Ep 287- FairSquare CEO Dave Gilbert

Speaker A: Hey, it's the fintech newscast. My name is John and with me, as always, we're lucky to have Steve. Welcome.

Speaker B: How's it going?

Speaker A: John, is that you applauding yourself?

Speaker B: No, no, that's me just throwing money away, making it rain.

Speaker A: Yeah. All right. Uh, and we are very lucky to have this week a, uh, special guest, Dave Gilbert, the CEO and founder of Fair Square. Welcome to the podcast.

Speaker C: Thanks, John. Uh, nice to be on. Uh, Steve, I like that, uh, that, that money show.

Speaker A: He's uh, there's never anything actually in his hands when he does that, but.

Speaker B: No, not at all.

Speaker A: Someday. Someday, Steve. All right, our new story for the week. Uh, you know, I've been seeing a lot in the news about prediction markets and how they're kind of working their way into the financial system. J.P. morgan and Goldman Sachs specifically have been talking to Kalshi and Polymarket and uh, how do they can coordinate? And maybe they and other fintechs are going to get ready to jump into this, what has been a very profitable market at the expense of the people jumping in there. What do you think, Steve? Are the Akashi and Polymarket real fintechs or is that more like a Las Vegas casino?

Speaker B: Oh, it's, I, I think it's definitely on, on the Vegas side. I think that even with the, um, with oversight from the SEC or, or the um, Commodities Trading Commission, I think these are not. If only, right? If only. Um, I think these are not fintechs by any stretch of the imagination. Um, I think that it's a hot, it's a hot market. And speaking of that, I actually saw earlier how, um, speaking of a company that was chasing after the latest trend, Meta recently announced that they're building something called Project arena, which is basically their way to build a separate app to enter the prediction market space. So once Meta goes into an industry, you can pretty safely assume that, uh, it's pretty saturated.

Speaker A: You know, you could probably use your Meta glasses to get into the Metaverse and start betting on things in their platform. And then you share and have people share and like your, you can crowdsource your, you can crowdsource your predictions.

Speaker C: I do, I do think on the fintech side, I mean there is a lot of, um, people that are addicted to prediction markets. Right. It's a person's dream to predict gambling.

Speaker A: Yes.

Speaker C: Uh, gamble or to make a position which allows that's in the same with the stock market to some level with puts and calls. Uh, and it's just kind of going big where you, uh, have Big institutions involved. So. Well, it's gambling. You could say Vegas was gambling. That regulation came in and then kind of legalized uh, it and put better infrastructure. Um, and so it is kind of interesting times where fintechs are getting involved in distribution of unique stuff, right? Just to help the flow of uh, money or information. Um, who better to do that than people that are tech, tech driven fintechs. So it is a weird period. Men is getting in it. I mean that's what people, they love it. So they love it.

Speaker B: But it's also you know, to um, uh, to your point that you mentioned earlier about Vegas, unlike Vegas, this is gambling that you can do in your underwear from your bed 24 7, right?

Speaker A: This is not a picture I want painted when you're saying it, oh well

Speaker B: this isn't me, this is the hypothetical guy. Uh, and it's also, it's also something that is know is it's built to garner your attention, to keep you hooked on there as well. And it's something you do socially. So I think it's actually much more pernicious than uh, the gambling that we saw in Vegas. It's also interesting because there's all these studies that demonstrate how the legalization of gambling can actually have significant bad outcomes for people. For example, I know that there's a study in Pennsylvania where they tracked bankruptcies and rates of suicide and basically every negative outcome you could have essentially increased after gambling uh, was legalized. Now you add to that, you know, the pull of social media, look at what I gamble, et cetera, and also the fact that you can gamble on everything now, right, Famously from Iranian uh, missile strikes to what words the president will say, et cetera. I don't think it's a good look and ah, disheartened to see this.

Speaker C: The history of these companies are getting into it is kind of biblical, right? In terms of uh, batting.

Speaker B: Right.

