Ep. #565 - Accessing Working Capital

Matt DeCoursey 0:00
And we’re back. Back for another episode of Startup Hustle. Matt DeCoursey here with Matt Watson. Hi, Matt.

Matt Watson 0:07
What’s going on, man?

Matt DeCoursey 0:10
Oh, I’m just sitting here. And you know, I’m trying to get some capital together and I bought a ticket to DC. And I was gonna head on down because that’s where the capital is, right?

Matt Watson 0:22
Well, I mean, the government sure spins it like it’s like there’s a never-ending supply of it. So yeah.

Matt DeCoursey 0:30
Wait, I’m trying to access working capital. That’s where they work at the capital, right?

Matt Watson 0:36
No, they don’t really work there, either.

Matt DeCoursey 0:40
Man, I might be really I might be confused. I mean, I here I showed up to do part 12 of our series about how to start a tech company. And you know, I’m supposed to talk about accessing working capital. So I bought a ticket to Washington, DC. I’m leaving it like right after this show. Well have fun. I need to cancel. I may, I might not have a clue. I mean, what does matter is knowing that today’s episode of Startup Hustle is brought to you by Payoneer, where you can get up to 750 grand and working capital instantly to grow your Amazon or Walmart stores, from inventory to advertising. If you visit payoneer.com forward slash funding today for all your E-commerce financing needs. There’s even a special fee and rebate for listeners of Startup Hustle.

Matt Watson 1:30
Now, so don’t don’t tell my wife about this. She’s gonna go get $750,000 to spend on Amazon and Walmart. That’s what I heard.

Matt DeCoursey 1:39
Yeah, well, yeah. Okay, so here’s I finally, here’s the definition of working capital, it’s clearly not what I have in mind. Working capital is the money available to meet your current and short term obligations. Oh, that kind of working capital. So Okay.

Matt Watson 1:57
Which is not, which is not the same thing as raising capital that you plan to burn? And

Matt DeCoursey 2:03
it’s also, it’s also not the same thing as the capital. So Okay. All right. Well, that’s good to know. So, you know, like working capital is is. And by the way, I do know, working capitalists, but working capital is is is a central part of any business. And without it, life is a lot more difficult. And things are a lot more stressful at the business. How do I know that? Because I’ve been on both sides. I’ve run a business, a lot of I’ve had a lot of working capital, and sometimes I haven’t. So

Matt Watson 2:39
sometimes you referred to it as plate spinning, right?

Matt DeCoursey 2:43
Yeah, well, it can be and you know, that’s the thing, and what I mean, we like to we like to use real life examples. And sometimes when your business is growing really fast, people are like, wow, that’s a really good thing. And you’re, it’s easy to sit back and go not always,

Matt Watson 2:56
not if you don’t have the working capital. That’s the thing. Yeah.

Matt DeCoursey 2:59
Yeah, yep. Yep. And so that’s the issue. And you know, when businesses grow quickly, your working capital can get sucked up. When you don’t manage your accounts, receivables, or your relationships with those that you do business with, it can be the same problem. And overall, if you don’t increase your sales or grow your revenue, you can your working capital can also dry up that all of that said, there’s a lot of things that exist. And you know, like when I think about working capital in some regards to I think about one of our mentors, and one of Kansas City’s greatest startups, Sandy Kemper, and C to F. Oh, yeah, that is a huge platform. That I mean, you know, does billions of dollars worth of working capital? And what does that mean? In that case, it means that they are able to provide funding for the businesses to do what they need to do ahead of them being able to collect the money from those that they’re doing business with,

Matt Watson 4:05
well, let’s let’s use let’s say Full Scale as an example for this right? Let’s say stack FiOS Full Scale $100,000 a month in services is an easy number, right? Well, if we paid you on April 1, for the for the services, you’d be able to pay the employees and do all those things are in April right? No big deal. But if instead Full Scale billed us net 30 At the end of April, now all of a sudden we not May May I pay you till like may 30 For work you did in April. So that means you had to pay all those employees and all that stuff and you’re floating all that money, and that’s where the working capital gets really critical and serious and and it’s not that you haven’t earned the money right? You perform the work you’re gonna get paid. But it takes working capital to bridge that gap.

