E226: Convenient Financing Solutions for Ecommerce Sellers
We’ve had 5 Minute Pitch videos available online for a few weeks now. The entire process has been tiring yet fulfilling and we couldn’t have done it without the help of great companies. One of which is Payability, a financing company exclusive for ecommerce sellers.
On today’s show, we have Vicky Sullivan to talk more about their products – Instant Access and Instant Advance.
Here are some specifics that we covered in this interview.
- The high cost of a missed opportunity in ecommerce
- Why banks don't understand the needs of ecommerce sellers
- The difference between business financing and personal debt
- What is Payability and how is it different?
- Payability success stories
Cash flow is key to growing that ecommerce business. But when it takes Amazon two weeks to pay, this can be quite difficult. This is where Payability’s services can be of assistance.
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If you have any questions or comments, feel free to leave them below. Happy selling!
Full Audio Transcript
Intro: This is Mike and welcome to episode number 226 of the EcomCrew Podcast. Today we have a special episode; Vicky from Payability is on the show with us today. Payability is a service allows you to really work on your cash flow needs. As you know, if you sell on Amazon, they will hold your money for at least 14 days if not more, depending on what cycle you're in and if you're a newer seller or not. And what these guys will do is they'll release your funds to you every single day so you can start making more inventory purchases and grow your business. And they also have another program that allows you to get basically a term loan.
So, it isn't the cheapest money. We talk about that pretty candidly on the show here. But a lot of times what people don't think about if they're looking at buying inventory is it's actually more expensive not to buy. A lot of times, if you have something that's growing, you really need to just keep on funding that, fueling that fire until you kind of hit a peak of growth to where you can organically grow from there. So, it's an interesting interview with Vicky. We have a pretty candid talk about financing, some stuff that we've done in our business for financing. And if you are in that position, I think you'll find this episode to be quite interesting. So, right on the other side of this break, we're going to get into the interview with Vicky.
Mike: Hey Vicky, welcome to the EcomCrew Podcast.
Vicky: Thanks for having me.
Mike: No problem. And just so people know how we got here, you are sponsoring 5 Minute Pitch which has just come out I think as these episodes are getting released, so we definitely want to encourage everyone again, to go over to 5 Minute Pitch and check that out on 5 Minute Pitch on iTunes, the number 5 Minute Pitch, or you can go to 5MinutePitch.com and find more stuff about that. We're super excited about the show, excited to have you a part of it. And I wanted to talk to you because we were talking about the sponsors of 5 Minute Pitch. There quite a few that I wanted to get on EcomCrew, because there's some really cool stuff going on with some of our sponsors.
I think that Payability, which is the company that you represent, is one of those, something that we've gone through ourselves, we talked a lot about financing, and how we've been able to grow our business and Payability takes a different approach to that just as unique in the marketplace. And if you're a young Amazon seller or e-commerce business, you probably already know how difficult it is to get your hands on capital and grow your business. So, that's the gist of what we want to talk about today. So again, Vicky, welcome to the show.
Vicky: Yeah, thanks for having me. I'm so excited to share Payability with your audience. And we're super excited about 5 Minute Pitch. Congratulations, you're a shark.
Mike: Yeah, Steve or Scott probably joked it sounds like the mini shark or something. I could just see that giving everybody a hard time now, so I'll hit the softball for them and make fun of myself. But yeah, I mean like I said, this is obviously something that was a struggle for us when we were first getting started. And I guess probably the best way to get started here is just if you could just tell people that are out there listening that haven't heard about Payability what it is that you guys do, and then we can get into some of the nitty gritty.
Vicky: Yes, so Payability, we are a financing company exclusively for e-commerce sellers from products to design to make Amazon ecommerce sellers succeed. We have two products. One is instant access, which is our daily payments product. So instead of waiting 14 plus days, like you do on Amazon or Walmart or other marketplaces to get paid, you're going to get access to yesterday's sales today. So, it's really a financing solution that grows with you, gets you paid daily and that way, you always have money on hand to buy more inventory, or maybe you have a bunch of inventory, but you sold it and now you've to pay for a bunch of shipping and a bunch of shipping materials.
You can always do that because you always have that cash on hand. So it's a great way to scale your e-commerce business. As you know, platforms like just Amazon have really created unlimited demand. So you really need unlimited cash flow in this business. Our second product is called instant advance and what it is, is kind of like a merchant cash advance, but on your e-commerce sales. So, we're going to give you up to a month's worth of payments in one lump sum so you can make a bigger order, launch a new product, invest in different areas of your business more quickly.
And I guess what makes us unique and different from your more traditional financing options is that we [inaudible 00:04:56], we do not check credit; we do not ask for bank statements or tax documents. All of our underwriting is based on your account health and sales performance. So we really reward you with financing just for being an awesome seller. You don't have to have business credit history as a lot of e-commerce sellers don't, a lot of them are first time business owners. And we're also really fast because we don't pull your credit or ask for all that other stuff that your bank is going to ask for and we can get you paid in 24 hours.
