# Entrepreneur: Easy to apply for Nationwide SBA loans for underserved minority small businesses through Arkansas Capital Corp.

An episode of [Money Making Conversations Master Class](https://invisiblenetwork.ai/podcast/1264705641), 5 Sep 2024, 31 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/b1db7263-d1a3-4d00-8976-af62012aab44/00a51c10-28f1-4a05-95bf-b1dc013d4f49/audio.mp3?utm_source=Podcast&in_playlist=35a10561-3e1b-4d05-a529-af62012aab6a

Listen and subscribe to Money Making Conversations on iHeartRadio, Apple Podcasts, Spotify, www.moneymakingconversations.com/subscribe/ or wherever you listen to podcasts. New Money Making Conversations episodes drop daily. I want to alert you, so you don’t miss out on expert analysis and insider perspectives from my guests who provide tips that can help you uplift the community, improve your financial planning, motivation, or advice on how to be a successful entrepreneur. Keep winning! Two-time Emmy and three-time NAACP Image Award-winning, television Executive Producer Rushion McDonald interviewed Craig Calafati. Executive Vice President and Director of Lending for Arkansas Capital Corporation (ACC). The discussion focuses on small business financing, SBA-backed lending, underserved communities, entrepreneurship, business planning, and the realities of obtaining funding for a startup or growing business. Lafferty shares valuable insights about what lenders look for, why many businesses fail, and how entrepreneurs can better position themselves for success when seeking capital. Purpose of the Interview The purpose of the interview was to: • Introduce Arkansas Capital Corporation and its lending programs. • Explain how SBA-backed lending works. • Educate entrepreneurs about preparing for funding. • Discuss challenges faced by underserved communities. • Highlight the importance of business plans. • Help small business owners understand lending requirements. • Encourage responsible entrepreneurship and financial planning. About Arkansas Capital Corporation Arkansas Capital Corporation is a: • Private nonprofit lending corporation • Founded in 1957 • Originally created to stimulate economic development in Arkansas • Focused on entrepreneurship and economic growth • Dedicated to serving underserved and rural communities The organization's mission extends beyond lending and includes: • Small business development • Job creation • Economic growth • Educational programs • Community development initiatives Major Announcement: Nationwide SBA Lending Authority One of the most important topics discussed was Arkansas Capital Corporation receiving an SBLC (Small Business Lending Company) License. According to Lafferty: • SBA made only three licenses available nationwide. • It was the first time in approximately 40 years such licenses had been issued. • The license allows Arkansas Capital Corporation to make SBA-backed loans beyond Arkansas. Initially, the organization plans to expand throughout: • Arkansas • Texas • Louisiana • Mississippi • Tennessee • Other surrounding Southern states before eventually moving nationwide. Key Point: This license significantly expands access to capital for entrepreneurs. What Is Arkansas Capital Corporation's Mission? Lafferty explained that Arkansas Capital was created to help: Underserved Communities Including: • African American communities • Hispanic communities • Rural communities Entrepreneurs Helping individuals start and grow businesses. Small Businesses Providing access to capital that may not be available through traditional banks. Arkansas Capital Is Not a Bank One important distinction made during the interview is that Arkansas Capital Corporation: Does not function as a traditional bank. It: • Does not take deposits. • Focuses on business lending. • Works through specialized lending programs. • Serves borrowers who may not fit traditional bank criteria. The Biggest Mistake Entrepreneurs Make Throughout the interview, Lafferty repeatedly emphasized one critical issue: Lack of a Business Plan According to him, many entrepreneurs: • Have passion. • Have ideas. • Have ambition. But they do not have a detailed plan. He described the business plan as: "Your Bible." A quality business plan should explain: • What the business does • Revenue projections • Operating expenses • Competition • Growth strategies • Risks • Management structure • Funding…

## Transcript

[0:05] Speaker 1: Welcome to the show. I am Rashawn McDonald, the host
[0:08] Speaker 1: of Money Making Conversations Masterclass, where we encourage people to
[0:11] Speaker 1: stop reading other people's success stories and start planning their own.
[0:16] Speaker 1: Listen up as I interview entrepreneurs from around the country,
[0:19] Speaker 1: talk to celebrities and ask them how they are running
[0:22] Speaker 1: their companies and speak with nonprofits who are making a
[0:25] Speaker 1: difference in their local communities. Now sit back and listen
[0:29] Speaker 1: as we unlock the secrets to their success on Money
[0:32] Speaker 1: Making Conversations Masterclass. Hi, I'm Rashawn McDonald. I host this
[0:36] Speaker 1: weekly Money Making Conversations Masterclass show. The interviews and information
[0:41] Speaker 1: that this show provides are for everyone. It's time to
[0:43] Speaker 1: stop reading other people's success stories and start living your own.
[0:47] Speaker 1: My guest is the Executive Vice President and Director of
[0:50] Speaker 1: Lending for Arkansas Capital Corporation. Arkansas Capital Corporation is a
[0:54] Speaker 1: private nonprofit lending corporation dedicated to empowering entrepreneurs in Arkansas
[1:00] Speaker 1: and surrounding states. Please welcome to Money Making Conversation Masterclass,
[1:04] Speaker 1: Craig Calafate. How you doing, sir?
[1:07] Speaker 2: I'm doing well. How are you?
[1:08] Speaker 1: Well, first of all, I got to find out about,
[1:10] Speaker 1: are you a football man? Because football season is starting
[1:14] Speaker 1: in the state of Arkansas. That's Razorback country.
[1:17] Speaker 2: Who do you align yourself with? I'm a longhorn in exile, man.