Matt DeCoursey 4:55
Yeah, and that’s actually a real life situation. So you know, Matt and I own Full Scale together. They’re and we do services, tech services go to fullscale.io, you can check it out. But when we started the business, we were at first providing a month of service, and then we’d send an invoice and we want to get paid within 15 to 30 days. And at first, that seemed like a reasonable thing to build a business around. And then we started growing pretty quickly. And I sat back one day and started doing math. And I was like, Oh, my God, we’re going to be carrying millions of dollars of receivables, meaning outstanding invoices and things that we haven’t been paid for yet. And that created a whole lot of problematic situations. Because one, you’re on the you’re on the hook for that until you get paid. Now, business school teaches you that receivables are assets, but you still need to get paid for it, you can’t pay that money has to Yeah, that money has to come from somewhere, you can’t wave IOUs to your employees and be like, yeah, trust me, we’re gonna get paid. So we started looking at that. And we realized that we had to do something different. And we immediately changed our billing practices. So we would invoice our clients on the month that they were the first of the month that they were about to receive service end. And then we collect money on the 10th. Now that did a few things for us, because one, stabilize that cash flow. And it also very importantly, gave us a health check on our clients abilities to keep their accounts current. And when I say current, meaning their bills on time. So give me an example. If we’re doing business with a startup, and they’re having problems with working capital. If you’re billing people in arrears and holding receivables and stuff like that, you could get months down the road before you realize, oh shit, these people aren’t going to pay you. And that’s not great either. Because that can I mean, now that’s like a double whammy on the working capital, because not only are you not collecting it, you’ve also created an opportunity cost where whatever you could have sold or the services you could have provided were not available to give to someone else.

Matt Watson 7:05
And here and here’s another example of working capital. So at Stackify, we have customers that pay us annually. So let’s say normally we do $500,000 a month in revenue by like GAAP accounting, right? But we might actually get $300,000 in revenue this month. But then we have customers who pay annually. And then when they pay annually, we get these huge sums of money in right but then monthly, we don’t get as much money coming in, because of the big annual payment. So we have to take those big annual payments, and keep the money in the bank, because we kind of received it all in advance. Because if we spent it all that day, next month, we’re not going to make as much money. So you know, cut, you know, businesses that do that do get paid in advance or get paid for annual, you got to keep excess working capital around for a while because you know, you’re not going to make as much money in the future, too. So it’s working capital is a tricky thing to continue to track and deal with.

Matt DeCoursey 8:00
Yeah, and for those that have businesses that are young or smaller, this part of the business and growing your business is often really frustrating because you lose out to the big guy a lot. And I say that because Alright, so we look at like at Startup Hustle TV, Eric Perkins, and a builder. All right. So you know, they often provide they buy all the materials and then do whatever and then they get paid, you know, in stages along the line from the bank. And you know, that can be tricky too, because they’re funding it and waiting to get paid. And the problem is is for a lot of small businesses is you won’t have the ability to access money to get to fulfill that mega order. Now, this series is about tech companies, which is a little different than a product maker. And that’s what see CTFO does is they actually will help you fund your receivables. So you can manufacture a product and send it to Costco or wherever and, you know, and help bridge that gap. So when it comes to accessing working capital, a lot of times that needs to occur due to seasonal differences and cash flow like that can occur than that. And what you mentioned, like your example, that is getting paid annually is what I would call that a seasonal difference. But in some cases, some businesses surge in the fourth quarter, and if they don’t have access to working capital at that time of the year, that’s going to mean the other nine months are gonna suck.

Matt Watson 9:33
Yeah, the key is a lot of businesses have ebbs and flows, and you know, we mentioned Payoneer earlier, and a lot of times the business needs just needs a little money, right? We just need 100 grand or 50 grand whatever it is, we can make payroll for a couple of weeks and then we’re good like we got lots of receivables we got customers who did the work they’re gonna pay but we just got to bridge the gap right and a lot of times that’s where the working capital comes in.