So, if you see inventory today that you really want to buy, if you see a store closing or your suppliers having a sale and wants to get rid of a bunch of inventory, you can really jump on that opportunity and have cash on hand. So that's what we're all about, helping your business and helping you jump on those big opportunities and we're designed exclusively for e-commerce sellers. We started out on Amazon but in addition to Amazon, we also finance sellers on Walmart, Jet, Tophatter, Newegg, Shopify, Etsy, and it's constantly growing so as you diversify your business you're going to have capital that goes with you as well.
Mike: Excellent, and one of things you didn't mention there is that even if you are talking to banks, they won't work with a company that hasn't been around for at least two years, that has two years of tax returns. Instead I think that that's the time that you need the cash the most as you're growing as a young business and it sounds like you guys will work with companies way before that stage.
Vicky: Yeah, you only need 90 days of sales history and an average of $2,000 a month in sales to get started on daily payments with us. So, yeah we definitely help you even in the early stages of growing your business, and yeah I know how that is with banks. It can be really difficult too with FBA, and if you think of a bank, we totally understand FBA and we love our FBA sellers, but that's hard too. If you go to a bank and even if you are an established business with your tax returns in order and all that, and if you go to a bank and try to get a loan and you say my inventory is in 18 FBA warehouses, they're going to say, I don't understand that, see you later. And so and for us, we are like, oh, great, you're FBA. That's awesome. Okay.
Mike: It was definitely a really frustrating experience for me, because I had actually never needed financing for any of my businesses up to that point. I had been doing affiliate marketing and other types of businesses that were the cash flow just wasn't an issue. So, when I first applied for cash from a bank that I had had a relationship with for like 10 years, just like you were saying, they didn't understand it, first of all, and second of all, they were just like, we need at least two years of tax returns for this business. It doesn't matter how many years you've been in business, it doesn't matter that you have an 810 credit score, it doesn't matter that you have all these personal assets, we can't lend this business anything until it's been around for two years.
And I was like, okay, well, that's just a policy of that bank. And then I started hunting around San Diego go and local banks and it was the same thing over and over again. It was really frustrating. So, for us, we ended up taking Amazon loans, because we didn't know about Payability and some of the other options, they might not even existed back then. But it was definitely a very frustrating time for us.
Vicky: Yeah, I mean, I know how that is, I do that all the time where like sellers, they have $300,000 waiting for Amazon balance going to be released in seven to 10 days. And they can't even get a bank to give them like 10 grand. It's kind of ridiculous.
Mike: It was actually literally the number that I was offered was 10 grand but it was a personal loan. I was like, you got to be kidding me, we have more than that in cash in the bank. So the whole situation was ridiculous. And banking I think it's got a little bit better since. I mean, this was a few years ago, still coming off the heels of the financial crisis so it might be a little better now. But certainly, they’re still not going to talk to I think younger business that's just getting started.
So okay, let me walk through here like a scenario. Let's see, you said if someone has been selling for 90 days or more, and has more than $2,000 in sales a month. Let's use a round number like $10,000 in sales a month just so we can walk through the process. So, they're selling $10,000 of stuff a month, or their monthly or every two weeks payout is going to be on 5,000 in sales. So they're probably getting around 2,000 or $2,500 or something more like $2,000 from Amazon. So you would finance what based on that, what would the credit limit be, and what would they be able to go do with that cash at that point?
Vicky: So for instant access for daily payments, there's really no limit to that. You get 80% of whatever your payout was yesterday. So again, that's a financing solution that really grows with you and really has no daily limit to like how much cash you can get as long that you've made those sales on Amazon or whatever other e-commerce platform we're servicing. And the reason we advance on 80% is the cover returns and charge backs so that you don't end up owing us money at the end of the pay period. And then we release that 20% to you on the end of the two week period, once we recoup the money from Amazon that we've gotten.
Our instant access product is usually up to a month worth of payouts. It can be a little less than that, especially if it's your first time taking one or sales decline slightly, like other risk factors. We do try to be a little bit more conservative with that product at this point, because we do need more data; a lot of it is based on machine learning and stuff like that. So and we do want to put sellers in a position where they can definitely — where we're giving them money that they can definitely pay back. So, it would be about up to whatever your payout is, but probably it might be more like three weeks. But once you're growing and once you're taking more of them that it definitely becomes more flexible.
Mike: Got you. So, is this something that you apply for each time you need it, or how does it exactly work like the details of getting your payments and the frequency of the paying you back and all that and the interest rate, how does all that stuff work?.
Vicky: So once you are a Payability customer, it's really easy to get an instant advance if you're already getting daily payments or easy to apply for an instant acess product. We link up to your Amazon account so we can see all the payments going through and see all the data. And again, we don't look at credit. So we're just looking at all of your sales history and performance metrics. So we'll make a decision based on that and it's really simple.
Mike: Got you. And then what about the other product the instant in advance, how is that different from the instant access?