Speaker C: And so the um, you know, how do you flow with people that want to consume something and then is that a problem? So you look at the history in the US you have ah, a lot of Indian reservations, you have um, you have a lot of local casinos that you're kind of questioning. Why are they in these specific communities and are they preying on the elderly? You know, the prediction markets are being uh, uh it's more of a broader spectrum of people. So there is probably different mental risk, health risk in terms of um, ability to access, ability um, to create markets, ability to do stuff. And that's where I think it's just the next form of uh, gaming, you know and then. But it's hitting the youth a little bit more than the traditional going to Vegas or the riverboat casino in, in a small town. So um, I don't think it'll go well.

Speaker A: Are you saying, are you saying that JP Morgan and Goldman Sachs aren't going to be, take the moral stand that uh, they uphold our high principles that they always have?

Speaker C: I think that why don't, I guess it just depends on their, the people's definition of gaming because I don't know historically, I don't know, uh, these, these big banks might have financed all Vegas.

Speaker A: Yeah. Yeah. Well Robinhood has, has kind of been making stock market trading and uh, even more risky uh uh, derivatives. Very very useful tool for, for hedging. But yeah you can use it uh without any underlying uh, risk that you want to hedge. Uh. But yeah, so yeah, Robinhood's kind of uh, gone down that same track. It seems like uh. Maybe you're right. It is along that same track we've been going towards for a long time with the uh, financialization of everything.

Speaker C: So fantasy football kind of helped I would say create the community of uh, free gaming. Right. Just like arcades and gaming to now you could bring that to mainstream. So there's a path that when you look historical that probably led to this period and then. Yeah. How do you, how do you manage it? And all that was, was different.

Speaker A: Yeah, yeah, yeah. So we, we do see the big banks uh jumping into this at least dipping their toe in. They still have some regulatory uh, restrictions so uh, we don't expect them to come out with their own products but maybe um, uh running the back end for, for these fast growing companies. Uh and of course since Kalshi and Polymarket are so successful, uh we, I'm, we're definitely going to see more and more people jumping in hopefully uh, not just Mark Zuckerberg. Another, another bastion of our high moral high ground here. Yeah. So uh, yeah, kind of interesting but uh, yeah I thought that was a new development in the uh, fintech world. Uh the way the they're classifying these by the way are like uh, binary options. Uh so you have options on uh, a stock price on volatility, uh which are essentially bets. So you can bet a stock can go up, down, you can I think

Speaker C: over time strategy you'll always have the protection boards come in to help uh, organize like mortgage and auto and any industry. So I completely understand where you're from and I do want them to rein it in obviously. But I do think that will all come through. It's just their job. They gotta protect consumers and at this point the disclosures and the spreads and knowing the like you kind of know some, the real risk and some gaming like what the odds are. But transparency is a big one and um, I just do believe they'll figure it out. I just don't know from a moral and all that. That's a different discussion in terms of is that good for society and like you know, well our lawmakers, a lot of things are they good for society?

Speaker A: Yeah, our Congress and our lawmakers are famous for being ah, long sighted visionaries that look ahead for the best interests of the people and what kind of society that they want to build. So yeah, I'm, I'm also very uh, optimistic on that as well. But we'll see. Um, you know, maybe we'll have a prediction market uh, fintech on soon. We can, can uh, we can jump in there because there are, yeah there are more and more coming uh in so. Yeah, kind of an interesting development. Not anything to do with Fairsquare though. Nope. I want to make clear uh, Fairsquare, uh, which uh, you're the CEO and you founded is a holding company around SMB lending. Uh, can you, can you give us the brief history of, of Fairsquare and how it came to manage so many uh, subsidiaries?

Speaker C: Um, so I started with 27 years ago, started the company in 1999, uh called National Funding and um, with a $10,000 loan from my uncle and uh, kind of built the American dream of helping to finance and, and uh, support customers with growth capital uh to hit their dreams. And so over time um, a company that was started in Chatsworth, California in a very small, I think it was 120 square feet, became a very successful company. And then we had 08 crisis which

Speaker A: caused it to corporation.