Matt DeCoursey 9:56
Yeah, so you know, other other reason or Are scenario as you know, to find obligations to suppliers, employees and the government while waiting for payments from customers. You can also look at like, you know, in some cases, working capital can provide a big asset, if you have the ability to to gain supplier discounts from some kind of bought purchase now, and the situation that you mentioned with an annual payment, are you giving those clients or people a discount for paying annually?

Matt Watson 10:28
A lot of times they do? Yeah, it could be 10% or 15%, or 20%, whatever it is, yeah.

Matt DeCoursey 10:34
And that’s now for those of you listening, that’s a big win for your business. Because what do they say, a burden hand is worth two in the bush, cuz you know, you’ve got the money there. And that can fund some other stuff along the way. Now, when it comes to tech and the scalability of it, I mean, that that, I would imagine that your business now, that is a big asset to be able to get paid, and no, because you’re you’re retaining that client for a year as well, you know that and also, hey, here’s the money upfront.

Matt Watson 11:04
Well, if you have a lot of customers are paying annually. What’s interesting, when you think about GAAP accounting and recognized revenue earned revenue, you may not actually be making any money. But from a cash flow perspective, you should be you could be doing great because you’re getting lots of upfront annuals. But you know, it takes a few months for that recognized revenue date to kick in. And that’s one of the great things about charging customers annually as you can pull that cash Ford. As long as they keep renewing, it just keeps stacking up. Year over year, those big renewals keep coming in it’s beautiful thing.

Matt DeCoursey 11:39
Now, and if you’re on the buying side of that, just just while we’re on the subject, if you’re on the buying side of that, and you know, you’re going to use the service for the next 12 months, like, you know, you know, you’re gonna use it right and you you have working capital, you can leverage that, because now you’re gonna save any time, who knows? Whatever percent could be a lot. And you know that that begins to add up. And it’s smart business decisions like that, that can really make a difference when it comes to growing your business. Now, one of the things that’s frustrating when it comes to accessing working capital is, you know, banks don’t give loans to brand new businesses. And they typically, they typically approve the kind of the running joke amongst entrepreneurs, both when it comes to investors and getting loans from banks, as you can usually find all the one all of it that you need, our way you can find as many as you want, when you don’t really need it. And when you do really need it, it is often very, very difficult to locate.

Matt Watson 12:40
We we had this exact problem that at VinSolutions. Now this was back, say 2008 2009 2010, during the recession, and we weren’t automotive, right and GM is bankrupt, and Chrysler is bankrupt. So we’re not really in the best of places, but our business was booming. But the banking industry was not a good place. And nobody would give us a line of credit. Until we were doing a million dollars a month in profit, and then need it just the way I want

Matt DeCoursey 13:07
to give it all then they want to give it then then they’ll ask you how much do you want?

Matt Watson 13:11
Yeah, start making all the money and we don’t need it anymore. It’s like Oh, my good.

Matt DeCoursey 13:15
I mean, that’s and that’s the frustrating world and life of of an entrepreneur and a founder and many business managers and people like that. So I’d probably a good time to give a reminder that you can get up to 750k working capital with pioneers capital advanced, that’s attractive fixed fees and flexible settlement plans that ensure you’ll always have the funds to handle your daily operating expenses, you can apply now@payoneer.com forward slash funding and enjoy a 10% rebate on your first capital advance now, these kinds of things this this, these are cash flow, working capital type loans. So and I don’t know I’m not gonna I can’t speak to Payoneer services just meaning like a you know, like, they’re going to look at all this differently. But the world of tech and fintech in general has made this kind of loans, often very fast and easy and accessible. Now, they’re not always cheap. But a lot of these a lot of these options you’re going to hook up, like there’s a fintech startup called plaid that helps connect us at a bank account to your bank account, and they’re going to just look at how much cash flow you have coming in. And it becomes very algorithmic in some of these things. You can get money and a debt. Yep. You know, and and that and sometimes the and the benefit of some of that was even now here’s the thing is I don’t think those are good long term solutions. And usually they don’t even offer a payment or repayment timeline that’s like 12 months is long. For a lot of those, some of them are six months, nine months and you’ll pay them act really aggressively and some people even get those loans and only keep them out for like a week.

