect the returns to be there.

[00:20:06]We expect the deal flow to be there. Um, so I I I I don't know truly other than I think it's just the phase that we're in of, hey, you know, no longer does, you know, a a yield on the stock market make sense anymore. We want to be in private credit. So when you've got all this money flowing into and it's not coming just domestically, it's coming from overseas as well.

[00:20:31]>> Which is a huge source of capital, the pressure that is on these fund managers, these providers to get funds employed >> is remarkable. And here's the problem in my opinion is that there's really no way to truly monitor and manage what's going on within these funds >> until and maybe it's too late.

[00:20:52]>> Until it's too late. Yeah. I mean h how how how how these funds are marking their portfolios is in my opinion kind of arbitrary and in many instances they may not truly know >> right so there's a there's a lot of variability out there as to what's going on but the amount of capital the amount of pressure and the difficulty to manage it has been challenging so where does that go that goes into the moral hazard of let's get as much capital out there as we possibly can you know it's it's not my personal money you know I I I I it's my job to go out and find deals um you If they work, they work. And as long as they work, everybody's the smartest person in the room. But when they stop working, then it becomes this contagion that I think is going on, this uncertainty of, okay, is this private credit issue a bigger problem? Is it going to spread throughout some financial institutions?

[00:21:39]What ramifications does that have?

[00:21:41]>> So, it it's interesting, but it definitely has caused and muddy the waters for a lot of us out there because there's just more options for borrowers to have.

[00:21:48]>> Yeah. I mean and and you know you're getting we actually talked about this with Jim Cretella a couple a few weeks ago on a previous podcast and you know I think it comes to the question of okay is this a systematic issue like we talked you I'm sure you've had the first brand conversation with many many people as all of us have >> um and I don't want to be I don't want to go over that ground too much but you know again I think the question is like when you look at a first brand or traure or or a lot of the other um you know headline grabbing fraud cases is, you know, you know, obviously I think the the cases are interesting, but I think the more interesting question is, are we, like I said, is this a systematic issue because of private credit or is the are these one-offs that are just getting a lot of press out there and and I see I see arguments on both sides and I'm not 100% sure what's >> Yeah, I I I think you can make an argument for both. I think there is some systemic aspect of this going around but I do think that the bigger issues have been more of unique >> uh situations where you can look at the failures on both ends >> of course.

[00:22:55]>> Well I think even with your with your guys I mean you know and correct me if I'm wrong but for you so much of what you do again like we talked is very tangible getting your hands and and feeling the ground. I I tend to think a lot of the failings that of like a a first brand, you know, we read from reading through a lot of the the court documents, I would assume, and correct me if we're wrong, a lot of that based on kind of your process is hopefully you're a little bit more immune to than than a lot of lenders in that case.

[00:23:22]>> Yeah. I mean, you you you you certainly like to think that what we adhere to on a daily basis works. And I'd like to think that over the 30 years that we've been doing this, there's some proven, you know, structure that it does work.

[00:23:35]>> Um, but look, at the end of the day, I mean, we all are human and we all have this greed factor and we all have this fear of missing out and wanting to build our portfolios and we've got other people to answer to. So, you you know, you you you don't want to have the hotel 100% occupied.

[00:23:50]>> Yeah.

[00:23:50]>> Because you're not charging enough. But, you know, then if you don't charge too much, then you're not you know, then your portfolio is hurting as well. So, where is that fine line? and and and I I I truly believe this.

[00:24:02]As much as we try to become more efficient, as much as we try to be become more scalable, to try to take a lot of the human error out of things, and there's a lot to be said about that, especially on a normal day-to-day information gathering, maybe some of the more number detail uh analysis where it can be done uh safely and efficiently through an AI tool or some type of agent that goes out and just watches and looks and examines the relationship aspect of what we do in this this industry, whether it be traditional banking, factoring, assetbased lending, PO finance, standalone inventory, whatever it may be. The relationship side of things is so critical.

[00:24:46]>> Agreed.

[00:24:47]>> The the conversations, the wait a second, why are you coming to me? You've got an order. Let's talk about PO Finance for a second. You come to me, you've got a large order. Well, what did you do in sales last year? Well, I did, you know, I've got a I've got a million dollar order and I did $50 million in sales last year. Okay. So, how did you fulfill how did you get through that $50 million of orders last year? Were you self financed? Did you have a lender?

[00:25:12]What happened? Now you're starting to peel back the onion a little bit, asking the questions, trying to learn the business, right?

[00:25:19]>> What do your trade payables look like?

[00:25:21]Well, now you can start seeing the picture that, hey, this is there's a bigger issue here other than just the fact that they've got an order that they need financing help with. I think that dynamic is lost a little bit. I think the relationship aspect of truly understanding a business and understanding the why of why our clients are looking to us or looking for capital has been lost >> and it's an art that's proven and you can uncover uncover so many issues that way. Uh I think it's so you know important to maintain and stay curious and just ask that that extra question.

