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The HaBO Village Podcast

What They Never Taught You About Credit Unions - With Guest, Mark Ritter [Podcast]

Episode 164: Michael and Kathryn talk with Mark Ritter, credit union and small business lending expert, about the secret sauce that makes credit unions so appealing for small business owners. Should you take out a loan from your local credit union instead of a bank? Find out by giving this episode a listen!

Mark Ritter and Michael and Kathryn Redman portrait

 

In This Episode You Will...

  • Discover the real difference between credit unions and banks.

  • Find out how commercial lending has changed in last 5 years to the advantage of small business owners.

  • Get Mark's top tips on how to prepare for and apply for a loan through your credit union.

“There's so many resources in America. It's like shopping for a restaurant. You could go to McDonalds that's cheap and fast, or to a top of the line steak place with great personalized service. Many times lenders and financial institutions are like that. We're all selling money, and all restaurants feed you. But they're not all in the same marketplace."

- Mark Ritter

 

21 point vision checklist

References:

 

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Michael:
             Hello, and welcome to the HaBO Village Podcast. I'm Michael Redman -


Kathryn:
             And I'm Kathryn Redman.


Michael:
             ... and this is the podcast that develops whole leaders for the whole business so that you can live the life you dreamed of when you started your company. Today, we've got a great guest. We're really looking forward to it and so let's jump in. Kathryn ...


Kathryn:
             So I am super excited to introduce Mark Ritter to all y'all. Mark is the CEO of Members First Credit Union and new direction lending. So he's an expert in all things credit union, small business lending. There's a ton on Mark's RAP sheet, over here. But I'm not going to read it all. I'm going to let Mark talk about himself. But he's been working in this industry for a very, very long time and started the organization he's with now back in 2002. And really, we're super excited to talk to Mark because as we help small businesses in their own pathways in growth, one of the issues always is finance and capital and how do we get a loan? How do we grow? How do we be wise about what that looks like. And Mark is uniquely positioned out of Pennsylvania to help us answer these kinds of questions. So Mark, welcome to the show. We're super excited to have you.


Mark:
    Thank you for having me. Looking forward to the conversation.


Kathryn:
             All right.


Michael:
             So when we first met, Mark, one of the things I realized would be really cool for our listeners is just that idea that there is, first of all, to talk about loans. I think most loan officers hide or belong to some secret club that say we're not allowed to talk about anything that goes on in the loan process at all. And the fact that you not only wanted to, but you were actively like how do I share this news, stood out to me. Why is it that it is so hard to get a straight answer about how the loan process for loan institutions works?


Mark:
    Yeah, sometimes that's the secret sauce. And in many institutions, it constantly changes and it's a moving target. Sometimes, it gets very political. Sometimes I've worked with institutions and seen particularly banks, month to month, week to week, we're looking for this type of loan, we want this type of loan. They're in and out of businesses. Sometimes people just don't know which is the reason why I love what I do in helping people through a credit union as opposed to the commercial banks or other types of places.


Michael:
             So what's the big difference between ... I mean, for a lot of people, what's the big difference between a credit union and a normal bank? Because there's a lot of people that probably have heard of credit unions but they've never even been in one.


Mark:
    So what's amazing is over 125 million people in America belong to a credit union. And many people have that exact same question that you have and they don't know the differences.


Mark:
    Credit unions are all over your area, they're all over my area. People drive past them and they have drive-thrus and ATMs -


Kathryn:
             They look like banks.


Mark:
    ... and they have teller lines. And they have ... Money is money. My dollar spends the same as everybody else's dollar. But really what's the difference is if you go under the covers and unwrap the corporate institution. And what a credit union is, it's a not for profit financial cooperative. The board of directors is democratically elected by people who have accounts there. And there's no stock holders like you would in a for-profit commercial bank.


Mark:
    So what happens when you're in a cooperative, much like other cooperatives, you can sometimes charge a little less in your fees and interest rates. And sometimes pay a little bit more in deposits. And do what's best for the cooperative. Credit unions generally get their money locally from people in the community. And they're lending it out locally to people in the community. And my father was a credit union person for years for the factory that he worked at. And typically, sometimes people had that impression of the local teachers or government workers or Military base where it was just for that. But the entire world has changed in recent years.