Speaker C: Yeah and then we had the uh, OA crisis which people recall. And then um, over time um, we've just been accumulating broad depths of industry knowledge only around small business. So I don't have consumer background. Um, we've been financing customers between like 200,000 in revenue to 25 million is kind of our sweet spot and we've been doing that for a long time. And it's kind of fascinating because you guys interview a bunch of people and like you get to hear people's uh, stories in all different industries, backgrounds, um, walks of life and you get to see a lot of success and sometimes you see failure but it's uh, it's kind of all I've been doing, uh, created fairsquare a couple years ago, uh, to oversee a few of the brands. So we have small businessloans.com, uh, we have Finova Capital, we have national funding and a few other brands that uh, we're developing. Was really as a holding company, uh, to help small businesses in a variety of verticals grow. Um, and we were able to recruit some top talent to take, uh, my vision, continue to move it northbound. And um, this AI world is probably the bigger topic in terms of how's AI going to help or slow down small business?

Speaker A: Heard about it. What, what is this AI thing? You're, how does that affect you?

Speaker C: Well, because I have kids in college. Right, so you have kids in college and you're, you're hearing all the AI booze, you know, at the commencement speeches and. Yep.

Speaker A: Yeah, sometimes.

Speaker C: We have a lot of public companies that have really bright people here. Uh, I'm in San Diego where they got laid off. Right. And so you're like, okay, there's a lot of bright people that never could start a business because they were employees. Right. And now with AI, I think it's since COVID there's been 50% growth in business formations. Anytime there's disruptions, there's more entrepreneurs that come out of it. You're going to have a lot more than ever and they'll just be smaller. Um, and there'll be a lot of entrepreneurs that can become entrepreneurs that, whether they're brilliant or they're not as brilliant, these tools will give them the opportunity if they have drive that they couldn't do before. So, um, it's interesting because there's a lot of fear. Um, but fear kind of drives opportunity traditionally. And so I think you'll see that people that really relied on so many resources and fear of starting a business can actually start one. Um, like you said, out of your home.

Speaker A: Yeah, yeah, absolutely. Uh, so you do, uh, thousands of small and medium sized business loans. Just curious, on the top level, uh, are you seeing any trends in the past, I don't know, year, year, two years, like, uh, in different sectors doing better or worse. Like, do you get like a, a bit of a preview on how the economy's doing?

Speaker C: Yeah, you get, usually in our industry you get first looks of how people are feeling. And so it's been a lot of pressure in the last couple years surrounding tariffs, um, and then the instability.

Speaker B: Ah.

Speaker C: And just confidence. Right. And so, uh, traditionally big companies, they work on their margins. You're seeing record earnings in public companies. Um, and then small business owners traditionally have the harder time pushing their pricing upwards. Uh so we've seen them maneuver through um, their entrepreneurism to figure it out. Right. Whether it was adjusting their models, using um, different tools, but it hasn't been, it's been more pressure fundamentally because their margins have gone and compressed. Right. And so it's our job to help support them in different phases of transition. Because if you been in business and our average customer has been around 10 years, you've been in business that long, not every year is fruitful. You're going to have good years and bad years. Um, and so when you're in those different periods in your life cycle of business, how do we help support you? Um, there's huge movement in the uh, construction related industries because of all the uh, data centers. So you're going to see a lot of businesses that are booming in uh, certain industries like plumbing, transportation, roofing, all the stuff that's needed just for trades, uh, to support all this growth. And then a lot of it's usually regional. Right. How does it impact you directly? So if your cities, um, a border city, how does that impact you if you're in a big city? So there's, right now there's a lot of volatility state by state and city by city. Um, but at the end of the day, you know, the business owner wants to know that they're taken care of and that they have support. I think restaurants have gotten hit the hardest, you know, from uh, you know, wages and food, um, expense that it's been the hardest for them out of all industries, you know, to staff, maintain, um, anything that's uh, related to um, uh, food and beverage. Right. Because landlords have raised rates and food uh, costs have soared and wages have soared. So um, of our whole portfolio, say that's the toughest one. Um, in order of, you know, if you're willing to start up a restaurant now and you know, growth aspirations, it's just state, um by state. How is the, that world looking as inflation's kind of came through the country.