[00:25:54]So much is uncovered um you know where it's just like one question away and you probably would have caught something that you know you you typically might even ask that question but you know the conversation was going well. are you short on time? Like it's just the little things that you know uh in hindsight obviously it's also easy to say like >> um >> you know it's a lot of times just those little things but just staying disciplined and and true to your process.

[00:26:21]>> Well and and Nolan the other thing about asking the questions and developing that relationship is on the flip side you also develop a rapport with the clients and the clients really appreciate you really truly understanding your business. you're building trust, rapport, relationship, like you understand them more. You're able to uh prove yourself more as a partner like >> you know >> and just building that foundation.

[00:26:46]>> It's taking as much an advisory position more than just a capital position. I mean, you don't want to be the dumb capital in the structure.

[00:26:51]>> Absolutely. Plus, you know, keep give people an opportunity to talk. They'll tell you they'll they'll tell you what you want to hear and they'll tell you probably some things that you're glad that they told you that you'll have to put in your back of your mind a little bit. So >> yeah, for my for my days in audit, it was like when you're talking to a client, just let them talk. Just let them talk and don't inter don't interrupt them. And because amazing the things you'll learn if you just let let client talk.

[00:27:15]>> Yeah. It's like it's like it's it feels like people have to fill the room when there's almost like a a moment of silence so they start oversharing or you know it's um it's funny how that tool works but it's just like human nature that you >> you do it long enough where there are there are things that do come up in a conversation that is just as effective of a due diligence tool >> as actually doing the checks >> with whomever you're doing the checks.

[00:27:44]It it is inevitable that certain characteristics and personalities will show themselves and you know that's where you learn a lot.

[00:27:52]>> Yeah. So what would you like what would some advice be to lenders that are still trying to maintain speed and efficiency you know while not missing anything because we we're in an environment where like those are two you know some of the most important things when it comes to winning these deals. Everyone's moving quick. Everyone's trying to be as efficient as possible. Um I I you know I that is the great question. I mean we're we're again we're under so much pressure to speed to execute, speed to propose, speed to underwrite, speed to fund, speed to all these things >> and it's understandable.

[00:28:29]>> Yeah. Um, but I think it is certainly if we haven't already learned where some of that reckless um, uh, structure and reckless uh, underwriting and reckless account management gets to gets us. Then I don't know how we're going to learn any differently. If we take a deep breath and we say, "Hey, let let's maybe develop and implement some internal workflow protocol that allows us to maintain our efficiency, but allows us to be as thorough as we have been in the past." And it's incumbent upon, you know, business development officers and certainly those that are, you know, underwriting and and and and doing the account management. I mean it requires us to really be a little bit more diligent to learn the deal to be more effective and efficient and quick to action points.

[00:29:19]>> You know that that is the value of what a lender can provide. It's not just make a decision for the sake of making a decision. It's let's implement internal uh of protocol and workflows to make those decisions quickly but yet not compromise what we're doing. So it's that's on us. So I I would say that you know how do lenders do that?

[00:29:41]>> Um you you you can't be bullied into for or forced into making decision that you know you shouldn't be making but you also know that you could probably do better in the manner in which you gather documents, the manner in which you internally communicate and the manner in which you actually get back to the clients. And so whether there's a little bit of a taking a deep breath, not being bullied, but also internally making sure that you're doing things the right way by the client to be quick, to be able to be efficient.

[00:30:11]>> That's on us.

[00:30:12]>> I mean, do do what you need to do, do Yeah. Do your job, just do it better and do it more efficiently.

[00:30:17]>> Yeah.

[00:30:18]>> Uh, one more thing I want to ask you about. I mean, really, literally almost a year ago, I think we were both at the independent sponsor conference for SFET, by the way, fantastic conference. Um if you if anyone in the space I would highly highly highly recommend it to tend if you can. Um so that's my plug for they deserve it. It's a great it's a great deal.

[00:30:37]>> But last year while we were there um that's when the the administration announced the the the first round of tariffs. I guess it was what it was Independence Day I think is the term for it.

[00:30:48]>> And so obviously it was it was a lot of okay well what does this mean? What does this mean for people in the space? And obviously, you know, tariffs have moved all over the place over the past really 12 months since then. So, can we kind of give us a retrospective? What has the last year for you guys been life like in in the wake of all the the tariff uncertainty and where do you what do you see going forward in this?

[00:31:07]>> Yeah, I it it it definitely caught us everybody uh offguard because it was just the uncertainty of what what is this going to look like now?