[1:22] Speaker 1: Well, they joined you in SEC, so you're in their territory.
[1:26] Speaker 2: I'm very happy about that because now I get my
[1:27] Speaker 2: longhorns on TV.
[1:28] Speaker 1: There you go, my friend. I appreciate that. Now, when
[1:31] Speaker 1: you say surrounding areas, I'm from Houston, Texas, so I'm
[1:35] Speaker 1: very familiar with that whole area, especially that Texarkana area.
[1:39] Speaker 1: I've been through that many times. What do you mean
[1:41] Speaker 1: when you say surrounding states?
[1:44] Speaker 2: Well, something happened that kind of caused us to expand
[1:48] Speaker 2: into the surrounding states. About six months ago, SBA made
[1:52] Speaker 2: available an SBLC license, which is a small business lending
[1:58] Speaker 2: company license, which allows a non-bank to lend nationwide for
[2:03] Speaker 2: the SBA program. We received one of those, one of
[2:06] Speaker 2: the three that were available. First time in 40 years
[2:09] Speaker 2: they've made them available. So we were limited to Arkansas
[2:12] Speaker 2: up to that point. We're allowed to go nationwide, but
[2:16] Speaker 2: my thinking is I want to be sure we're doing
[2:19] Speaker 2: it right. So we're going to start with a slow rollout.
[2:22] Speaker 2: We're doing basically, be honest with you, it's not just
[2:26] Speaker 2: surrounding states, it's the SEC. That's the outline we chose
[2:30] Speaker 2: because everybody knows it, right?
[2:32] Speaker 3: Right, right.
[2:33] Speaker 2: So initially, that's what we're going to start with, just
[2:35] Speaker 2: the surrounding areas, this area of the South. And then
[2:39] Speaker 2: when we feel that we've got everything in place, everything
[2:42] Speaker 2: that's necessary to do the job right, then we'll take
[2:45] Speaker 2: it nationwide.
[2:46] Speaker 1: Now, that's really impressive because of the fact that I
[2:49] Speaker 1: had never heard of that. Why was that restriction in place?
[2:52] Speaker 1: And you said it's the first time in 40 years.
[2:56] Speaker 2: Well, the non-bank lenders are not regulated federally. So every
[3:01] Speaker 2: bank is regulated by the FDIC or the OCC, the
[3:05] Speaker 2: Office of the Control of the Currency. And so you
[3:08] Speaker 2: have non-bank lenders that are out there that really aren't regulated.
[3:12] Speaker 2: We happen to be regulated by the state, but some
[3:14] Speaker 2: aren't regulated by anybody. So it's incumbent on SBA if
[3:18] Speaker 2: they're going to let you lend across the country, they
[3:21] Speaker 2: have to regulate you. They have to do the auditing
[3:24] Speaker 2: and everything else. And frankly, they just didn't have the manpower.
[3:27] Speaker 2: And so they beefed that part up of SBA. So
[3:32] Speaker 2: now we are regulated not only by the state of Arkansas,
[3:35] Speaker 2: but by the SBA.
[3:38] Speaker 1: Now, I'm speaking to Craig. He's the Executive Vice President
[3:40] Speaker 1: and Director of Lending for Arkansas Capital Corporation. Now, I
[3:44] Speaker 1: say it's a private nonprofit. Now, this whole show is
[3:48] Speaker 1: going to be about educating me because my banking is
[3:52] Speaker 1: Bank of America, Fifth Third, Wells Fargo. Now, I'm talking
[3:57] Speaker 1: to you. Please educate me on the difference.
[4:00] Speaker 2: Okay. Well, we're not a bank, so we don't take
[4:03] Speaker 2: deposits or anything else. Quick background on Arkansas Capital. We
[4:09] Speaker 2: are a non-bank lender, as I said. We're a nonprofit.
[4:13] Speaker 2: We are, and we, well, let me back up. We
[4:18] Speaker 2: were formed in 1957 by the governor of Arkansas, Governor Rockefeller.
[4:23] Speaker 2: And at the time, what he did was he had
[4:24] Speaker 2: a barbecue and he got together all the business leaders
[4:27] Speaker 2: in Arkansas and said, look, we're sitting in a very
[4:30] Speaker 2: agrarian society. We need to build up industry. We need
[4:35] Speaker 2: to foster entrepreneurship. you're the guys that are going to
[4:38] Speaker 2: help me do it. And he had them all kick
[4:40] Speaker 2: in some money and start a company to do just that.
[4:43] Speaker 2: And that, that was us. So since 1957, our mandate
[4:47] Speaker 2: has been to not only foster entrepreneurship, small business, but
[4:53] Speaker 2: to get into underserved communities, rural communities, which we have
[4:58] Speaker 2: plenty of here in the South. Right. And, and so
[5:01] Speaker 2: that's really our focus. We do a number of different
[5:03] Speaker 2: things other than just small business lending. We, We also
[5:07] Speaker 2: have what's called an EB-5 hub, which is a program
[5:10] Speaker 2: through the Department of Treasury and Homeland Security that lends
[5:15] Speaker 2: money to approved projects that create American jobs via immigrants
[5:21] Speaker 2: that come to this country. So if you were immigrating, say,
[5:23] Speaker 2: from China or India, and you had a spare $ 900, 000
[5:27] Speaker 2: lying around, you could invest it in this program and
[5:31] Speaker 2: get your green card right away, but also create American
[5:34] Speaker 2: jobs at the same time. We do that. We'd also
[5:37] Speaker 2: do new market tax credits, which is another program through
[5:41] Speaker 2: Department of Treasury, which fosters larger developments, typically over $ 79 million.