Speaker A: Yeah. That's funny you say that. Uh, there was just a large restaurant chain. I don't know if you saw this Steve, uh, closing in the Bay Area here in San Jose and Larkspur.

Speaker B: Ah, we have a gift card to, to Left bank that we never use for about a year and a half. Yeah, yeah, yeah. And I think that they were just

Speaker A: collected in bankruptcy proceedings. You can cash in on that, can I?

Speaker B: I have no idea. I mean it's only like, I, I think it's like 100 bucks. But I think it's um, as uh, Dave mentioned, a combination of rising costs for, for you know, for, for food, for you know, and for, for labor and just, you know, tighter competition as well. So it seems like it's always, it's

Speaker A: always been the toughest business and it's been.

Speaker B: Yeah, uh, yeah, so raise your thin margins.

Speaker A: Yeah, you already put a little bit more on that and yeah, we can see that. And I just want to get back, um, you're based in San Diego. You're our first fintech that's based in San Diego. How is the market there for. I guess, um, I mean

Speaker C: we have an Atlanta office. I would say is more of like where the fintech center component is. Um, I'm based out of San Diego. We have an Orlando office and an Irvine office, uh, and a small presence in New York. So yeah, I wouldn't say fintech in San Diego is big. You know, we, we do have Intuit and some Qualcomm, uh, and some bright companies out here. But this isn't a fintech hub. Um, you know.

Speaker A: So how do you find uh, talent and uh, how is that these days?

Speaker C: I think talent, to be honest is probably the best in a long time, uh, to acquire because I think people are making a lot of life choices right now. You know, do I want to continue working at a certain company? Is there a new company that's growing? Um, and those are big time decisions. When you're recruiting 10 to 20 year career people, why should they come work for you? We have a proven 27 year history. Uh, not PE backed. Um, and so there's this whole different story that might not have been as popular pre Covid when everyone was worried about options and stocks and stability is

Speaker A: looking pretty good right now, huh?

Speaker C: Well, I just think that people have maneuvered their own views of employment post Covid, uh, to remote to this, to that, to um, gaining ground of um. There's a lot of insecurity at certain companies. Right. You know, some companies have done such major layoffs that you know, um, now are they laying off brilliant people? The answer is yes. You know, they're. And then are they fearing other ones? Yes. And then we're a small company, we have close to 300 employees. Right. So for me that, that's opportunity to go recruit some of the brightest people, whether they were just recently let go or there's someone bright that wants to come over and have better opportunity. It's all the perception within A lot of these companies of your value in today's world, um, especially if it's on the public company side.

Speaker B: I'm curious, you mentioned that your size is about 400 folks or so. Um, and we see a lot of competition in this space, right? It seems like um, a lot of new fintechs or new fintechs are providing working capital solutions. So how do you maintain that edge in terms of being able to get customers and provide a competitive market in both the face of again competition on one side and then rising interest rates on the other? Because I assume that your cost of money has also gone up as well. So how, how do you tackle this very um, competitive space?

Speaker C: I would say that it is a competitive space. One the cost of rates and money going up has more of an impact on confidence for the customer than it does like their, their need. Um, I would say. So the competition's still there where we differentiate ourselves through um, not just product differentiator but also primarily through marketing channels. And then you know uh, what type of customer we're serving. A lot of people started to kind of get so niche as they were post Covid that they really want to focus on certain verticals and then they kind of abandoned like the traditional small business customer because it was easier to scale bigger companies um, and finance bigger companies. You've seen that in the banks, right? Where the banks started saying I only want to loan bigger companies, I don't want to really lend to the small. Kind of went into that same world in the alternative space for a while. Um and so we spent a tremendous amount of money both online and in direct mail and other channels to originate a lot of uh, peers. Their competition is really through third party uh, channels or affiliates. And so there's different sourcing uh, situations that will kind of also just in all companies when the market shifts, uh, what's your competitive advantage? And um, self originating and balance sheeting and financing. Our own paper wasn't considered popular at some point. It was more offloading the risk. And so I think we've done an unreal job of balancing risk and balance sheet and fintech of lack of risk on some of that uh, to mirror the economics needed to compete. Uh, interesting.