Matt Watson 15:05
Well, and that’s the thing, we’re talking about working capital, right? Which is totally different than, you know, somebody’s like sacrifice, like, hey, we raised a Series A, we raised $5 million. And we’re gonna go hire a bunch of people and burn all that money, right? That is not what working capital is working capital is more short, short term. It’s not like we’re gonna go spend a whole bunch of money and invest it in something and not get it back. It’s, it’s more of working capital is a short term thing. So it’s a different thing.

Matt DeCoursey 15:32
Right. And this can be like, similar to, you know, and we’ve used some of these tools at Full Scale, just as we’ve grown quickly, and you’re just kind of bridging and leveraging these gaps that exists. And, you know, it’s like, so one of the things that our business is, like we mentioned, with our payable cycle, we collect money once a month. So, you know, occasionally, if you’ve got 20 new people starting or something like that, you might need to buy, you know, buy a bunch of stuff and spend a bunch of money and, you know, only need the money for a week.

Matt Watson 16:08
And, you know, the first thing that most people would use is a credit card, right? In the early days of VinSolutions, I had two or three of my own personal credit cards that were maxed out, you know, in the early days of Full Scale, you know, we started up with like, hey, well, we’ll just use our own credit cards, whatever, we’ll switch to some corporate cards or whatever, later, right? And so a lot of times early stage company, it’s your own credit cards or a business credit card you’ve registered that is that original kind of line of credit for these things. But eventually you outgrow that and you need a real line of credit with the bank or use a service like Payoneer and other like that to help bridge the gap with line of credit.

Matt DeCoursey 16:52
Yeah, so the things that I that I mentioned, that kind of approach and Payoneer, though I mean, those are referred to as unsecured revolving lines of credit many times and sometimes they’ll say open as credit lines, and sometimes they’re just paid back. And in a short term manner, but yeah, I mean, that some of the things to use accessing working capital, sometimes that is just quite honestly a card, your credit card. And a lot of people will use things like the AMEX gold Amex gold card, you know, and that’s kind of a staple of, of business ownership. And you talk about leverage. Now you gotta be careful with that, because that’s not a credit card, that’s a charge card, which means that whatever you charge within, within a statement period, you’re going to owe that same amount back in a month later, but a ton of people. So you know, I have a history in the ticket business, and I can’t I have a had a book of gold cards, basically. And, you know, we used to use those, and we would buy stuff and sell it so quickly that it was never a big deal to continue making that payment. Now, I will caution everyone, you got to once again, you got to be really careful with some of that stuff. Because if you if you don’t pay it back on time, it gets steep. Like not only are you not going to have access to the to the card anymore, there you might be agreeing to some really, really insane penalties and fees and stuff like that. So, you know, I mean, it, it really can add up. So, you know, there’s some other things too, you know, like we mentioned Payoneer, and once again, thanks to them for sponsoring this episode. You know, here locally, we’ve got a company called all cap, which specializes in lending to small businesses. And you know, and sometimes serving Well, in sometimes working with underserved communities, meaning the founders and companies and businesses that might not always have the same fair access to some loans. So you got to go out and look for it. And

Matt Watson 19:02
they do some more specialty kinds of things, don’t they?

Matt DeCoursey 19:05
Yeah. And that’s I mean, because that’s the thing is, is if you’re going to be a startup founder, especially a tech startup founder, you need to really be prepared for your business to be misunderstood by traditional banking. Oh, yeah, absolutely. I mean, and it’s like, the question is why? Well, it’s like the questions why, and, you know, we’ve talked about this so much, and we use backlot cars, as an example. And I’m not going to get too specific here. But Matt and I were on a call with a CEO of a bank, who was asking our advice about how do we get in front of more startups, and I’m sitting there going, you need to learn how to understand our businesses. And it was actually you that gave an example because backlot cars and our former guests, Josh Parsons, had been acquired for $425 million the week before and you you Mr. Watson said, I bet you wouldn’t have given them a loan a month ago, because they might not have been profitable on Paper the way that the bank like, but somehow were worth $425 million, and someone that wanted to buy it,

Matt Watson 20:06
that the biggest struggle is a tech company like stack fi or backlot, or any of those is they they want some sort of assets, right, but we don’t have any assets, our assets is code, that they don’t see that as an asset. It’s not like we have a warehouse full of stuff that they can, you know, use as leverage.