[5:48] Speaker 2: And we do those across the South. And then our
[5:51] Speaker 2: educational arm, we put on a contest called the Governor's Cup,
[5:56] Speaker 2: which is a contest for college students, college teams from
[6:00] Speaker 2: different universities, very much like Shark Tank, kind of an
[6:04] Speaker 2: elevator pitch contest. where they win up to $ 20, 000, $ 30, 000
[6:08] Speaker 2: to take their plans forward. But we've been doing that for,
[6:14] Speaker 2: I think, 21 years. So while lending is our primary focus,
[6:19] Speaker 2: it's not the only thing we do here. But yeah,
[6:23] Speaker 2: it was a big boost for us to get the
[6:26] Speaker 2: SPLC license. It was a huge compliment.
[6:30] Speaker 1: Well, it allows me to talk to you because, you know,
[6:32] Speaker 1: my show is nationwide.
[6:34] Speaker 2: Yeah.
[6:34] Speaker 1: And that's one of the reasons I was excited about
[6:36] Speaker 1: it because of the fact that when you start talking
[6:38] Speaker 1: about underserved communities, that's my audience. I'm not saying my
[6:41] Speaker 1: audience is filled with entrepreneurs. There's 60% African-American, 20% white.
[6:44] Speaker 1: $ 55, 000 is the medium income. My audience is 78% male.
[6:46] Speaker 1: You know, so when I... Look at the breakdown. Excuse me,
[6:59] Speaker 1: it's 54% male. The great thing at the start of
[7:03] Speaker 1: the conversation, we was talking about the Arkansas Capital Corporation.
[7:07] Speaker 1: It was established for entrepreneurs in rural communities and underserved communities.
[7:14] Speaker 1: Listening to my audience, a lot of them in big cities,
[7:17] Speaker 1: so I think that disqualifies rural communities.
[7:20] Speaker 2: The rural, but not the underserved necessarily. Right.
[7:22] Speaker 1: That's where I'm going. What qualifies as the underserved?
[7:28] Speaker 2: Communities of color, obviously, and rural fits into that. I
[7:33] Speaker 2: would say when we're talking about underserved communities, we're talking
[7:37] Speaker 2: about communities of color.
[7:38] Speaker 1: Awesome.
[7:38] Speaker 2: Primarily Hispanic and black communities.
[7:41] Speaker 1: Awesome. Awesome. And so again, when I do these interviews, Craig,
[7:46] Speaker 1: as always, can you tell everybody the website that they
[7:50] Speaker 1: can go to who wants to see the application, if
[7:53] Speaker 1: they want to fill out the application?
[7:55] Speaker 3: Yes.
[7:55] Speaker 1: And the process again. One more time, Craig.
[7:58] Speaker 2: Yeah, it's arcapital.com. Pretty easy to remember. And you go
[8:02] Speaker 2: on there and you'll see.
[8:04] Speaker 1: That's pretty easy. arcapital.com. arcapital.com. I love it. It's A-R-C-A-P-I-T-O-L.
[8:14] Speaker 2: T-A-L.
[8:14] Speaker 1: T-A-L.com.
[8:16] Speaker 2: Dot com.
[8:17] Speaker 1: And then is it a registration button that says loans
[8:20] Speaker 1: or where do you go?
[8:21] Speaker 2: It says apply here.
[8:23] Speaker 1: Apply here.
[8:24] Speaker 2: Apply here. great and then you do that and then
[8:27] Speaker 2: uh there's also contact information if you need to call
[8:30] Speaker 2: us you have questions remember we're also watching you uh
[8:33] Speaker 2: you know as the application is being done and and
[8:37] Speaker 2: if all of a sudden you disappear we're probably going
[8:39] Speaker 2: to call you and say do you need help or
[8:41] Speaker 2: do you need you know i love that.
[8:43] Speaker 3: I love that please don't go anywhere we'll be right
[8:47] Speaker 3: back with more money making conversations masterclass Welcome back to
[8:57] Speaker 3: the Money Making Conversations Masterclass hosted by Rashawn McDonald. Money
[9:01] Speaker 3: Making Conversations Masterclass continues online at moneymakingconversations.com and follow Money
[9:08] Speaker 3: Making Conversations Masterclass on Facebook, Twitter, and Instagram.
[9:12] Speaker 1: The mentorship that you was talking about, you're not there
[9:15] Speaker 1: just to take applications. You're trying to assist them. And
[9:18] Speaker 1: like you said, this is an honest conversation, Greg. I
[9:21] Speaker 1: commend you on it because so many people in this
[9:23] Speaker 1: business can be frustrated and need to hear the truth.
[9:26] Speaker 1: It's not time right now. You know, get that business
[9:30] Speaker 1: plan together. See it out a lot better. Make sure
[9:33] Speaker 1: you understand your profit margin, your cost on this particular product,
[9:37] Speaker 1: all these things. Because I'm telling you, I get a
[9:39] Speaker 1: lot of businesses that start, you know, they're doing all right,
[9:42] Speaker 1: but they're struggling, but they're struggling to the point that
[9:45] Speaker 1: they cannot qualify for a business loan, a line of credit.
[9:49] Speaker 1: And then, so they stuck. They kind of like stuck.
[9:51] Speaker 1: And so trying to provide business opportunities for them, then
[9:57] Speaker 1: their paperwork won't look good. It will not look good.
[10:00] Speaker 2: Right. And also through that application process is also where
[10:04] Speaker 2: you find out exactly how much money do you really need?