Michael:
             Interesting. And one of the reasons I found this very interesting is because we have a normal bank that's a local ... Well, it used to be a local bank. Then it was bought and then it was bought again. But we also have a relationship with one of our local credit unions that we've actually had for I don't know, 15 years. But we've done things like -


Kathryn:
             We take loans. We'll do the car loan or the consolidation loan or whatever through the credit union. But I've never thought of opening an actual just normal account, like a checking account [crosstalk 00:04:54] -


Michael:
             ... account. Or even doing a large loan.


Kathryn:
             Or even doing a large loan, yeah.


Michael:
             I mean when we first talked to you, you were talking about some really large loans. Let's talk, what are the size potentials of a loan you could do through credit union for business?


Mark:
    So we do a lot of loans as simple as you're buying a truck for your business or a new delivery van, the small startups. A lot of credit unions have corporate credit card programs. Down to the very simple, all the way through ... I'm in a major metro area and this week, we did a 42 million dollar loan.


Michael:
             42 million dollars, I love that.


Mark:
    And that is very much the outlier. But most credit unions are for those people who I call main street America and maybe they need a couple hundred thousand dollars, maybe they need an SBA loan, maybe they're just buying ... They have an autobody shop. And really, what they get into is small balance commercial real estate. We do a ton of loans for people that maybe you have a full-time job and you're buying your first rental property or a small apartment building. We focus on ... We like to help people who have the accounts there but also looking for something different. When you talk to people and say, what's my ideal financial institution? How many people say, I want a relationship with my business lender and business banker. And very few people get that because many times, every time there's a merger, you tend to move down the food chain at your local institution one letter.


Mark:
    And like yourself, people generally have a favorable impression of credit unions. It was ... I got into credit union business lending 20 years ago and it was about 25 years ago that really credit unions were legally able to. So it's a relatively new phenomenon. To this year, credit unions will do over 40 billion dollars in commercial and small business loans for the community. And it's that secret sauce that a lot of people just don't consider because they like that institution for their needs but sometimes, they think about going elsewhere when they want to grow their business.


Michael:
             Do most credit unions actually have a commercial business mindset now? Is that [inaudible 00:07:33] ... Because it feels like for a long time, they didn't. Like even ours. Like it seems like it's been shifting over the last five or six years when I look at their material.


Mark:
    Absolutely. When I first got into commercial lending in credit unions, it was a microscopic part of our business and industry. Where they literally ... I was 29-years-old and the credit union hired me. And literally just said, we'd like to do business loans. You seem like a nice guy who could help us do it. Figure it out.


Kathryn:
             So we have you to personally thank for any business lending that credit unions do. Mark who started it all.


Mark:
    Not quite me but I had to literally make up policies and learn how to buy all the systems and everything that goes into starting a whole new institution. And now, it's become a lot more sophisticated. Currently, I'm in ... And credit unions, since they're cooperatives, and most of them, relative to other institutions, they're relatively small institutions. So they'll work cooperatively. Maybe your local institution can only lend half a million dollars but you're in an area where you have to buy million dollar property. What we actually do is we work with about 75 credit unions all together who will pull their money together to lend it to the community so that they can make more loans together than they could individually.


Michael:
             Okay, what did you say? 75 credit unions?


Mark:
    Yeah, with our company, we individually work with about 75 credit unions and there's a network of probably 12 to 15 companies like us. We really have the whole country covered in terms of bringing these services to people who want to increase their business lending needs and business services needs through that local credit union.


Mark:
    The reason why I love my job, nobody's protesting on their streets against their local credit union.


Kathryn:
             There, there.


Mark:
    When you say, I work with credit unions, it's like saying I sell puppies for a living. Everybody likes that, you know? Oh great, let's talk. And so it's really enjoyable to bring this whole other aspect of the credit union culture and financial network to small businesses and entrepreneurs.


Michael:
             So as you said, there's a network of organizations like you around the country. So this is something that, is there any blind spots in the United States that you know of that couldn't do something like this?


