With the coronavirus severely impacting the U.S. and global economy, the need for liquidity is at an all time high. Many business owners are beyond stressed having to layoff employees and not knowing whether they will be able to survive.

In today’s episode we chat with Brock Blake, the founder and CEO of Lendio, the largest marketplace for business loans in the U.S. To date, Lendio has funded over $2 billion across over 100,000 business.

We cover a lot of ground in our conversation from how the marketplace serves main street businesses to Brock’s own story building Lendio and the many challenges he faced along the way.

We hope you enjoy the show.

(Hear the full conversation with Brock on iTunes or Listen Notes.)

RJ: Brock, thanks for taking the time, delighted to chat with you today.  Perhaps we can kick off with a bit of background on Lendio.

Brock: Lendio is the largest marketplace for business loans in the United States, we have funded over 100,000 business owners for $2 billion of loans on our platform.  So what that means is we’re not a balance sheet lender ourselves, we’ve aggregated 75 lenders onto our platform, lenders like Bank of America, American Express, Kabbage, Funding Circle and so on.  And so it’s kind of like the Expedia for business owners.  As a business owner, and we’re talking main street business owners, restaurant owners and retail shops and manufacturing and so on.  A lot of times they need capital to grow their business and they have this dream they want to accomplish, and they go and apply for a loan at their bank that they’ve been banking with for 10 years.  And they get declined, not because they’re a bad credit but because, you know, most banks only really offer one type of loan product.  And yet there are many different types of loan products that a business owner can qualify for, they can get lines of credit, term loans, equipment loans, AR loans, SBA loans, credit cards and so on.

So if they go and they apply for a loan, they get declined, it’s not a great experience.  What we’ve done is we’ve said, “Let’s bring all these lenders into one platform, business owners, you can come to us, fill out one application.”  We have all the integrations with the lenders on the back end so we’ll shoot that application off to the right lenders, they’ll underwrite it and send back to us and offer or a decline.  And then we’ll present those offers to the business owner in a way they can comparison shop the rate, the term, the payment amount and so on, and choose the product that’s the best fit for them.

And so it’s not lead gen, we handle the entire customer experience and we handle it all the way till it’s a closed loan.  And what we’re really passionate about is helping that business owner, they get that loan and we have thousands of five star reviews and feel like there’s an enormous opportunity.  So this round, after 12 straight quarters of growth and really outsized growth, and not really needing to raise money, we haven’t raised money since 2016, we’ve been in a great position as a company.  We felt like there were some opportunities in front of us that are enormous that we want to chase.  And so we decided to pull together, we announced a $55 million round which included equity and debt and fortunately good timing, we’re excited to go and be aggressive going forward.

The market you serve is huge given the volume of businesses out there that have a need for capital.  Where do you find that your solution is most helpful?  Are you focused on the lower end of the market in terms of business size?

No question, it’s main street business, so our average loan size is between $50,000-$100,000.  We’ll do loans as small as $5,000 and there’s loans as large as about $5 million across all different asset classes, SBA loans and equipment loans and so on, and working capital loans.  And so we really service, just we think about main street businesses, that includes businesses that are extremely healthy, fast growing, that could get a loan anywhere, they’re trying to shop for the best rate.  And some that might have, you know, not the most the ideal profile, they might have great personal credit, but their cash flow is struggling or the opposite, their cash flow is great and their personal credit’s low or they don’t have collateral.  And so we have lenders that kind of service all the different niches and unique scenarios.  I would say the one category we don’t service, we don’t really have many options for that business owner, it’s a true start-up, they have no revenue and bad credit.  Unfortunately in all our years of searching we haven’t found a lender who will lend to someone without any cash flow and poor credit, as you can imagine.  But besides that, that group, we likely will have options for that business owner.

And so you’ve mentioned the institutions, the large banks, we figure that their underwriting criteria is fairly streamlined.  Do you also have as funding sources private debt funds that can do things that are a little bit more outside the box of a traditional institution?