[10:07] Speaker 2: Because one of the worst things we could do is
[10:10] Speaker 2: underfund somebody. Right. That's why you see most of these
[10:13] Speaker 2: businesses go out of business. Everybody wonders, this business was
[10:16] Speaker 2: around for six months and their doors closed. What happened? Mm-hmm.
[10:20] Speaker 2: It's because they thought they were going to be full
[10:22] Speaker 2: on day one. Yes. And that doesn't happen. And you've
[10:26] Speaker 2: got to have some cushion in there and you've got
[10:28] Speaker 2: to build that in up front or you're not going
[10:30] Speaker 2: to make it. And undercapitalization is far and away the
[10:34] Speaker 2: biggest reason for failure.
[10:35] Speaker 1: I want to be if somebody was listening to my show, Craig,
[10:39] Speaker 1: and they contacted you, what is the procedure of doing
[10:42] Speaker 1: a lending relationship with Arkansas Capital Corporation?
[10:48] Speaker 2: Well, it's kind of interesting. One thing that we brought
[10:51] Speaker 2: online in the last year is an online application. And
[10:55] Speaker 2: it's not what a lot of people are used to
[10:58] Speaker 2: seeing when they go on a bank site or some
[10:59] Speaker 2: other lender site is kind of an inquiry form. Hey,
[11:02] Speaker 2: this is what I'm looking for. Give me a call.
[11:06] Speaker 2: That's not ours. Ours is a full blown application. It's
[11:09] Speaker 2: the complete application. They can fill it out at home.
[11:12] Speaker 2: I mean, let's face it, the people that we're talking
[11:14] Speaker 2: to and talking about here are people that are working
[11:17] Speaker 2: all day for the most part. They got jobs, they
[11:20] Speaker 2: got businesses. So they, you know, they can come in
[11:23] Speaker 2: this thing two in the morning, they can fill out
[11:24] Speaker 2: their application. Once they submit that, it takes them to
[11:29] Speaker 2: another page, which shows them all the documents that they
[11:31] Speaker 2: need to upload. So it's a pretty seamless, pretty easy
[11:35] Speaker 2: process to get into. We are notified the moment they
[11:39] Speaker 2: open the application, we get emails that says, Hey, so-and-so
[11:42] Speaker 2: opened the application so we can watch it. in case
[11:45] Speaker 2: they have problems. But once they submit it, we get
[11:47] Speaker 2: another notification and we know to contact them at that point.
[11:52] Speaker 2: So it's a pretty slick and easy to navigate process.
[11:59] Speaker 1: Well, I like that because I don't like those little
[12:02] Speaker 1: forms you fill out and then you go back because
[12:05] Speaker 1: I'm a member of the National Minority Supply Development Council,
[12:09] Speaker 1: which is the affiliate of Georgia Minority Supply Development Council.
[12:12] Speaker 1: And I would tell you, it's like filling out a
[12:14] Speaker 1: bank loan to apply for that, you know, cause they're
[12:16] Speaker 1: asking you for your tax. The only thing they don't
[12:19] Speaker 1: ask you for is your bank statements. And so would
[12:21] Speaker 1: you have to have at least four months or consecutive
[12:23] Speaker 1: months of recent bank statement? So just, just here, I
[12:27] Speaker 1: know it's online, but if you can give us a
[12:29] Speaker 1: kind of like an overview, like, like I just mentioned,
[12:32] Speaker 1: tax returns, do it have to be signed bank statements?
[12:36] Speaker 1: What is, what is, what are you looking for as
[12:38] Speaker 1: far as that, that, that credit score, just an overview
[12:41] Speaker 1: of what, if one goes to online prior to going,
[12:45] Speaker 1: they have an insight of what is to be expected
[12:48] Speaker 1: of them.
[12:49] Speaker 2: Well, yeah, obviously it's going to ask them about their,
[12:51] Speaker 2: you know, the project and what they're looking for.
[12:53] Speaker 1: Right.
[12:54] Speaker 2: And you'd be amazed how many people aren't really even
[12:56] Speaker 2: sure about that part when they get into it. But yeah,
[13:01] Speaker 2: so we'll ask them what their project is, what their
[13:03] Speaker 2: background is. Then when you get into the document uploads,
[13:09] Speaker 2: We want three years of, well, we want a business
[13:12] Speaker 2: plan first and foremost. So if it's a new, and
[13:14] Speaker 2: I'm talking about a new business here, we want a
[13:16] Speaker 2: business plan and we want a detailed business plan that
[13:19] Speaker 2: shows that you actually know the business and you know
[13:22] Speaker 2: what it is you're going into. I mean, that's the key.
[13:25] Speaker 2: You know, a lot of it I can glean just
[13:28] Speaker 2: from looking at numbers. I can tell roughly what you
[13:30] Speaker 2: want to do, but I'm going to get into your
[13:32] Speaker 2: business plan and see how you plan to manage day-to-day operations,
[13:36] Speaker 2: how you see it going, what what you see as
[13:39] Speaker 2: your challenges, how you're going to overcome them, that kind
[13:42] Speaker 2: of thing. We really put a lot of weight into
[13:46] Speaker 2: that and the work that's put into that. So you'll
[13:49] Speaker 2: have that. You'll have any cost documents, any invoices that
[13:53] Speaker 2: you're going to need to pay. We'll have you upload
[13:55] Speaker 2: all that stuff. It's really the information that we're going
[13:58] Speaker 2: to need to make a credit decision. Your resume is
[14:02] Speaker 2: going to be involved, obviously. Yeah, the most important thing
[14:06] Speaker 2: when you're laying all this out is that you know
[14:08] Speaker 2: exactly what it is you're asking for and why you
[14:11] Speaker 2: need that. I mentioned this earlier, it's surprising how many
[14:15] Speaker 2: people show up to the process. And really, you ask them, okay,
[14:19] Speaker 2: first and foremost, what are you looking for? And they
[14:22] Speaker 2: look at you and say, well, how much can I get?