Matt DeCoursey 20:23
Yeah, and then that same conversation is an example. So Full Scale has has purchased over a million dollars in equity and other tech related companies. And I was I was using that as an example. Because that that isn’t publicly traded stock they get, they would give us no asset value, to borrow against and at the same time, and that same conversation, the example was used, why? Because I asked, Well, who do you give lunch? This is usually manufacturing. So I said, so there’s a, there’s a semi-truck full of bolts somewhere, that somehow you would repossess and do something with and you’re letting someone borrow against that. But yet tangible value in a rapidly appreciating business is good is worth zero. And we were told, I would rather have the equity in the startup than the than the bolts in the truck. But the bank is restricted from doing that, because they’re there due to certain types of regulations and rules. They can’t they can’t acknowledge our our ownership and other businesses as being something worth leveraging into alone. But the bolts are somehow tangible. Are you going to do with the bolts, if you go back and get them, they’re probably made for only one thing to like, well,

Matt Watson 21:47
and you really just hit the problem there when it comes to tech companies in general trying to have any kind of real bank relationship is is that like, we’re not profitable. We’re burning capital every month, because we’re growing. And so we don’t, we don’t show a profit, and we don’t have any assets, so no bank will touch us. And the problem is, as you mentioned, that has to do with risk, and regulations and all those things, and the banks just can’t do it. So, you know, we either have to go raise capital from a VC, or we can raise money through venture debt, like stack phi used a company out of Texas that did venture debt. Or you can access things like the working capital from places like Payoneer and solutions like that. But not a normal bank.

Matt DeCoursey 22:38
Well, let’s talk about venture debt for a second, because that actually makes a lot of sense. And we were talking about Sandy Kemper, who’s been a great mentor and supporter of the show and everything, he actually recommended that we create our own venture debt at Full Scale, we did, we created a basically, and that’s loans, we created our own our own lending program. And that’s how we funded it. And in lieu of selling actual equity in the company, which was a lot more complex, and was longer commitment. So you know, you can go out and do some things like that. And you do want to talk to an attorney and an accountant before you do that kind of stuff. And make make sure you’re doing it in a way that isn’t shitty or illegal, because you don’t want to do that. But I mean, there’s a lot of different options and things that you can you can embrace when you when you get into that. And, you know, in your case, I believe the venture debt was often the kind that’s often referred to as RBF revenue based funding.

Matt Watson 23:37
Yep. And then we would pay back a small percentage of our revenue every month towards paying off the note.

Matt DeCoursey 23:45
So if you grew faster, they got paid back faster. If you grew slower, they got paid back slower. Now, were you were was there a benefit to the faster you paid back was did that benefit the company?

Matt Watson 23:58
Um, I mean, ultimately, we would pay less interest. But yeah, I mean, that’s their model.

Matt DeCoursey 24:04
that benefits the company. Yeah. The company and they make

Matt Watson 24:07
a really high interest rate, those venture debt places. It’s like you borrow a million dollars and you got to instantly pay back like 2 million. And it goes up every year like they they’re making making some bank on the interest rate of that. So

Matt DeCoursey 24:21
it’s, but some people will look at that and they’ll go that’s crazy. Why would you sign up for that, but that non dilutive capital? It while that sounds expensive, if you were going and raising that money from investors later, when you could that equity might be worth significantly more than the money you paid. That’s why we did venture debt. That’s why we created our own our own round.

Matt Watson 24:46
And if you’re the one funding it, you have to look at this way too. It’s like Hey, I could have invested in equity in the company. But if it all goes to zero, I get nothing. But if I loaned them money and I charged them a high interest rate, I’m first in line so if they sell later or I’m guaranteed to get paid back first because I’m debt. So in some sense, they have less risk as well.