Mark:
    Very few. A lot of times, people will contact me and if I don't have one of my direct lenders, at no charge, we do an introduction to somebody else in your local marketplace. There's 5,000 credit unions in America. And we're not a homogenous industry. A lot of us work with businesses, but not everybody does. So we don't want people hopping credit union to credit union to do that. So sometimes, a lot of times, we help them out and get the ball moving with their local institution if we don't have direct coverage.


Michael:
             So let's talk about the difference between getting let's say a home loan or a car loan and a business loan. A lot of folks who have small businesses, small to medium size, they probably have done nothing more than maybe a line of credit. What's the difference, right off the bat, between the commercial and the non-commercial?


Mark:
    Sure. And the first thing that people need to understand is when I go get an auto loan, when I go get a mortgage loan, it's really a standardized, homogenous product. They take your income, we're pulling your credit, we're plugging a formula and yes we can do it or no we can't do it. And if we can, here's the interest rate based off of this machine that spits out.


Mark:
    The small business lending is much more subjective. In the first thing, as a community lender, the first thing that we want to do is understand your business. And that's where we want to understand the story of who you are. We want to make sure you understand your business. And I always tell the story of, if I go to somebody and say, I have good credit, I have a good income, I want to open an autobody shop. Well I can't even change my own oil. That would be a disaster. So we want to know that you understand your industry. We want to hear the story of your background. We want to hear the story about where you've been, how you're going to use the money, and how it's going to benefit your company. We sometimes will turn down loans because it's a bad business decision and we can look at the financials and say this is bad ... We're putting you in a bad spot where quite frankly, you're not going to be able to pay it back or you're going to make a whole lot less money. And we look at that as a duty to people to show them, here's where you're at.


Mark:
    So we have this whole subjective side of understanding who you are. And that's where we want to have your conversation. And we don't simply put you to an online portal where you punch in the numbers and the machine says you're either in our box or out of box like some of the national banks.


Mark:
    The second side is, that's where we get into the objective side of really understanding where you're at personally. We want to see where you're at personally, what's your personal credit is like. What your personal income is like. And then we look at that business side and really mash it all together to come up with how you look globally. Because for a small business owner, the smaller the loan, the more the success of that loan is based on the person who's there to run the business. If Jeff Bezos gets sick for a week at Amazon, things still move along. If we have a hair salon with one person who is running it and he or she is sick for the week, things have problems. So really, that's where we want to understand the people and the business and how we can help you and really put all of that together.


Mark:
    The first time you're getting a loan from an institution on the small business side is always the hardest. I always say it's like that first date. It's that awkward conversation of let's talk about who you are and what you're doing and see if this will work from the long-run. And then that second and third and subsequent ones get much, much easier and casual and quicker. That's the thing where sometimes, there are the national lenders or we sometimes see people going to these online lenders where they push a button and say I'm going to get my money tomorrow, no questions asked. But it's at 35 percent. We would rather spend a little time with you to understand and get to the best possible deal.


Kathryn:
             Yeah, makes sense. So with traditional banking loans, I know that for ... Especially, I'm thinking of my very young startup entrepreneurs. Typically, to even talk to a bank, you have to have two years of profitable tax statements, right? Is that true for a credit union for small business loans?


Mark:
    You know the nice thing about the credit unions is first of all, if somebody has a relationship at their local credit union, that always goes to the plus side. If you've been a responsible member and part of the cooperative, that's good. Where credit unions generally, we're trying to see how we could make it work. What I always tell people is there's always money for you, it's just a matter of how much you're willing to pay. And for somebody, particularly starting out, where maybe you have a vision. You know your industry, and you want to go out on your loan, many times that best option is an SBA loan. And there's lots of credit unions that actively participate in that, particularly for smaller amounts.


Mark:
    What I really enjoy is to also, to make sure with people that they're maximizing local opportunities. There's a lot of money at the state level, at the local level, in the small business development centers and resources to make sure you're maximizing all the possible tools before you take out a debt. I lend money for a living and I am most debt-adverse person as you get. And I don't want to see businesses take out debt. So I always want to make sure, particularly in that startup phase, where you're maximizing all the resources and free government loans and other people who want to see small businesses succeed, before you take out that debt.