[14:24] Speaker 2: That's not the answer that we want to hear. Right.
[14:28] Speaker 1: And I think anybody wants to. The thing about it
[14:30] Speaker 1: is it's really cool having you on the show because
[14:32] Speaker 1: of the fact that You know, so many people are
[14:35] Speaker 1: funding companies out of their pockets or funding their companies
[14:39] Speaker 1: through family relationships, you know. And some people go online
[14:42] Speaker 1: and try to do GoFundMes to try to get revenue
[14:45] Speaker 1: for that. But that business plan, and for the life
[14:48] Speaker 1: of me, I never heard it associated with a loan expectation,
[14:54] Speaker 1: but it has to be. That has to be one-on-one.
[14:57] Speaker 1: And let's talk to that business plan because so many
[15:00] Speaker 1: people just start a business based on a dream. are
[15:03] Speaker 1: based on faith. You hear a lot of faith conversation
[15:07] Speaker 1: when people go out and become entrepreneurs. So talk about
[15:11] Speaker 1: that business plan and why people make a mistake and
[15:14] Speaker 1: put that at the back end before they open their business.
[15:18] Speaker 2: Yeah, it really does surprise me because the business plan
[15:22] Speaker 2: is really your Bible. It's showing how you're going to
[15:26] Speaker 2: open the doors, how you're going to keep them open,
[15:28] Speaker 2: and how you're going to pass that on to the
[15:31] Speaker 2: next person. So So we're looking for every aspect of
[15:35] Speaker 2: the business. And the other thing that people find when
[15:39] Speaker 2: they start doing their business plan is that they didn't
[15:43] Speaker 2: realize how much they didn't know about this particular business.
[15:46] Speaker 2: When they start having to work through different ideas within
[15:51] Speaker 2: the plan and they say, oh, I didn't think of that.
[15:53] Speaker 2: And I didn't think of that. And that's where really
[15:55] Speaker 2: a mentor can come in. Maybe find somebody who's already
[15:59] Speaker 2: in that business, start talking through these things with those people.
[16:02] Speaker 2: There are also what are called SBDCs all over the country.
[16:07] Speaker 2: Every major university in the country has what's called an SBDC.
[16:11] Speaker 2: It is a small business. I can't remember what the
[16:16] Speaker 2: acronym stands for, but basically what it is, it's a
[16:18] Speaker 2: free service that's paid for by the SBA. And you
[16:21] Speaker 2: can go in. They will help you with your business plan.
[16:24] Speaker 2: They'll show you how to do your books. They do
[16:27] Speaker 2: a number of different things for free. and they can
[16:30] Speaker 2: really help you flesh out what is important in a
[16:33] Speaker 2: business plan. But like I said, that's really, the proof
[16:39] Speaker 2: is in the pudding in that thing. We look through
[16:41] Speaker 2: that and say, if you have a restaurant, we want
[16:44] Speaker 2: to know, and this would be not just us, this
[16:46] Speaker 2: is any lender, how many times is that one particular
[16:51] Speaker 2: table going to be sat, turned, we call it? How
[16:55] Speaker 2: many times is that table going to be turned? What's
[16:56] Speaker 2: the average ticket price? What are the prices in your menu?
[17:00] Speaker 2: What's your food cost going to run? There's a lot
[17:03] Speaker 2: of different aspects to that. And that's really what we're
[17:06] Speaker 2: looking for because so much of what we call underwriting
[17:10] Speaker 2: and lending, at least here, is not based as much
[17:14] Speaker 2: on the business as it is on the person. Who
[17:17] Speaker 2: is this person? Do they have the background that they need?
[17:20] Speaker 2: Do they have the skills that they need to do this?
[17:23] Speaker 2: Have they really put in the effort everything to get
[17:27] Speaker 2: this business off the ground, because this is going to
[17:29] Speaker 2: be the hardest job you've ever had. If you start
[17:32] Speaker 2: your own business and you know this, you start your
[17:34] Speaker 2: own business. That's the hardest you're ever going to work
[17:36] Speaker 2: in your entire life. And a lot of people don't
[17:38] Speaker 2: realize business plans, setting you back. You're going to have
[17:40] Speaker 2: real problems once you open the door.
[17:41] Speaker 1: And I really wanted to bring that up because of
[17:43] Speaker 1: the fact that a lot of people get frustrated and
[17:46] Speaker 1: in certain situations, people might say, Hey, you know, I'm
[17:49] Speaker 1: being rejected because of the color of my skin. In
[17:51] Speaker 1: some cases it does happen, but there is a process.
[17:54] Speaker 1: And the process can frustrate you because it's so detailed
[17:59] Speaker 1: and it asks a lot of you. And sometimes the
[18:02] Speaker 1: frustration of, because you are not ready at that moment,
[18:06] Speaker 1: you might be ready six months later, or you shouldn't
[18:09] Speaker 1: open a business at all because you aren't ready.
[18:13] Speaker 2: Right. No, that's exactly right. And you know, that is
[18:15] Speaker 2: a big part of my job, our job as a lender.