Matt DeCoursey 25:09
Yeah, and so in our case, when we created venture debt, we started paying it. So those are lenders, technically not investors. That’s the way that that’s phrase. And that’s the way those things are written. And we started paying them back 60 days after they made a deposit with us, and we paid them a return, like an interest, and we have the ability to pay them earlier. And overall, they would all be paid in full within 36 months. And I gotta be honest, that was that was way easier and a lot more straightforward and a lot less stressful than anything we did where we tried to raise capital and get real investors. And by the way, if you want to watch me on Startup, Hustle, TV, and the moments after I turned down a million dollar investment offer, go to start go to YouTube and type in type in Startup Hustle, and you can learn all about it, because that’s the kind of stuff we’re sharing. But yeah, I mean, Mab. Is it stressful to go through investment rounds.

Matt Watson 26:07
It’s exhausting. I mean, it’s, it’s, it’s just a lot of work. But then it’s a lot of hurry up and wait and just waiting around, are they going to make a decision? You know, it’s just like, it’s just exhausting everything about it.

Matt DeCoursey 26:20
I mean, my dad asked me at one point when it came to us gaining, you know, capital and whatever. He said, Well, why would you want to pay that much just said, you know, honestly, it doesn’t feel like a whole lot compared to the part of my soul that I have to sell to close an investment round. And, you know, until you’ve done that, or you’ve gone through that process, I can’t tell you how frickin stressful and lame and distracting and draining. It is. I mean, that’s why you want you want you want naptime about every other hour, right?

Matt Watson 26:51
Oh, absolutely. The stress of it. I remember some of the memories I have from my VinSolutions days. My main business partner CEO is in charge of sales. And he’s like, look, we got to make payroll next Thursday, we have a week to collect 50 grand, go sell some shit and tell them to overnight the money we got to do this. Now. We need the money now or you guys aren’t getting paid next week. So go figure it out. And it would have been a lot nicer to have a small bit of money from thin air somebody so we could just sleep and not worry about it. But

Matt DeCoursey 27:22
what we’re talking about accessing working capital, sometimes that’s a way to do it, you know, like, yeah, and out the client list, and start and call the people that believe in you that believe in your services and say, hey, look, I’m gonna be honest with you, I need to collect some money. What can we do to figure something out? This is commonly done, this has done a lot Can I give you a 10? A 10% discount to prepay your services for six months? And if it’s if you’re calling a business that’s flush with capital, why wouldn’t they want to do it?

Matt Watson 27:55
Well, in some companies are right. Like take Sackler for example. If we raise a $5 million, series A and we got $5 million in the bank, what are we gonna do with it?

Matt DeCoursey 28:05
Cuz that’s smart business. For you, it lowers your overhead. Yeah. So and that’s the thing, pick up the phone, dial it, call people tell them say, Hey, look. And by the way, if you’re going to make that call, you better have a win win attitude. From the moment that person picks up the phone. Get right to the point and just say, look, here, we’ll send Hey, Matt, it’s Matt. Look, man, I appreciate all the business that we’ve done with each other and I’m gonna be straight up with you. I need to try to speed up my receivables a little bit. Would you be open to prepaying your services for three months? And I’ll give you 10% discount?

Matt Watson 28:48
You know, other Matt, I think that’s a great deal. If I could say that 10% And no problem. Sure.

Matt DeCoursey 28:55
And that can be as easy as that. And I’m not kidding, it really can and then sometimes and get right to the point don’t waste people’s time because here’s the thing is if they can’t do I just find that because I’ve made those calls. I know what it’s like I’ve made those calls as a salesperson trying to make quota to Yeah, now here’s the thing is if you’ve done a good job for your clients, for the people that you work with, and all of that, hey man, I find that people are willing to help me out in the past, you know, like when I went before I was an entrepreneur, and you know, it’s like here you are, I’m working for someone else and I’m in the last few days of the quarter and I’m like a couple sales away from making quota and earning a bonus I and I had done a great job for I’ve helped a bunch of clients do a bunch of stuff my accounts benefited from having me as the rep I would find that people understand they get it people are people and they’re cool with that and you got to be ready to deliver after that. Yeah, you know, cuz I’ll tell you what, if you disappear or provide shitty service or don’t appreciate it, and I would always in those cases So I’d always do something like send a handwritten note or I just do something I’d be like, I really want to appreciate you helping me out, let me know when I can do that for you. That’s something.