Michael:
             So how does a small business person, wherever they are in the country, navigate that? Is there one place or is this a huge research project to find that money?


Mark:
    No. You know, the SBA, and when I say SBA, I don't like to use lingo, Small Business Administration, is by far in a way the friendliest government agency there is out there.


Michael:
             Really?


Mark:
    And 20, 30 years ago -


Kathryn:
             Who knew?


Mark:
    ... that was not the case. But their resources for the small business community is fabulous these days. And the reason being is that they really don't receive any money from the federal government anymore. They've basically become a standalone agency where they just depend on the fees that people pay them. So they have to be friendly or people will not use them.


Kathryn:
             There you go.


Michael:
             When we first started our business, I remember the conversation of that. And even one of the local business people that had gone through them to start a veterinary hospital, and it was a nightmare. And I just ... We were told, just don't ever do it.


Mark:
    And it is an absolute nightmare. And there's two paths for that. Is many lenders, I'll just say, are kind of lazy and don't like to deal with SBA loans because if I can get you 300,000 dollars, they're paid to produce loans. The easiest thing is I get your paperwork and I push it through the system and I don't have to deal with the federal government. If you have somebody that has an SBA business, it can be a very friendly process provided there's no glitches and backgrounds and appraisals and everything like that, SBA loan today for us is about a 60-day process.


Michael:
             Wow, that's not bad at all.


Mark:
    Yeah. And the fees are great on it. And many times, the process when people get frustrated, is lender-driven more than the SBA-driven. So it's important to find somebody who knows that business and who does it. A lot of SBA lenders are what I call dabblers where they might do one a year just because there's no other option and they want to try to get the loan done. And most of the time, it's a train wreck to get done.


Michael:
             So how does a business person find somebody who is not only fluid in them but likes them?


Mark:
    Sure. I hate to say Google's a great tool but Google's a great tool. On the SBA site, they actually list all the lenders in your region and how many loans that they do in terms of number and dollar.


Michael:
             They do?


Kathryn:
             Interesting.


Michael:
             Oh, that's fantastic.


Kathryn:
             Okay.


Mark:
    It's on the front page of every SBA district office. And you can also see what types. There are lenders who just focus on larger SBA loans. There's people who do a lot of smaller SBA loans. And they also list all of, what's I call SBA microloans which are those particularly very small, many times, they're under 30, 40,000 dollar loans, to those new businesses. You can see all the listings on the SBA site of people who do that in your area. The Community Development Corporations of America, which are really non-profit lenders with a similar philosophy as credit unions, are really an underutilized resource, as well.


Kathryn:
             Like our three-core.


Michael:
             Are they part of that?


Kathryn:
             I think so. Because they used to be the Tri-County Economic Development Corporation. That's their name.


Michael:
             Is that partly what you're talking about?


Mark:
    Exactly.


Michael:
             Okay. As we're having this side conversation over here. Oh is that what they are?


Kathryn:
             Yeah.


Mark:
    And many people, probably what we see, is when people are searching for these loans, they ask one or two places and get frustrated and just say, ugh, I can't get the money. I'm going to borrow against my house. I'm going to go to one of these online lenders. I'm going to max out my credit cards. But there's so many resources in America but I always tell people, it's like shopping for a restaurant. Think about it that way. You can go to McDonald's that gets cheap, fast. You can go into your local convenience stores and walk in and walk out. Or you can ... Ruth's Chris only serves top of the line steaks and you pay for it and you get great, personalized service.


Mark:
    And many times, lenders in financial institutions are like that. We're all selling money and all restaurants feed you, but they're not all in the same marketplaces.


Michael:
             Well let me ask this. So when we're talking that analogy of restaurants, is there a Yelp type of thing for banks?