We don’t, I mean we might have one or two here or there real specific niche type loans that we might work with.  But primarily because we’re doing so much volume, like last month we did probably 4,500 loans on our platform.  And so much of what we do is built into our machine learning and AI technology that we’ve built that really we’ve identified these lenders we know.  We have very, very deep information around what types of loans they fund and what loans they don’t fund based off of credit score and revenue and geography and average stated balances and whatnot.  And those other groups, the private groups that you’re talking to, it’s not really formulaic in the way they underwrite, it’s kind of deal by deal, which makes it inherently difficult to build technology and science around, right.  So there might be scenarios where we’ve got a borrower and it’s a one off, and we might look at trying to go through one of those partners to help them, but it’s definitely the exception and it would be very few and far between.

So it’s the business that’s been around for some time generating cash flow and can demonstrate that through their financials, and as opposed to just walking into their bank or calling up their bank.  When they go through your system they’re reaching out to around 20 different lenders, that they have the possibility to match with, 20 to 30 different institutions, so it’s way more efficient.

Yes, you’re searching for a flight from wherever, and you could go to Delta and you could go to American Airlines and you could go to Southwest and you could go to United.  And you could try and do it all on your own, you could try and search and write down the price and then go to the next one, or you could go to Kayak.  And so we’re all used to using these marketplaces, whether it’s Airbnb or whether it’s Amazon or whether it’s Yelp or any of these, Expedia, the same thing for these business owners.  They are so busy running their business and they’re experts in their business, but not necessarily the experts in loans.

We save them all that headache; we do all the research on the back end.  Especially right now with this coronavirus talk and other things, certain lenders are saying, “Okay, we’re not going to lend in the state of Washington because we can’t assess risk.  Or we’re not going to lend to this industry or that industry.”  And to try and have a business owner navigate this, it’s impossible to navigate through all that, we do, and then we make it easy.  Well, you’re in Washington, well, okay, we’re not going to push you to this lender because they just paused lending in Washington, but these other four lenders, you know, are really active.  And so our technology does all that, that work, the legwork to help that business owner, you know, navigate.

You’ve been, as you mentioned, growing consistently, you’re leading a sizeable organization now.  What are some of the things that you pay attention to as you’re growing a business, when you think about the company culture and optimizing recruiting and retaining talent?

I believe you focus on your customer, you focus on your team, take care of them and really that will solve a lot of problems.  And then not only does it solves problems, it becomes a unique differentiator for you and, you know, at Lendio, we were just named by Glassdoor as one of the top 50 cultures in the United States, that comes from anonymous reviews or our team members.  We’ve won Utah’s Best Places to Work, and we just have this incredible culture of people that are humble and hungry and also want to be a part of something that is meaningful, that is mission driven; we all want to be part of something bigger than ourselves.  So this culture is built, it’s not built off of perks and t-shirts and snacks and ping pong tables, it’s built off of winning, it’s built off of being mission driven.  And then it’s built off, we call it the CEO of your job, I believe you find people that are so passionate about what they do, that they’re going to be thinking about it on nights and weekends and, you know, in their drive and in the shower or whatever, not because we want to be workaholics.  But if they’re thinking about it all the time, they’re going to be problem solvers and they’re likely going to be really good at whatever it is they do.  And then we give them ownership of their area and then get out of the way.  We really like to empower our team members because people want to feel ownership and feel they’re solving problems.

And then the other thing is we don’t settle, we talked about this in our leadership meeting the other day, like we have really big hiring plans this year.  Last year we went from 150 employees to 310, we’ll probably go to 450 this year and so we want to grow, there’s a lot of areas we’re investing in, we’re excited about.  But that means sometimes you settle on the type of person you’re trying to hire.  I need to fill this position, and I think our teams have done a really good job of not settling.  And so anyway, culture is a really big part of the things we think about.  So we have this balance of strategic thinking, every single team has what do we need to accomplish in the next one to three years versus what do we need to accomplish in the next one to three weeks, and that balance.  And I think our team … we’ve figured out some operational cadence things that help us balance, so we are thinking, you know, forward thinking, but also managing the day-to-day and there’s some things we’ve done that I think have been really valuable in help us balancing those things.

And speaking of not settling, for the entrepreneurs and the executives in our audience, sometimes they appreciate hearing about the tough times in business.  Is there an example of how along the way you faced an obstacle but were somehow able to overcome it?