Matt Watson 30:09
And I think you’re absolutely right. You know, what we’ve been talking about. Another thing that you can do if you need working capital is just not pay your bills. And back in the VinSolutions days, again, we had all these problems, at any given point, we had like three or $400,000, in bills that were unpaid, and ever on a monthly basis, and it’s like, you just paid whoever screamed the loudest. And then he just didn’t pay him again, for the next 90 days or whatever, while you were paying. Like, but it’s sometimes

Matt DeCoursey 30:44
it can work and work. It’s not recommended for building for building long term successful relationships by Matt does have a good point. flipside of that, though, like you there’s one group, there’s one group, you don’t want to slow pay, and that’s your own employees, because I’ll tell you what, nothing, nothing will, nothing will will form a wagon train on the way to the door and the parking lot faster than that. Stand then there, seen it done it, it sends shockwaves. And you know, like, that’s an asset. And now I know, you’re the same way to like, through and through and through, like, I will go mortgage something of my own, to make sure everybody gets paid on time, because they don’t own the business like you do, they’re there to get paid on time and to do a good job, and you will kill your company culture. If people don’t have confidence that their paychecks can arrive on that

Matt Watson 31:44
the vast majority of employees, the number one thing to them is always job security, right? Nobody wants to go home to their, their spouse and be like, Oh, we’re not getting paid next week,

Matt DeCoursey 31:53
we can’t buy, we can’t buy groceries because my paychecks late that doesn’t really instill confidence. So I got a couple other things that are working capital mistakes you might want to avoid. And that’s confusing short term working capital needs and longer term permanent requirements. Like do you don’t want to take out a short term loan to buy real estate? Nope. I mean, it’s usually not the best, the best way to do it. And you know, it’s like, and then also, like, you know, it can be tempting to use a working line of capital line of credit to purchase machinery, real estate, higher permanent replies and different expenditures that call for for a different kind of financing. You know, that’s still in that same in that same vein, and, you know, and then sometimes do, that’s, that’s where, like, the pain and errors and places like that, it’s sometimes you just need a seven day bridge, that’s a completely different thing.

Matt Watson 32:46
And there’s, there’s definitely some gray area there, right? If you’re like, Okay, Full Scale, could hire another salesperson. And in the next 60 days, they could sell some stuff that then they’d be able to pay their own salary. So it’s like, we just need to like a little enough money to pay his salary for like, 90 days, and then he’ll start being profitable, and then we could pay it back. And but yeah, that’s not not necessary. I mean, that’s a gamble. Right? You’re you’re gambling that working capital way, but you can do it.

Matt DeCoursey 33:15
If ifs and buts were candy and nuts. We’d all have a Merry Christmas, man. Yeah, that’s what I always like to say in that so you got to be a little bit careful with that. Here’s the thing though. Like, hey, you know, here I am and you know, 45 years old and I’ve I mean, I’ve been around the track a lot. And you know, overall like, I mean, dude, it’s it as an entrepreneur, just the reality of it, it is plate spinning. It’s I’ve been on the good side and the bad side of leverage before and and the problem is, is if you get over leveraged meaning you’re borrowed and you’re borrowing past the point of your ability to pay back it can be you know, when the lever snaps, it’s not good. It’s not Yep. But there are a lot of tools and like I said, I think we’ve talked about quite a lot of them. I mean, this is like some of these things are standard and just out there on the internet. Some of them are a lot more creative. And you know, overall, you got to get to work, you know, working for it. Now. One thing here mountain but you know, before we wrap up, I wanted to just let everyone know that one more time that you there Payoneer offers up to 750k and working capital and you know, their capital advanced programs based on your store’s earnings. So there’s no credit checks, just funding growth, go to Payoneer, that’s pa ye o n e, e r.com forward slash funding, there’s a link in the show notes and, you know, go go check it out, and they’re gonna give you they’re gonna give you a few bucks off for being a Startup Hustle listener. You know, like I said, I feel that we’re we’re forewarned on that typically those things and you know, like, there’s some other things too, like, you know, the ticket business we would do that sometimes, like there were things that A Pay Pal was one of them. And because we had received so many payments, we could sometimes, you know, we would be needing to spend a whole bunch of money the next day, and we and they take like 10% off of every deposit that would come in, or I don’t know, there’s all kinds of weird shit out there, but you got to look for it. Alright, so here we are, Matt. And we’re, we’ve figured out which kind of capital we were talking about. I’m glad I got that right. After a couple of minutes. I mean, what what are mean? What’s your best advice or your takeaways here? Like, what what can we what do we have to offer? What do we like?