[00:31:15]>> Right. Yeah. Is this going to be permanent? Is this going to be transitory? Is there going to be some negotiation? are the you know the other countries going to give is the United States going to give how are our clients going to be able to react is this going to be inflationary you know what what impact is this going to have on the consumer um what we found was the resiliency of the entire supply chain >> um yes there was some pain um yes the importers who had focused all their business on one supplier had to either really reconfigure their margins had to negot negotiate if they had the ability to with their in customers with their suppliers, but a lot of the a lot of the uh importers already had redundancy in supply chains. So they th those folks that were that were not that were that were not concentrated on one supplier really took the benefit of it. What we also learned was that there was a lot of room to absorb those margins. In my opinion, >> the cost structure overseas was the the biggest I think shock that was well they were able to absorb the margin compression significantly. They were we didn't see a lot of adverse impact in at least initially because the suppliers were saying hey look we'll we'll cut our costs um and they were able to you know to to pass that along to the buyers as well. Um so luckily we were able to get through that now as the tariffs kind of changed and we were able to advocate a little bit on that that helped out. Um a lot of the suppliers had to reshore >> they had to move their production to different you know manufacturers that took a big hit. You can't just snap your fingers and say hey I'm going to move production from China or from India to Vietnam.

[00:33:03]>> Yeah.

[00:33:03]>> Um you know that takes a long time.

[00:33:05]There's a lot of cost that go into that.

[00:33:07]So there was a little bit there was a lot of hurt there. Um I think though that that uncertainty has dissipated. There is still the concern of where things are going to be and it changes. What are my margins truly look like? But from a standpoint of being able to still make a profit to be able to execute. I think we're hopefully on the other side of the tariff concerns.

[00:33:31]>> It's still a bigger cost, >> right?

[00:33:34]>> But it's now being absorbed. it's being um it's being understood a lot more as being dealt with. So I I hope knock on wood that that's just now kind of come and gone.

[00:33:46]>> But you know, as an aside, it is interesting and I think it's a positive in all of this that >> you know I y'all probably read the stories that with just in time inventory cycles that we would just had this brittle supply chain and that the least little thing was going to upset it. And I think if if there's anything I guess I've been impressed with and and maybe it's a I think it's a positive society that supply chains have adjusted were pretty dynamic and were did have flexibility and and did did make it through this. So or may I don't know if that's a polyanish view but that does seem to be one of the stories that coming out of this.

[00:34:20]>> It it was painful. Um, but I think it came with a lot of good lessons and I think that that aspect of not putting all your eggs in one basket to be able to have redundancy and the integrity of the supply chain. But you also brought up a really good point, this just in time model versus a just in case model.

[00:34:38]Um, you know, I think and and that and that is what we're seeing a lot of with our customers is the dynamic of how much inventory should I have in production, >> right? But on the flip side, a lot of the retailers here domestically are pushing their suppliers to a just in time inventory model, too, where they're pushing off a lot of the cost associated with bringing that inventory in. Now, that's a whole different dynamic that's really posing, in my opinion, a challenge on a lot of the underc capitalized suppliers doing business with a a Walmart or a Costco or some of the big box retailers because they're responsible for incurring all those costs, >> right? having it ready to be shipped and then when the big box retailer says, "Hey, now ship it." I can get I can garner the benefit of just having that inventory on my shelves just as long enough so that I can push that cost back on >> pushing the balance sheet. That's right.

[00:35:35]Balance sheet hold off of my balance sheet onto the supplers's balance sheet.

[00:35:38]Definitely.

[00:35:38]>> And and oh, by the way, I'm going to also push my uh my pay my my my payment terms from 30 days to 60 days as well.

[00:35:49]So, kind of, you know, we didn't get to touch on everything that that we wanted to today, but there's a few things that I, you know, I can't let you leave without, you know, kind of picking your brain on. So, as we look in, you know, a lot has changed, a lot is changing. Um whether that's just with uh you know the industry as a whole um you know any you know new government uh you know rules and regulations.

[00:36:19]>> Um what are you paying closest attention to here in the next 12 to 24 months?

[00:36:25]Like what do you have your eye on and what are you already seeing starting to shift?

[00:36:30]>> What's big focus? Yeah, that I I I I it's a great question and I'm I'm I'm looking forward to hearing other people's answers as well. Um I I I'm looking at interest rates.

[00:36:41]>> I'm looking at integrity of supply chains. I'm looking at this dynamic of just in time inventory versus just in case inventory and what impact that's going to have on small business. Um obviously AI is this buzzword. I am the least bit educated on artificial intelligence, you know, other than putting into, you know, a certain, you know, chat GPT or other tool that allows me to get some really sophisticated answers but not knowing >> if they're truly accurate or not.