Mark:
    Yeah. Many times, that's under the covers in some government data. But it's always there. What I always advise people is much like when you're starting a business, talk to those successful people that have been where you've been in your marketplace and ask around. The attorneys, the realtors, they all have a good pulse on your micro-level. And once again, the SBA is a great resource for it. There's different trade associations out there. If you have a lot of money with great credit and you want to buy large commercial real estate, this conversations easy. There's a hundred people in your neighborhood and they're calling you all the time to give you the money. We do that too. But what we really like to do is try to help out those new, small businesses and people looking for smaller dollar amounts.


Michael:
             So let's talk about that for a moment. One of the things that we've seen over the past is this standard, we loan for property, we loan for equipment. We don't loan for cashflow. We don't loan for blah, blah, blah. Is there categories or things like that that we're looking at within the credit union business loan stuff that you could help us understand better?


Mark:
    Yeah. You couldn't have set me up anymore for that. I love that question. So we do a ton of vehicle loans. We do a ton of equipment loans. We do real estate loans. And we do SBA loans. Where credit unions struggled was, I need to hire four people to expand my business. I need to hire a new location. Those non-real estate loans.


Kathryn:
             Un-collateralized, yeah.


Mark:
    Yes. And actually, we saw a tremendous amount of credit union members who would just get frustrated and go to the on-decks and cabbages of the world, paying 35, 40 percent interest rates because it was fast, quick, and easy, and they would give them the money.


Mark:
    We actually just last year, formed a division for this particular program called New Direction Lending. And New Direction is NU. And it is the thing-tech like, I call it the credit union friendly version of the online business loan. Where our credit unions are funding these loans that people can get an answer for in seven minutes and closing's usually in four to five days. Is the rate higher? Yes. It's unsecured. It's a small business loan. But it's usually, our rates are usually a third of the online lenders out there. And we don't charge pre-payment penalties. We don't charge all the interest up front. We don't do anything like that. And we did that because credit unions wanted to do well for helping small businesses. And that's why we formed New Direction Lending.


Kathryn:
             Wow. So where an on-deck or somebody like that is going to be charging 30, 35 percent, you might be down in the 10 to 12 to 14 percent?


Mark:
    Our average rate is 12 percent these days and we've funded deals at 8 or 9 percent. And if it's a little bit riskier, it might be 14 or 15 percent. And if people have one of these loans, we do a lot of these loans where we're refinancing these online business loans where people ... Hey, listen, I realize sometimes when you're in a pinch and you're in a crunch and the world has gone crazy the last 18 months, you got to do what you got to do sometimes. But we love to help people refinance those and really lower their interest payments and get it to something that is fair and transparent. And it's all funded by credit unions.


Michael:
             I love this.


Kathryn:
             Yeah, me too.


Michael:
             I mean this is a resource that we need to have.


Kathryn:
             So with that, with New Direction Lending, is that something that is less tied to a local credit union? Is it like -


Mark:
    We lend to that in 46 states.


Kathryn:
             Okay.


Michael:
             Is California one of them?


Mark:
    California is one of them.


Michael:
             I like that, okay.


Kathryn:
             Good news. Good news, California friends.


Mark:
    We're unable to, [inaudible 00:26:17], we're unable to lend in Nevada, the Dakotas, and Vermont.


Kathryn:
             Okay.


Michael:
             How interesting.


Kathryn:
             Interesting.


Michael:
             Okay, I'm just curious. Is there any easy answer of why?


Mark:
    It gets into different lending laws in these states that just doesn't make it friendly. You know sometimes, on state levels, bankers tend to give a lot of money to politicians. So sometimes there's different laws that just making sure the local folks are taken care of and there's not a lot of competition. You see that in today's political world, too. We want to tax billionaires until billionaires call you up and tell you what they do and don't want to pay. So bankers tend to have a lot of political sway, as well.


Michael:
             How interesting.


Kathryn:
             Super interesting.


Michael:
             All right. I'm just like where do we go next.


Kathryn:
             Your brain is spinning.


Michael:
             This is totally ... Okay, so one of the things I'm thinking is this is the first time I've been this excited about a banking conversation so thank you for that, Mark.


Mark:
    You're much more excited than my wife and kids are talking, when I talk about it.