Oh man, unfortunately the show is not long enough for me to go through the mistakes we made.  You know, early on we ran out of money, we couldn’t make payroll.  At one point in our career, my co-founder and I, this is really the second business that we started.  We had a company, it was the predecessor to this where we made about every mistake in the book, but we built that predecessor company up to 10 million in revenue.  And we were trying to figure out how to make the business model work and even though we kind of figured out how to grow, we kind of hit this plateau and we realized this business model is completely flawed.  And we started on nights and weekends thinking about, we’ve got to make a pivot to this thing and we came up with this concept in February 2011.  And, well actually we became Lendio but we shut down our old business, going from, you know, 90 employees down to 8, going from 10 million in revenue to zero overnight and restarted and kind of this full pivot and recap and launched Lendio in 2011 and it was the most painful experience ever, it was so challenging.  When you think you’ve got these plans, but you go from a lot of revenue to zero, now our cash flow problems and, you know, to have that big of a layoff, because we really shut that old business down, it’s just never fun, it’s not, you know, I kind of committed at that point, we’re never going to put ourselves in that position again.

And it wasn’t because we had to do the layoff, the business was operating, it was just because we knew that the former business wasn’t going to continue to scale and we couldn’t run both, and we just felt like it was the best decision to shut it down.

And so challenges we’ve had along the way, we were raising a round and we’re literally seven days away from closing.  I’m on vacation and I get a call from the group that’s leading the round that because of a research report that we had zero control over and then actually the research was completely inaccurate.  But because of this third party research report, they did a due diligence, they were going to pull out of the round and I mean just can you imagine how devastating that was when you’re a few days away from closing?  And you’d spent six months raising money and to lead up to that and now you’ve got to start over and you’ve got to really think through, okay, what happened and why, is it us?  And fortunately it wasn’t us and we were able to pull together a round pretty quickly thereafter.  But we’ve just gone through every business, you go through so many of these challenges that really define who you are and you can’t get too high and you can’t get too low.  You’ve got to enjoy the journey and we’ve had our fair share of those near death experiences and those really, really painful moments.

And when you switched from the prior business to the current one, that’s a really tough decision to make, to go from 10 million revenue to zero and layoff a bunch of people.  How did you know? One could think, well, we’re generating 10 million a year so that’s pretty good, a lot of businesses can’t get to that level.  So how did you know that it was the right decision to pivot?

A few things, the business that we built was not really built around technology, there was a lot of people providing services to our customers and so it wasn’t scalable, it was being held together with duct tape and superglue and bubblegum, and so that’s first off.  The second, so I knew it wasn’t going to … like 10 million was a miracle and I knew it wasn’t going to scale much beyond that.  And secondly, the customer experience, not because of intention but was not exactly what we felt like we wanted to build because it’s not built on technology, it’s built on a bunch of people providing services.  That means that people aren’t predictable at times and the quality of the service isn’t there and then you start to have people say, “Well, I paid for this, and I got that.”  And it’s hard to control that and so that was some struggles, the pricing issues.  I mean we just had a lot of things, like we had great intentions to build this great business that delivered value to our customers.  And what we did is we just went through a PhD class on a lot of things you shouldn’t do, but it was so painful but such an amazing learning experience where we took a step back and we said, “Okay, this is the reality of the business that we built.  What are the things, if we had a magic wand what are the things that we would change, what would make a scalable business?  What would make a business that you’re not depending on these people?  What would make a business where the pricing is right?”

And so we started really, you know, crafting the idea around Lendio because of all these painful things that we kind of we built and we’ve downed ourselves in.  And so I wouldn’t trade it for the world because, you know, now we have this amazing business that was growing and has the opportunity to be, you know, 10 times bigger than we are today, at least.  But I think it’s because … I truly believe it’s because of the pain and those really difficult times that we learned from the business we had before.

There’s something interest to point out, for some time now there’s been a lot of very talented entrepreneurs that come out of Utah, and a lot of great businesses based in Utah.  And recently there’s been some light shed on how folks in the LDS community have a really great experience early on in their young adulthood through the missions they go on.  If you wouldn’t mind, could you share how going on a mission has helped you overall in life and as an entrepreneur?