[18:20] Speaker 2: Sometimes it's just to say, no, it's, Because these people
[18:26] Speaker 2: are going into a contract. They're going to borrow a
[18:29] Speaker 2: lot of money. They're going to put a lot of
[18:32] Speaker 2: their life on the line here in terms of their business,
[18:38] Speaker 2: everything that they do. If that business fails, they're not
[18:41] Speaker 2: going to lose all that money. They're going to owe
[18:43] Speaker 2: all the money that they borrowed from the lender. That's
[18:46] Speaker 2: going to follow them around. I mean, this is a
[18:48] Speaker 2: huge decision. So sometimes it's up to us to say,
[18:51] Speaker 2: you know what? You're not ready yet. You need to
[18:54] Speaker 2: do this, this, and this, and then we can talk.
[18:57] Speaker 2: But it's a huge decision, and it's a huge responsibility
[19:00] Speaker 2: on our part, too, because you have the capability of
[19:04] Speaker 2: ruining somebody's life if you don't make the right decision.
[19:08] Speaker 1: Craig, you have some really interesting questions that I wanted
[19:11] Speaker 1: to bring into the show because I think it provides
[19:13] Speaker 1: valuable insight to people. Because I'm talking to Craig Califati.
[19:17] Speaker 1: You know, he's the executive vice president and director of
[19:19] Speaker 1: lending for Arkansas Capital Corporation. Arkansas Capital, if you don't know,
[19:24] Speaker 1: is a private nonprofit lending corporation dedicated to empowering entrepreneurs
[19:29] Speaker 1: in Arkansas and the surrounding state. That's how he's starting
[19:32] Speaker 1: out right now. He wants to work because he just
[19:34] Speaker 1: got approved to do this, hasn't been done in 40 years,
[19:37] Speaker 1: to go national. But he wants to work with the
[19:39] Speaker 1: surrounding states initially. I'm not saying if you listen to
[19:42] Speaker 1: this show, you can't go to the website and fill
[19:45] Speaker 1: out the form. It's an online form, very detailed. You're
[19:48] Speaker 1: basically filling out an application. You're filling out an application
[19:52] Speaker 1: if you click the registration button. It's not one of
[19:55] Speaker 1: them we're going to contact you later. It's going to
[19:58] Speaker 1: ask you for all the necessary documents that will require
[20:02] Speaker 1: you to qualify for what you're trying to attempt here.
[20:05] Speaker 1: What I'm not trying to do on this show is
[20:07] Speaker 1: encourage you not to do anything I'm encouraging you to
[20:10] Speaker 1: prepare to do different things. And one of the things
[20:14] Speaker 1: you said in your questions is that small business owners
[20:16] Speaker 1: should establish a line of credit with immediate access, especially
[20:20] Speaker 1: for small businesses with payroll employees. Talk to me.
[20:25] Speaker 2: Well, yeah, a line of credit's important because every business
[20:30] Speaker 2: has unexpected expenses that pop up. Let's assume it's not
[20:35] Speaker 2: a business that needs a line of credit in a
[20:37] Speaker 2: normal course of business. You just wanted a security. It
[20:41] Speaker 2: doesn't necessarily have to be a large line of credit.
[20:43] Speaker 2: You're not going to pay on the money that you're
[20:45] Speaker 2: not using. But it's a good idea for a lot
[20:49] Speaker 2: of different businesses to have that just as a backup.
[20:52] Speaker 2: Because like I said, things always pop up. You don't
[20:55] Speaker 2: want a big rock going through a picture window shut
[21:00] Speaker 2: down your business because you didn't have enough money to
[21:02] Speaker 2: fix the window. You know, silly little things like that.
[21:05] Speaker 2: So a lot of times a line of credit is
[21:07] Speaker 2: very important. Some businesses just can't function without a line
[21:10] Speaker 2: of credit. If you get into construction or something where
[21:12] Speaker 2: you're laying out a lot of money up front before
[21:15] Speaker 2: you're going to get paid, then those lines of credit
[21:17] Speaker 2: become absolutely necessary. But even small businesses should look at
[21:23] Speaker 2: just having a little cushion in the back.
[21:25] Speaker 1: And I 100% agree. You know, I would tell you, Craig,
[21:28] Speaker 1: I've broken all the rules, the wrong rules. You know,
[21:31] Speaker 1: opening up, you know, on the, on faith. This is
[21:34] Speaker 1: what I want to do. Uh, getting in business with
[21:37] Speaker 1: partners with no contract. Um, the whole idea was just
[21:42] Speaker 1: to make money. That was my goal. And I think
[21:44] Speaker 1: that's the average entrepreneur. They just want to make money.
[21:48] Speaker 1: They see the possibilities, but they don't see the ramifications
[21:52] Speaker 1: of not setting it up correctly. And I'm talking to you,
[21:56] Speaker 1: not trying to get you to do a book one-on-one,
[22:00] Speaker 1: some advice, like three pointers to, about starting your own business, Craig?
[22:08] Speaker 2: Know what you want, meaning exactly, let's talk about what
[22:13] Speaker 2: you need to do when you come to a lender
[22:14] Speaker 2: like me. Know what you want and know why, not
[22:18] Speaker 2: only why you need it, but how much it's going
[22:21] Speaker 2: to cost. I mean, that's, I keep going back to that.
[22:26] Speaker 2: That is the key. You really want to know you,
[22:28] Speaker 2: and this is going to happen in your business plan.
[22:30] Speaker 2: It's going to flesh out a lot of this. You
[22:33] Speaker 2: might have said, oh, well, I'm going to open this
[22:37] Speaker 2: plumbing company and we're going to have this big, really
[22:40] Speaker 2: cool antique truck that's going to drive around town. It's
[22:44] Speaker 2: going to cost $ 100, 000, but it'll give me great advertising. Well,
[22:48] Speaker 2: you start going through the numbers and everything. How important
[22:50] Speaker 2: is that really? That's maybe something you do down the road.