Speaker B: So you mentioned something that I think we also that I learned actually um, as part of an interview maybe about a year ago or so I really underestimated the amount of business that a fintech can get by direct mail. It seems like for me that seemed like it wouldn't be a profitable channel but it's actually Quite significant. And I'm curious, um, can you give me some sort of sketch as to how, either what percentage or how you're using direct mail to get customers? Is it, um, how is this.

Speaker A: You should see my mailbox, Steve.

Speaker C: It's not as full as you think, correct, John? I think, I think there's a, um.

Speaker A: It's pretty full. John has a full box and some other stuff. So I get everybody sending me stuff, but I get a lot of mail.

Speaker B: Interesting.

Speaker C: So we've seen, we've seen. It depends on too, where you're getting your mail at home or at work. So a lot of people have moved to email or texting and kind of we're abandoning mail as mail costs have gone up. Um, data has been better than ever from a targeting perspective, as all the data providers keep getting better and the AI tools. So while your cost to market has increased, the ability to find the right people has also gotten better, big time in terms of your targeting. Um, some people prefer to go online and then there are people that prefer, uh, mail. But the targeting on both sides can be optimized. Uh, we spend over 30 million a year in direct mail, so it's a big part of our budget. And so we're a big marketer. Um, and, um, that really helps you, especially in pivotal times. And right now then you have, you know, a lot of people sourcing off ChatGPT and other channels. So you can't just stay in one year. We gotta be all over the place. Um, and I find that part fascinating. The quick pivot. I think Amazon said they did some amazing, massive deal yesterday, you know, with ChatGPT, you know, because people are sourcing their information differently. And so that's our job, right? How do you find the customer? And there's, uh. And that's what we do. Yesterday or two days ago, my wife fixed something at home, had a vendor, she used ChatGPT. The vendor's like, how did you find me? She said ChatGPT, and the person was amazed.

Speaker B: I think it's becoming increasingly more common. Um, I've heard, I forget the name, but it's sort of like SEO for chatbots now. But, um, I'll give you one example. Um, I recently, my daughter broke the sink in her bathroom. And I was like, man, I gotta get a new sink now. And, you know, you look at the configurations, et cetera, the size of the sink and all that. And just when I went on Gemini and just found, you know, this is my dimensions, I took a photo of the vanity as well. And it just told me, you know, buy this is given what you need and what you want, this is what you should get. And it gave me a straight link to a vendor that I didn't purchase. So I think that you know, using chatbots to kind of address the uh, the very niche and to you problem I think is the future. So I can see how um, partnering with companies like ChatGPT, Gemini or Claude, et cetera could be the new sales funnel for providers.

Speaker C: You can't ignore the marketing of that. And then um, you know, you gotta meet the customer where they're, where they're looking and uh, and invest in that. So the need hasn't changed. Customer savviness is changing which is good because you want them to be able to be more educated in their choices. And it kind of separates authentic uh, companies from non authentic. I don't think it stops though because um, there's just different adoption rates of that.

Speaker B: Yeah, yeah, yeah, it's a brave new world. Um, I'm curious, uh, uh, actually this question for you John. Are you using any sort LLM channels for, for your business or. Not yet?

Speaker A: No, no, but we have had like uh, like Dave, we have had people say that they found us through chat GPT. Wow. Without any you know, marketing. Uh, and we do get emails. That's the other thing. I do get a lot of emails.

Speaker C: Communications change how, how you want to be both of you communicated to um. Exactly. You might say not at all. But you might not want to take a call unless if you're ready to take that call.

Speaker A: Yeah, yeah that's true, that's true. You might prefer short times when you're in the market. Right?