Yes, so part of the culture of the Church of Jesus Christ of Latter-day Saints is this encouragement, it’s not a requirement in any way, but the encouragement to be able to go and spread the gospel through serving a mission.  Which it means that for two years you really leave your home, you travel to a foreign land, whether it be in the United States or outside, in my case I went, served in Uruguay down in South America.  So I went to this third world country, you really leave behind, you know, I played college soccer, I left that behind for two years, you leave behind your studies, your family.  And you’re going out and you are, you know, going door to door and you’re serving your whole two years of this service, it is teaching, and it is studying but it’s really just about others.  You’re really losing yourself in the service of others, is what you’re supposed, you know, the goal.

And it is hard, can you imagine, you’re an 18 year old and you grew up and 18 year olds are spoiled, their whole life is about them, and you turn around and now you’re losing yourself and it’s not about you.  And you’re meeting these amazing people, so you have to get outside your comfort zone and you’re talking a new language in this foreign country.  And you have to work, like it’s the hardest work you’ll have ever done up until that point in your life, because you’re going door to door every day, waking up early and it’s really dedicated that, it’s not a normal lifestyle.

So it was such an amazing experience for me that changed my life forever, just to learn how to work hard, to interact with people, you learn about people and different cultures and you learn to appreciate things outside of your small little bubble that you grew up in.  And you learn about service, you learn about … there’s just, I can’t even describe what type of experience that is.  And so for me it was life changing, I know a lot of people that feel the same way, it’s not the exact, it’s not that same for everyone.  But it is part of our, you know, here in Utah, because not everyone is “Mormon” or members of the Church of Jesus Christ of Latter-day Saints, but there is this … there’s a high percentage that have gone on missions that are comfortable getting on the phone and talking to people.  So from a customer experience standpoint, from a work ethic standpoint it really is built and in engrained in kind of who we are and how we try and build a business.

It really does seem like you learn a lot about resilience and getting outside of your comfort zone.

Yes, you get the door shut in your face day after day, after day and, you know, people telling you, no, and spitting on you in the streets.  And, you know, and they’re like shunning you, I mean it’s definitely an experience of overcoming challenges, for sure.

Given how stressful the whole experience of being an entrepreneur can be, maybe what we can do is close out with how you recharge, how you make sure that you have the right level of energy to approach your business each day?

Great question, one I’m extremely passionate about.  I think early on in my career, you know, you just think you can fight through anything and you can work 24 hours a day and just get through it.  I’m married and my wife and I have been together for 16 years, coming up on 17, have four kids from ages 14, 12, 10, 5, and I truly believe that… if there’s balance in my life I will be a better leader, a better entrepreneur.  And so what I mean by that is for example on a Friday night it’s date night with my wife, time with my kids, you know, whether that’s going to their soccer games or coaching their games of football, basketball or dance or gymnastics.  It means for me early morning, I have a personal study conscription study or meditation time on my own where I can really be, you know, introspective and thinking about how I can be a better person.

I also do morning workouts, I’m playing basketball early mornings three times a week or I get to the gym with a little bit of weights.  And eating right, and those things where if you think about this balance of, you know, there’s the work ethic, but then there is the physical health, there is the mental and emotional health, there’s the relationship side.  And if that stuff is in balance, when I am at work I strongly believe that I can be way more effective in 8-10 hours a day than I can if I’m spending 12-14 hours a day.

And I think I’m a better leader and I think there’s benefits to relationships with partners and people at work and co-workers and things like that.  And then you can sustain it for a long, long, long period of time, you don’t get burned out.  Everyone needs to kind of figure out what their own path is and what works for me doesn’t work for everyone else.  But I’ve kind of found now, after I’ve been at this a while how I can be mentally and emotionally happy and be extremely effective in my time at work and what we’re trying to do here at Lendio.

Brock, this has been a great conversation, really appreciate you taking the time.

RJ, thanks for having me, I really appreciate it and appreciate what you guys are doing and I look forward to listening to more of these podcast shows.

Excellent, thank you.

Thank you, take care.