[22:55] Speaker 2: So you get down to the nuts and bolts. What
[22:57] Speaker 2: do you need to open? What do you need to operate?
[22:59] Speaker 2: What do you need to keep the doors open? That's it.
[23:02] Speaker 2: And you, but you got to know it. And, and
[23:05] Speaker 2: it's that, that first and foremost, that's the most important
[23:09] Speaker 2: thing is know what.
[23:10] Speaker 1: You're talking about. And that business plan that you, that
[23:14] Speaker 1: they tend to forget. Cause I'm going to keep coming
[23:17] Speaker 1: back to that, Greg. My big takeaway is that business plan,
[23:20] Speaker 1: because I kid you not, I opened my comedy club
[23:23] Speaker 1: in 1992. I did not have a business plan. I
[23:27] Speaker 1: counted people who came through that door and, I knew
[23:30] Speaker 1: how to, you know, I had my budget, you know,
[23:32] Speaker 1: fly a comedian in, charge $ 10, advertisement for the radio stations,
[23:37] Speaker 1: but who I was going to have working that weekend.
[23:40] Speaker 1: But that's not a business plan because I was just
[23:43] Speaker 1: doing weekend to weekend. I wasn't projecting 90 days. I
[23:46] Speaker 1: wasn't projecting a year, let alone five years. I was
[23:50] Speaker 1: just going day to day, basically. And that's not a
[23:54] Speaker 1: business plan. And that's what you're talking about, correct?
[23:57] Speaker 2: No. That's exactly right. Yeah, I'm a former business owner, too.
[24:00] Speaker 2: Right out of college, I opened restaurants. And yeah, we
[24:04] Speaker 2: didn't do it with a business plan. And I really
[24:07] Speaker 2: wish I had because I spent probably a year undoing
[24:10] Speaker 2: things that I had done, you know, that I wouldn't
[24:13] Speaker 2: have done had I really thought it out ahead of time. Yeah.
[24:17] Speaker 1: I want to ask you about the SBA, you know,
[24:20] Speaker 1: a small business administration. And in my reading, it says
[24:23] Speaker 1: the SBA does not lend money. Instead, it provides guarantees
[24:28] Speaker 1: so lenders are more inclined to lend money to small
[24:31] Speaker 1: business owners. Please explain that to me.
[24:34] Speaker 2: Yeah, that's what a lot of people don't realize. The
[24:36] Speaker 2: SBA does not lend out money. What the SBA does
[24:39] Speaker 2: is they provide guarantees to lenders. So if I were
[24:44] Speaker 2: to do a small business loan, let's pick a round
[24:47] Speaker 2: number like $ 100, 000, they would give me as a lender
[24:49] Speaker 2: a guarantee that let's say it's a higher amount, like 500,000.
[24:58] Speaker 2: On 100,000, they would give me a guarantee of 85%.
[25:00] Speaker 2: On a half million or a million, they would give
[25:04] Speaker 2: me a guarantee of 75%. So what that does for
[25:07] Speaker 2: me as a lender, I know that I've got the
[25:11] Speaker 2: SBA behind me for 75% of the money I'm gonna
[25:14] Speaker 2: lend out. I'm only on the hook now for 25.
[25:17] Speaker 2: That lowers my risk to the point where I might
[25:21] Speaker 2: take a chance on somebody who's starting a business. who's,
[25:25] Speaker 2: you know, maybe doesn't, you know, SBA loans are usually
[25:30] Speaker 2: lacking one component that a bank likes to see. And
[25:35] Speaker 2: it can be a number of different things. Maybe there's
[25:37] Speaker 2: a collateral shortfall. Maybe they're new, you know, in town.
[25:41] Speaker 2: Maybe it's, most banks don't even want to talk about
[25:44] Speaker 2: startup businesses. And so that, that's a big one. So it's,
[25:52] Speaker 2: The SBA will allow us, it gives us just that
[25:55] Speaker 2: comfort level to be able to take that leap.
[25:58] Speaker 1: Okay, let me just ask you this, Craig. Okay, SBA,
[26:01] Speaker 1: because I always hear them talking about loans, especially when
[26:03] Speaker 1: COVID happened. They were talking about these different types of
[26:05] Speaker 1: loans and these interest rates tied to the loans. Is
[26:09] Speaker 1: that different than what we're talking about now?
[26:10] Speaker 2: Yeah, completely different. The PPP loan programs are over. All
[26:17] Speaker 2: that money has been allotted and everything else. And as
[26:19] Speaker 2: a matter of fact, that's one thing that's really changed
[26:21] Speaker 2: things quite a bit is we get a lot of
[26:24] Speaker 2: people that come on our website thinking it's free money.
[26:27] Speaker 2: And they come on there and then we'll give them
[26:30] Speaker 2: a call and say, this is a loan. They're like, oh,
[26:32] Speaker 2: I have to pay it back? Yeah.
[26:36] Speaker 1: Did you hear that, my listeners? You have to pay
[26:39] Speaker 1: this back. Why would they have that? Why would they
[26:40] Speaker 1: think that?
[26:42] Speaker 2: Because the PPP loans were forgiven, most of them. You
[26:46] Speaker 2: could apply to have those forgiven. And so people just thought, oh, yeah,
[26:50] Speaker 2: that's still going on. It's not. No, the programs we're
[26:53] Speaker 2: talking about primarily are the 7A program and the 504 program.