Speaker C: Yeah. That says hey, I want. Here's the information for when you're ready. Um, I had a hotel experience where I was frustrated and immediately they texted me the front desk number. And so how you're being treated and communicated. A lot of people um, from a cell and talk about a loan they want, usually verbal unless if they're very small and they want process driven, um, just like mortgage, you want to talk about your mortgage, it's one of the biggest decisions of your life. A small business loan is a big decision, uh, especially the fact that it's unsecured. You know buying a building is kind of a no brainer if you're like hey, I own the pizza shop and I want to own my own building. Uh, but taking a loan that's unsecured for your growth opportunity is nerve wracking for uh, a lot of People. So the communication is um, like your email. M. It's very hard with all the promotions and stuff. Is email as effective as it used to be?

Speaker A: Um, depends if uh, I'm the person, I guess. Uh, but I'll make sure to call in to uh, Finova and mention I was just on with Dave Gilbert. So uh, let's get this done. So the phone does sound like a good idea actually. Yeah, I have to be careful because you know, they can uh, stimulate your voice and uh. Oh, he's right here. Yeah.

Speaker C: Yeah, it is very fascinating.

Speaker A: Any interesting cyber security, uh, by the

Speaker C: way, that's always a big concern. You know what people say what keeps me up on night was always, you know, data, data concerns, privacy concerns. And um, and so we've spent a lot of money, you know, on, on those groups to protect. But um, I think that will always be a concern. Right. As um, I always tell people if you're a lender, your insurance company or a bank, there's bad actors out there that you know, they're trying to figure out your, your uh, your loose end.

Speaker A: I see you're looking right at Steve when you say that. Yeah. Can you just say, can you just say real quickly, I, I approved that loan for John. Very clearly enunciated, please.

Speaker C: You know, there is a gratification that sounds kind of weird when you, you close a loan for somebody. Like sometimes it's um, not the funnest process when you borrow. Right. Like a car loan or home. Um, but like when they, when they drive off the lot on uh, a car, you're, you kind of go at peace, right?

Speaker A: Yeah.

Speaker C: And in business loans, uh, the customers go through a lot of emotional volatility of how much they really need to borrow, what they really need it for, and can they make it without. With borrowing less. Right. Because um. So yeah, controlling the entrepreneurs mentality and journey through, through that, uh, it's been evolving, you know, over this 27 year period. Um, you know, people prefer to go on a. So have you been in a Waymo or an Uber or both?

Speaker A: Yeah, yeah, yeah.

Speaker C: Which one do you prefer?

Speaker B: Way more.

Speaker A: 100% way more. Yeah.

Speaker C: Okay. So you wouldn't seem like that person, right, in terms of do I trust nobody in the car?

Speaker B: Well, I think, I think it's a different experience because for me it's, you know, the car, it's a, it's a nice Jaguar. There's no talking, there's no tipping. It's just kind of a cool experience. Um, my preferences may change as it Becomes more um, widely available, but definitely when I'm in the city. Nsf Waymo all the way. It's pretty fun.

Speaker A: Yeah, we can uh, me and my wife can continue to fight in uh, Waymo. Everyone keep quiet in the Uber.

Speaker C: So they prefer Waymo. But then you have like in San Diego there's regulators that uh, you know, are they protecting the Uber drivers and their income at the expense and convenience of the customer who prefers. And it may be actually safer to be in a Waymo than an Uber, you know, with a driver. I don't know the stats on that, but you could tell the customer experience is a hundred percent what you expected. That's why it's so popular. Right. And so I do find it fascinating the different generations of communication to what they used to perceive black car service with a driver, they would prefer nobody in the car and put their music on. Um, and they did that change the first time they got in that Waymo.

Speaker B: Yeah.

Speaker C: Uh, so that experience is kind of what I'm all about about how do we transform this business as people are going to always need to borrow money in small business, how do we uh, find them, serve them and um, work with them? Because it is a very big changing time. I never would have predicted Waymo 5, 10 years ago or that it could be adopted so quickly.