[00:37:08]>> Um I I I am I I am also really focused on the dynamic of how the need for supply chain finance has grown. Um, the SFNet has done a wonderful job of keeping up with up-to-date market studies and what we learned just recently was the adoption rates of supply chain finance as a direct result of coming out of COVID coming off the tariff situation. Um and again the way big box retail does business the take up rates or adoption rates of these percentage of trade payables, trade receivables that are out in the market just in the United States alone has almost tripled in terms of how much and this is probably I would argue maybe even larger than that in terms of how much more of the payables receivables are being financed.

[00:37:58]>> And why is that? Well, because the pull on cash, the pull on working capital is so great because of the dynamics we just talked about. But there's also a lot of platforms that are offering supply chain finance solutions. The access to capital we talked about is there. So, you know, when you offer it, it's going to be taken. So, the amount of >> supply chain finance solutions that are being taken of taken advantage of is growing rapidly. And so that provides a huge opportunity for lenders like myself and others in the industry to be able to take advantage of that, to be able to differentiate yourself, to be able to make sure you're still sticking to your knitting and how you offer it. But the market's growing, >> the dynamics are are definitely our favor. It's just a matter of making sure you execute.

[00:38:42]>> Mhm. Yeah. Um, you know, one thing you mentioned with, you know, a the market growing and new uh lenders popping up.

[00:38:52]You know, another thing that we've seen also is maybe groups that aren't as specialized in a specific vertical or space kind of just going, you know, all in day one and they they might not have, you know, the the back office to support uh underwriting or monitoring and managing. And so, you know, we're seeing also a number of transactions where, you know, maybe the structure isn't as ideal. Um, so that that's definitely something that that we're seeing as a trend. Um, what do you think is one of the biggest opportunities that is, you know, turning over in the space? I know you'd mentioned, you know, the share. Is there anything else that you, um, are excited about here in the next 12 months or so? Yeah, I I mean again I think the growth in the need for capital, the growth in the adoption of and utilization of supply chain finance just creates an environment where we can all take advantage of it. think the folks that are proactive in terms of how they can look to work with partners that do have the expertise, >> you know, senior lenders that say, "Hey, look, we've got these relationships or let's let's strengthen let's augment these relationships with these third parties that can benefit not only us but benefit our borrower." That creates sticky revenue.

[00:40:17]when you've got a borrower that is really growing, but you can accommodate them and you can accommodate them effectively, that's just a perfect opportunity for you to maintain that client as much as you can. Um, I I like and I like the fact that the companies that the lenders that have been out there that have done it right, the longevity in and of itself is like this flashing billboard of marketing to say, "Hey, look, this is what we do. We've demonstrated performance." So when the borrowers are that are looking for capital in a more specialized manner, when the senior lenders who are looking for a partner, when the investment bankers or the consultants or the brokers that are out there looking for, you know, capital for their clients, they're going to go to the ones that that are proven.

[00:41:01]>> Yeah.

[00:41:02]>> They're going to go to the ones that they know they can execute and they're going to go to the ones that they know are wellunded.

[00:41:06]>> Yeah.

[00:41:07]>> They may not be the cheapest, but they know that they've been around forever.

[00:41:11]They know they can exe.

[00:41:13]>> Yeah. the brand name >> and that's, you know, that's for us to be able to take advantage of. So, it's it's an exciting opportunity.

[00:41:21]>> Well, for our viewers and listeners, you know, that may have heard something that piques their interest or they might have a transaction or they might be in need of supply trade or or purchase order financing. Where can the viewers and listeners find you, reach you, contact you? What's the best way to get a hold of you, Brian? Uh website um www.tracap.

[00:41:43]tradecap partners.com.

[00:41:45]Um, email, I can give you my email as well. I don't know if I want to do that uh phone number, but there's not a lot of us out there. So, um, again, would love to help. Send me a an email, smoke signal, you know, bat bat signal, whatever it is, but websites, um, there's not a lot of us out there, so internet just searches.

[00:42:05]>> I'll link I'll link it in the description. You know, anyone that's interested can, you know, find it below.

[00:42:11]Um, you know, like I said, I I wish we had 30 more minutes to uh, you know, talk about more. So, I guess we'll just have to have you back on again.

[00:42:20]>> You guys are the Joe Rogan of podcast and finance. I'm happy to be here. This is great. Thank you.

[00:42:25]>> Uh, we got we got Jamie back over there.

[00:42:29]Any anyone that watches Joe Rogan might catch that reference. Um, >> Jeff, thank you for joining.

[00:42:34]>> Thanks for having me. Always a good time.

[00:42:36]>> Yeah, absolutely. Brian, till next time.

[00:42:39]Yeah, we got to have you back on. You guys are great.

[00:42:41]>> Um, you know, to our viewers and listeners, especially, thank you guys for sticking with us. Uh, and remember to stay informed, stay inspired, and stay on course to growing your financial platform. Till next time.