Kathryn:
             That's fair, that's fair. So one of the things we talked about at the beginning before we turned the mics on for the audience was really asking the question, what is it that a small business entrepreneur, somebody who needs to find some capital, some investment, what is it they need to do to prepare for that? What do they need to have ready or in place to make that process as efficient as possible?


Mark:
    Sure. And one of the best things that you can do for looking at what you have is understanding what you're giving to us. And when we do all this financial analysis on your business, usually what comes back is we want to ask a couple questions. I'd like to think everybody's perfect and their numbers always go up and everybody has perfect credit and they've never had a blip in their life where there's no questions on their financials, but that's just not reality.


Mark:
    So if you have somebody who's an accountant or somebody who's friendly with financials, have them look at it and sometimes say, okay, what's this number? What doesn't make sense on here? And sometimes it's best to do a little quality control piece. And then the other piece is Google yourself. Make sure if you have any goofy leans, judgements, lawsuits that somebody filed against you that may be out there, liabilities. We'll find them and we would much rather have you find them and bring them to us than we search and have a whole bunch of and find out some crazy stuff. And really focus on that quality control and bring that to us ahead of time because it really can cut down on getting your loan and doing the research.


Mark:
    But many times, you need to understand that business and what you're getting to us so we can have that conversation. And just have an open, honest dialogue of hey, in March 2020, if you had a business shut down and you got behind on some things and you're back, we understand that. How many people didn't have their life a little bit of an upheaval in the past two years? So we just want to understand that ahead of time. And don't feel like you have to hide things and hope they don't find it. Most people can get a business credit report, a copy of their business credit report.


Michael:
             Where do you go to get that? Because I know it's different than our own personal credit reports.


Mark:
    Yeah, it's not as accessible. There's a lot of different websites that pull them out there. The DMV ones really are kind of tough to keep up with these days. Experian is the best business credit bureau out there these days. And has files just for your business. So make sure there's nothing goofy that came up from years ago. Because what happens is a lot of times, businesses have similar names. And something may get flagged for you but it's not you. There's a lot of businesses that have really, really close names. And business or credit reports aren't as regulated as consumer credit reports.


Michael:
             Oh, that's interesting.


Mark:
    It's really the wild west.


Kathryn:
             Maybe there's a benefit to having the name Half a Bubble Out. We're probably not in strong competition for that one.


Michael:
             Maybe not. Well and I'm seeing a resource because I'm always looking for where can we provide better resources? And I think on our website, it would be cool to have a spot where we started talking about some of these things. And even a checklist of things that people could do as a business and things to think about, even coming out of this conversation. Because having some of those resources, the SBA and talking about that and those are just things that ... Well I think getting a business loan is a lot like hiring somebody. The average person just doesn't do it that often so how do you get good at it? How do you get a lot of experience? And what does it look like? And Kathryn and I, over 20 years of business, we've had a myriad of varying events where ... Like we had one organization, we took two business loans, paid them back, and they wouldn't give us a third because somehow at that point, the way their board was, everything else, they just no, we don't like you. We don't think it's a good fit right now. And so you come away scratching your head.


Michael:
             I remember the first small bank we went to, we were young and the business was young and we were desperate. We were desperate, it felt desperate. And I remember the loan officer looking at Kathryn because she had quit her job and we were both working in the company. And the company was doing okay and then it took a dip. And she just looked at Kathryn and goes, I think you need to go back and get a regular job.


Kathryn:
             I didn't, I ignored her but -


Michael:
             You were like, ouch.


Kathryn:
             ... it was hurtful. She's like, I just don't know if this is going to make it. I don't know if you guys are ... This doesn't look good. You should just go back and get your other job. And I'm like mm. Thank you.


Michael:
             And as a loan officer and doing things like that in the past, I'm sure you've had plenty of conversations where they're hard to have. Is that true?


Mark:
    Yeah. And a lot of times what I like to do is if the loan prospect isn't looking good, many times what we'll do is take it back to the people and say this is what we're seeing. Do we agree on the facts? Are we off? Because a lot of times, bankers are off on what they're thinking. They're double-counting numbers, they're missing something, they're projecting out revenue that wasn't there. Or they're not taking other factors into it. So if your banker won't have a conversation with you about the process or have that conversation before a decision is made, that's a red flag. Look for somebody who can do that and have that conversation with you. And I realize, if I went to work for a bank I'd probably get fired in a week with my attitude.