Speaker A: I think a lot of people predicted it for 30 years ago, but took a little while.

Speaker C: But that is my thesis is like the dot com took just 27 years right, to uh, fully manifest, but then I don't know, 25 years from now what that looks like.

Speaker A: Well, I'm too young to remember that but uh, you know, so what are the market opportunities or next business steps that you're excited about right now? You mentioned uh, AI and uh, some the world changing, uh, what gets you

Speaker C: on a lot of digital experiences right now. And like while a lot of our customers want to be talked to on the phone on the bigger scale, there's a huge size of smaller customers out there that want the digital experience money in the bank very quick. Um, and that's really like the broad market in terms of certain uh, size customers and then how uh, their needs can fit based on their industries. Right. So a lot of truckers want to borrow for like short term 90 days. There are medical professionals that would prefer to borrow for three to seven years. And so we need to continue to segment our customer base and fit the right products. Uh, the digital one though is massive because that will service a lot of different niches. Um, and so we're spending uh, quite a bit of energy there.

Speaker A: So more precision in the products.

Speaker C: Yeah, um, precision and um, detail and convenience. Accessibility. There's a lot of seasonality that we're building into our models. Um, where you know, how do you give more, more lift before a season. How to, you know we talked about prediction markets but you can, you can use a lot of predictive elements to know if something's going to be a better season or not. For certain areas.

Speaker A: Sure. Yeah.

Speaker C: And we do see volatility in our portfolio and performance based on strong winters or certain areas. And so you can retarget a lot quicker through knowledge. Like Houston. When oil prices are low, the whole, the whole community gets crushed. But they don't know that's restaurants, plumbers, everybody. There's, there's a lack of money and oil prices are high. That city does well. So it's, it's, there's a lot of regional data. It's becoming more and more easy to access.

Speaker A: Just uh, okay, so using that uh, computing power and data access to target better to serve the customer better.

Speaker B: Yeah.

Speaker C: Well if you know they got hurt because they're in a two mile radius of a fire, we can actually reach out to help you and talk to you versus you calling in to help us. So there's.

Speaker A: What if they started the fire?

Speaker C: That would not be good.

Speaker A: I guess that's, I think that will

Speaker C: be interesting that Trump accounts and the funding and you went to prediction markets and like I do think as an employer it's great, you know, if I could help support uh, the generation below. I don't, I'm not sure how that gets mainstream and all that. So there's a lot of different things that are, are going on and that one I kind of like. Uh, because in finance it's hard to teach time, uh, value of money.

Speaker B: Yep, exactly.

Speaker A: Yeah. Well you can send them a picture of me and say don't end up like this guy. I might have to do a podcast or something. Uh, don't be like John, you mentioned interest uh, rate and you know I'm from the finance, treasury, banking part of the world. How does the uh, interest rates and I guess uh, it looks like more unpredictability these days, uh, affecting you guys. Is it you just all balance out. It must affect business.

Speaker C: I think the rate, the rates affect a lot of the housing market, new construction. Uh, so it does have different ripple effects, you know because we finance a lot of construction related projects. Um, and, but at the end of the day there's all these Other dials of lack of housing that's going on. And so you know, depending on

Speaker A: um,

Speaker C: people's mobility in their business, a lot of them will switch their trades and you know, depending on their community they can, we're in San Diego, they had a big LA fire. The amount of work in LA is endless. So people have kind of maneuvered because that's kind of what small businesses, uh, that's the backbone of the country. That's kind of what they do. I think the ones that get the hardest that we don't finance as much is the retail related space, you know, are people, you know, people prefer Amazon, you know, over going to the store. Um, and you're seeing some of that kind of reverse right now. But you know, customer usually wins is what ah, we've seen historically.