Matt Watson 35:34
Well, when you’re talking about starting a tech company, working capital is usually not as big of a priority, right? Because tech companies usually require a lot of investment that’s not really short term capital to be paid back, like you got to hire somebody permanently. So it’s like, we gotta go raise enough money to permanently hire this person. So usually, startups don’t have a whole lot of working capital kind of requirements. But again, you got to start out with just your credit cards, money you put into it. It’s really difficult to get any normal bank financing. If you get in a in a in a spot and need a little bit of money, a service like Payoneer would probably be a good choice. As we mentioned earlier, Full Scale has done it a couple times, we needed a few dollars to pay it back. So there were therefore there are great, great services and a lot of them are highly automated, go online, like we said, you can text your bank account and it pretty much immediately says, Okay, we’ll give you 20 grand or 50, grand, 100, grand, whatever it is. And you can have a line of credit at your disposal. And it’s a great service. So

Matt DeCoursey 36:38
yeah, and I agree with Matt, I think the best advice that I can have would be the, you know, back to the point about leverage, like, you know, if you if you do go, if you do access or lever up any of the things, anything from a credit card to an account relationship to Payoneer to any of it, do it knowing that you can pay it back. And a lot of these things is you’re gonna get them plugged in, and they’re gonna look at stuff and you’re gonna first thank, you’re gonna be like, Man, I just want to go ahead and get this paid back quickly. That’s not always the right choice, make sure you can pay it back early without penalty, but I usually pick the longer option for repayment. And knowing I can pay it early, because it lowers the initial commitment. Because remember, shit happens, yes. And if you’re financing it, if you’re if you’re going in and lever and out money on your name and the company’s name, and you’re hoping that someone’s going to pay you, you better make sure they’re gonna pay you. Because the problem is, is if they don’t, now you’re double screwed. And you can, that’s when I talked about the lever snapping and it can be really problematic. So just kind of know what you’re getting into and look at the different options and get the one that’s right for you. And, you know, I still I still think in many cases, the some of the most effective access to working capital is from the people that are already paying you. Yep, absolutely. I think that I mean, that’s just my own experience is like, call up your clients say, hey, what can we work out? Because it’s a great recommendation. They’re business people too. And you know, that that’s usually quick and easy and, and can create some really great partnerships and grow the business because, look, when your clients and your customers feel like, well, I want to be the first person you call, you know, I mean, and when they feel like that they feel it’s good, like and and that that leads to bigger, better things. So speaking of which, man, all of this has drained me. Is it now time?

Matt Watson 38:47
It is nap time. It’s Friday afternoon. It’s nap time.

Matt DeCoursey 38:52
Do you take a Friday afternoon nap?

Matt Watson 38:55
This Friday, you’re wanting to do that. Today is Good Friday, and I have the day off. So yeah, it’s good.

Matt DeCoursey 39:01
It’s Good Friday, so it’s good. It’s good for a nap.

Matt Watson 39:04
Yep. All right,

Matt DeCoursey 39:06
I’ll see. I’ll see you after naptime.

Matt Watson 39:08
See you.