Kathryn:
             That's funny.


Mark:
    But I really look at it as a relationship of we give our product away and then we have to get it back from our customers. So we want to make sure that we're comfortable for you, you're comfortable for us, and we make income by lending out money. So we want to ... Before we make a bad decision, I want to make sure we're making that decisions on accurate means. And we never really ... And it's one thing if you're shut down, if there's a lockdown. That extreme end, I'm sorry, there's not much we can do. But for 80, 90 percent of us who are in the middle, it's important that we have the facts correctly. And we understand you but we're also making it off of a good decision before we would turn down a loan.


Mark:
    And you just need somebody who will ... And I don't have to name names on the places that won't do that. But if you are talking to somebody and they won't have that conversation with you about the process and the decisions and what's important, and also if it's a fit or not. And if you can have an open conversation saying tell me the types of businesses and what you're looking for. And it might not be you but that doesn't mean you're not a credit-worthy company. That just means they're serving a different dish than what you're looking for.


Kathryn:
             So have you guys ever backed somebody that didn't measure up on paper but you were like, no, I think this is a good idea. Do you have that kind of latitude at all or are you guys still very much like there's ratios and numbers and there's no latitude for -


Mark:
    There's been a couple companies that are kind of at that venture capital type stage where I've said, this company's going to do well but I can't do it. It's an idea. It's an IT company. They're going to build an app. They want to build ... And regulated institutions are generally not the place for you if you have a ... If you're going to build a website and you want venture capital funding and you want me to come in behind them, well that gets kind of messy for everybody. And there's been one or two out there where I've said, they're going to do very well. And usually they have.


Kathryn:
             But what about, have you ever backed the auto loan guy or the auto shop guy or main street America person where it's like they didn't quite look right on paper but you found the flexibility to do that? I'm just curious, is there flex?


Mark:
    Absolutely, absolutely. And many times, it comes down to good people make good small business customers. And you really look for the values behind the person and if it's something that they want to stick with and have a passion for and a knowledge for. Those are the ones where you can take those, boy, this is a 50/50 one but they really know what they're doing, this is a passion for it. We think the business is good and can move and can keep going from there.


Michael:
             It's interesting because in the business world, when it comes to a lot of private investment money, there's a lot of great ideas out there we know of. Those of us that have been around a while. But the old saying is, we're betting on the horse. It's like well, that idea is a good idea. It could go, it could not. It really depends on you. It sounds like that's part of what you're doing is trying to, in maybe a more sophisticated way, assess are you betting on that horse or not?


Mark:
    Yeah. And many times when you look at how credit unions get their money, you're putting your money in your local institution and we're lending that dollar out. We're not lending out Wall Street money. We're not lending out insurance money. We're lending out that dollar of the local community. And it really is a fascinating circle of money that stays in your community. So we have to be good stewards of that community.


Mark:
    So the venture capital people, they'll make 20 investments and hope one hits the jackpot. We can't do that and take that level of risk. And that's where I say we have different levels of risk that we could take. Here's what's permissible, here's in our box. And if you want to build the next billion dollar company and it's going to be boom or bust, that's probably not going to your local credit union.


Kathryn:
             Probably not.


Mark:
    Maybe you get a couple bucks to start out, but that's more of your VC type of angel investor money who's paid to take that level of risk.


Kathryn:
             Yep.


Michael:
             Absolutely.


Kathryn:
             Makes a lot of sense.


Michael:
             Okay, really quick since we are in the third quarter, fourth quarter ... We're in the fourth quarter now -


Kathryn:
             Fourth quarter.


Michael:
             ... of 2021 when we're recording this. PPP loans have been a thing and what are the things that you think we need to think about when it comes to that? Because that's been an aspect of business lending for the last year and a half now?


Mark:
    So yes, good question. And we've done, here at MBFS, we've done over 12,000 of these loans. We hope everyday that there's not a third round of them.