Speaker A: Uh, is there anything that uh, uh, you would want SMB lenders to know or that are common misconceptions that you're like, I wish they would know this or you advise to them, uh, like

Speaker C: peers, I think focusing on the health of the customer, making sure that you're supporting them versus your own economics. Um, I think sometimes people are solving their own issues versus the customers. It's a period of volatility where people use the word AI kind of all over the place. But there's a lot of opportunity to gain knowledge. And that's what I try to teach my own college kids is ask the right questions and then you'll keep learning and if you keep learning enough, you'll move to the next side of this change. And I um, think it usually takes certain tasks to make you feel better, you know, that you achieve success. And I always kind of tell people short term gains and to measure them so people don't get lost, uh, in the long game, uh, when you're trying to do short term stints, the paranoia. I think it was Bezos that said a lot of bright people are scaring people. And I think he brought up a uh, radiologist and he's like radiologists will say hey, I don't know if there's going to be enough need for radiologists going forward. There's lawyers that are saying hey, I don't really need the first year interns. So you got bright people all over the place that are older, that are giving advice that are scaring the next generation. When that advice doesn't, that might affect them more than the truth. Right. Because if you're, you can do a lot more than ever with less. And I think the biggest thing was always wages when you start a company can, you know, benefits and wages, and now you can do all that with less. Um, and so there'll be more businesses than ever started.

Speaker A: There's plenty of opportunities.

Speaker C: We talked about that with gambling. Uh, lending's historical. There's always been borrowing. In order to grow, you gotta borrow. I, um, think that's. I'm a very American dream pro guy, that in America you're allowed to borrow. In other countries it's really hard to. Ability to get access to capital gives you the shot, right, to hit whatever your dream is. Uh, I think that that's like a cool part of what we do. Uh, you don't know all the impact. You just know that when you meet owners and stuff, you get to hear their stories, uh, and they employ people. And so you're financing people that employ people, which is, uh, part of the whole food chain of America you mentioned.

Speaker A: Uh, you don't emphasize, uh, retail, uh, so much in your lending. Uh, what are some of the ideal kind of, uh, customers these days? What's the sweet spot?

Speaker C: We're all over the map. A, uh, lot tied to housing construction, restoration trades. We do medical, we have, uh, business services. Uh, there are a lot of lenders in retail that are Captive, that can PayPal, Amazon, you can get loans directly, you know, from some of the people you borrow. Doordash will give loans. So you're fighting. Sometimes you're finding these little captive audiences where, you know, like, is that where you want to spend your time? Or if you, or do you, or do you partner with them in a different way, uh, because their data is so enriched. And so you have a lot of people in retail that, that POS system providers can offer capital. Uh, their goal also is to serve customers, right? So, um, they do it a little bit differently and we can help finance alongside them. If a customer's trying to grow in a meaningful way, you know, like opening up a whole nether location, then, hey, I need to borrow a little bit of money for time. They just. It's, uh, on a different distribution side.

Speaker A: So you've been at this for a little while and, uh, you've grown to a bit of a size. Uh, is there anything, uh, are you at the size that you want to be at where you're at now, or is there anything that, uh, would help you grow to the next level? More capital or something?

Speaker C: Yeah, we have plenty of capital. I think I consider a small. I think, you know, I think, you know, the bigger you are, the harder you fall. You know, we're only 300 people. We have a lot of opportunity, not just in bodies, but in scale. Um, um. Although we've been in business 27 years, the market's, I think, going to continue to grow, uh, fundamentally. And, um, it's kind of my fundamental outlook is, you know, what's the best way to. Like we Talked about, if ChatGPT becomes a big distribution of information, we need to move where the customers are trying to find you. Um, but there'll be plenty of customers.

Speaker A: Yeah.

Speaker C: Lending does it just like, you know, it's not like the insurance market's going away. Waymo still needs insurance, but, uh, a lot of things are changing and they become. Some areas could become very less profitable. Some areas could be more profitable.

Speaker A: Yeah. Keep moving with the market. Uh, thanks. Thanks so much for joining us. Some really good insights. Thanks for helping the economy with, uh, that funding.

Speaker C: All right, well, thank you guys for your time.

Speaker A: Yeah, well, thank you. That's Dave Gilbert, the CEO and founder of Fair Square. Keep up the good work. Please hit subscribe and we'll see you next week.