[26:58] Speaker 2: Those are specifically for small businesses, owner-occupied businesses. So if
[27:04] Speaker 2: you're looking to build a residential neighborhood, this is not
[27:09] Speaker 2: for you. If you're going to buy a building for
[27:12] Speaker 2: your plumbing company or whatever, this is where you want
[27:15] Speaker 2: to go.
[27:16] Speaker 1: Right, right, right. You know, the thing about it is
[27:19] Speaker 1: that we're not talking about PPP.
[27:21] Speaker 2: Right.
[27:23] Speaker 1: SBA, you're saying that they do not lend money.
[27:28] Speaker 2: In this sense. PPP they did, and for disasters they
[27:31] Speaker 2: lend out some money.
[27:32] Speaker 1: Right.
[27:32] Speaker 2: But these two programs, they do not lend money.
[27:35] Speaker 1: So what does SBA do? You're saying that they are back?
[27:38] Speaker 2: They provide a guarantee.
[27:39] Speaker 1: Okay, that's what I'm confused. Okay, so you go to SBA,
[27:43] Speaker 1: and what's that conversation that you're going to have with
[27:46] Speaker 1: them so they can go to you and get the money.
[27:50] Speaker 3: Okay.
[27:51] Speaker 2: The borrower will never talk to SBA. They'll come to us. Okay.
[27:57] Speaker 2: The borrower doesn't ever interact with SBA. The SBA deals
[28:01] Speaker 2: strictly with the banks. Okay. And if you contact the SBA,
[28:04] Speaker 2: all they'll do is give you a list of banks
[28:06] Speaker 2: that do SBA loans because you have to be an
[28:08] Speaker 2: approved lender with SBA.
[28:10] Speaker 1: Okay.
[28:12] Speaker 2: So you come to us. We deal with the SBA and-
[28:16] Speaker 2: Arkansas Capital is what's called a preferred lender. So we
[28:20] Speaker 2: don't even go through SBA underwriting. Now, a lot of
[28:22] Speaker 2: banks have to go through SBA underwriting, and that adds
[28:25] Speaker 2: time and a lot of other things to the process.
[28:29] Speaker 2: But we don't even have to do that. SBA trusts us.
[28:31] Speaker 2: They know we've been around. So we do our own underwriting.
[28:35] Speaker 2: And when we close the loan, there's certain documentation that
[28:40] Speaker 2: we send to SBA, and they provide us with a guarantee.
[28:44] Speaker 2: So if you didn't pay your loan back and you
[28:47] Speaker 2: still owed me after we liquidate everything and everything's all
[28:52] Speaker 2: done and there's still, say, $ 100, 000 that's still owed. The
[28:57] Speaker 2: SBA would pay us $ 75, 000 of that. We would be
[29:01] Speaker 2: out $ 25, 000. And then the SBA would go and collect
[29:05] Speaker 2: on that $ 100, 000. It would be up to them from
[29:08] Speaker 2: that point on. And they would give it to Treasury.
[29:11] Speaker 2: And that's what I was talking about earlier. And Treasury
[29:14] Speaker 2: will follow you around for the rest of your life.
[29:17] Speaker 2: It's really important that you want this loan.
[29:22] Speaker 1: You dropped a nugget on me with the business plan.
[29:25] Speaker 1: Even though I know that's important to hear come out
[29:29] Speaker 1: of your mouth and this is what you do, financial lending.
[29:31] Speaker 1: Because I had a conversation with a client of mine
[29:33] Speaker 1: today talking about getting a line of credit. And I
[29:37] Speaker 1: talked about a business plan, but I didn't say the words.
[29:40] Speaker 1: business plan. And I think that that has to become
[29:44] Speaker 1: a normal part of my vernacular so they can understand
[29:47] Speaker 1: the role that when you start planning. Because I always
[29:50] Speaker 1: tell people, you know, I always have at least six
[29:52] Speaker 1: months of income in your bank just in case something
[29:55] Speaker 1: goes wrong. Certain terms you say. But until you say
[29:59] Speaker 1: the right turn, the right buzzwords, it doesn't win. And
[30:02] Speaker 1: more importantly, winning with what you're trying to do. Again,
[30:06] Speaker 1: thank you, Craig, for coming to my show, Money Making
[30:07] Speaker 1: Conversation Masterclass. Great interview, man. Really, really great interview. And
[30:12] Speaker 1: we'll be talking again. If we can, like, you know,
[30:14] Speaker 1: twice a year just talk to you.
[30:15] Speaker 2: Oh, I'd love that.
[30:16] Speaker 1: I think that it's important. Things happen seasonal, you know.
[30:20] Speaker 1: And what we're talking about now is different from what
[30:22] Speaker 1: we were talking about in the spring because tax season.
[30:25] Speaker 2: Yep.
[30:26] Speaker 1: Employment types and all those things. So again, thank you
[30:29] Speaker 1: for coming on Money Making Conversations, Craig.
[30:30] Speaker 2: Thank you.
[30:31] Speaker 1: This has been another edition of Money Making Conversations Masterclass
[30:34] Speaker 1: hosted by me, Rashawn McDonald. Thank you to our guests
[30:38] Speaker 1: on the show today and thank you, our listening audience. Now,
[30:41] Speaker 1: if you want to listen to any episode or want
[30:43] Speaker 1: to be a guest on the show, visit MoneyMakingConversations.com. Our
[30:47] Speaker 1: social media handle is Money Making Conversations. Join us next
[30:51] Speaker 1: week and remember to always lead with your gifts. Keep winning.

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