Kathryn:
             I bet you do. I'll bet you do.


Mark:
    Because we're at our limit. So the funding period is over. There's no prospect in conversation of another round. These are 100 percent forgivable loans. No matter what you do, do not ignore this process. The SBA, it just recently has set up a portal where everybody in America who got a loan through bank or credit union or anybody else, can go onto the SBA portal for all loans, 150,000 dollars and under, and you can apply directly through the SBA. It's quick, it's easy, but if you ignore it and don't do it and think it'll just go away, you're going to end up stuck with a loan that they're going to track you down with and it'll haunt you for years. Even though it'll charge off and your lender's going to get the money back, you're going to be on the hook for it. And your business is going to be on the hook for it. So everybody, if you got a PPP loan last year or this year and you have not completed your forgiveness process, go to the SBA website and get it done and it's one of the easier things you'll ever do and you can check that box.


Kathryn:
             So if you think you have, like if you're like, I'm pretty sure I did that through my bank, is there a way to verify just in case it makes you a little uncomfortable? Like well I'm pretty sure I did it through my bank. I'm pretty sure I'm all done but now you're making me nervous, Mark.


Mark:
    Once your loan is forgiven, you are required to get a letter from your lender saying that it was forgiven. If you have not received that letter, assume your loan is not forgiven until you either hassle them for that letter for your records or go on the SBA website and try to apply just to make sure it is done. Because many of these loans have been bought and sold and done by lenders who were doing this at such a fast pace, records, these loans could be sold. Your loan could be given to a few other people. If you do not have a letter, assume your loan is not forgiven until you get one.


Kathryn:
             Fair enough. Good advice.


Michael:
             Good advice.


Kathryn:
             I like it.


Michael:
             Really good advice. Wow, this has been great. Thank you, Mark. I have just thoroughly loved this conversation. Can we have you back again to talk more about this type of stuff?


Mark:
    I love to do it. As things, the market, changes, happy to help people out.


Michael:
             Fantastic.


Kathryn:
             Nice.


Michael:
             Hey, one last question because I just have a million of them. When you're talking about the difference between a bank and a credit union and the money is local within the folks that are part of the credit union, if things were to go crazy, there's people talking right now about the dollar inflation, deflation, all those different type of things. There's even talk of, I don't know if it's scare tactics or what about if you have more than 200,000 dollars in the bank, the government can freeze it. Are there different regulations in a credit union for things like that potential dangers?


Mark:
    Credit unions are insured by the federal government to the exact same standard and with the same standard at that 250,000 dollar limit. If you keep more than that in your institution in cash, which you shouldn't, diversify it, spread it out among different people. Spread it out among different institutions.


Michael:
             Good, good. Good advice. That's what I would potentially say but I like having it coming from somebody who's got more credibility than me in the banking industry.


Kathryn:
             Somebody who actually knows.


Michael:
             No, that's good. And it clarifies that actually, I'm not in left field.


Kathryn:
             Okay.


Michael:
             I might be near third base but I'm not in left field. Mark, thank you so much for your time today. We really appreciate it.


Kathryn:
             And if you want to reach Mark, Mark, what's the best website? Newdirectionlending.com? Is that a great way -


Mark:
    You can reach us at newdirectionlending.com or you can reach us at MBFS.org and we're very active on LinkedIn if you want to follow us and message me directly.


Kathryn:
             Great. We'll put all that in the show notes. New Direction is NU, directionlending.com. So great, super.


Michael:
             Fantastic. If you have any more questions or are interested at all, go to Mark's website, contact them, catch them on LinkedIn. I'm telling you what folks, he sounds friendly, he is friendly. He wants to help. He genuinely cares. You can find people like that in your local market but from our experience, it's just not easy. So continue to build relationships with your local bankers that you like. Use Mark and his organization as a resource and again, thank you for listening to us today here on the HaBO Village Podcast. I'm Michael Redman -


Kathryn:
             And I'm Kathryn Redman.


Michael:
             ... you have a great week.


Kathryn:
             Bye-bye.


Michael:
             Bye-bye.