Vicky: So, instant access is daily payments, you are getting 80% of yesterday’s sales today. So, you can get that cash flow going and you always have money to pay your suppliers or your employees or buy inventory. For instant advance, that's just one lump sum of money so it's up to a month's worth of pay. We give you up to a month worth of payouts in one lump sum and then every two weeks when Amazon releases a payment, 25% of that goes towards paying the advance and then the other 75% goes back to you.
Mike: Got you, okay. And then is there like a time limit to that or just like once it's paid off how long it takes is how long it takes?
Vicky: So it's a maximum of 20 weeks and from there around 1% a week as a fee. So, the sooner you pay it back the less you will pay in fees, but you'll never pay for more than 20 weeks.
Mike: Got you okay. So at the 20 week mark, if you haven't paid the whole thing back, then you need to write you guys check, basically?
Vicky: Yeah, at still that same flat rate. But not only that does not happen normally, people pay it back a lot sooner because they do want the discount. And we have really good analytics that can predict that you are going to be able to pay this back.
Mike: Got you. So, I mean, at 1% a week, obviously, it's pretty expensive money. So what are some of the justifications of like why you would want to do this in your business?
Vicky: So yeah, it's definitely not the cheapest option. But we are the fastest and most flexible option. Again, you see, you're going to get approved in 24 hours. So if you see an opportunity to buy inventory, you don't have to leave money on the table, you can go and go and buy it. So that's really the flexibility and that it's fast. And that you don't need a lot of these ecommerce businesses are great businesses that make a lot of money, but like we said before, they don't really qualify for traditional financing. So this is an option and a tool you can use to grow your business.
Mike: Yeah, I mean, for us it was, we used up all the cash we had, we were lucky we had our own cash, and then I used some credit cards. And then it was just like, no one else wants to talk to me about lending money so what else do I do? And I'm a pretty debt averse, risk averse guy, when it comes to stuff like this. I'm a risk not a risk averse guy in business in general, but I'm just not really a huge fan of debt. And we did a whole episode about this, we’ll link to it in the show notes that Bill D’Alessandro was on and he had really convinced me and got my mind around having dead against inventory because every business does this.
I mean, even like the Walmarts of the world, it's basically impossible to run an inventory based business without some sort of debt against your inventory, if you want to continue to grow at these big numbers, the 100% per year numbers that we were running at especially in the early days. It's just impossible to grow on organic cash flow alone and having debt against assets is a pretty prudent thing to do in business. So again, this is something that happens even at the Fortune 500 level. And so, once we did that, that's when we experienced our biggest growth. And without having debt against the inventory, it just never would have happened.
And so, I had to get my mind around that number on the P&L every month for interest expense, which I'm used to having no credit card debt, and no paying any car payments or anything. So that part of my life was something I hadn’t ever seen on my personal or business balance sheet or P&L for a long time. But the reality is, without doing it, without taking that leap three, four years ago when we did, we wouldn't be where we are today. Like, it just would have been mathematically impossible to continue to grow at those rates without going bankrupt. We would have had a great business on paper but that's all we would have been able to show for it at the end of the day, because we would have been out of cash.
Vicky: Yeah, that's absolutely true. I think one of the biggest misconceptions too about business debt versus personal debt; I think people kind of think of them the same way when they're totally different forms of financing. I think with personal debt, it's never a good idea to live beyond your means, or max out your credit cards, just because, but with business debt it's really not the same thing. With personal debt, your stand to lose money, you stand to be under a mountain of interest in debt and that's just because you chose to live beyond your means or whatnot. But with business debt, this is a tool you can use to make more money. Yes, you are paying interest but you are ultimately making more money. So they're two totally different things.
And people also use instant access, which is again, our daily payments product to stay out of debt, because that's just a factor in itself, it's a new age type factoring service. It's not debt at all, we're only advancing you on sales you already made, it's not that we're giving you a loan or anything. Lots of our clients use that to stay out of debt because oftentimes with especially with the newer Amazon accounts, the ones made in the last two years, Amazon will hold back your balance for more than two weeks, all or a portion of it. And when you're getting paid daily, you know you're going to be able to pay off your American Express business credit card.
But when Amazon holds back a balance, you may have been really counting on that to pay off all your credit cards and your debts but now you're kind of stuck. So it's definitely a tool people use to stay out of debt. They don't have to take out loans because they always have the cash flow going to their business. So that's actually a product that even though it does cost money and it does cost fees, it can keep you out of debt.
Mike: Right? It makes a lot of sense. And the thing that Amazon does, it's really frustrating. Sometimes the whole back on that can be unpredictable. Like there's someone actually in my mastermind who's like a seven figure seller who has been getting their Amazon payments like clockwork every 14 days or whatever, just had all of a sudden randomly Amazon hold back five figures from them, which was really, really odd.
Vicky: We hear it all the time. And it's also I mean, data side, it's really hard to grow a business if you don't even know when you're going to get paid. So yeah, like you know you're going to get paid and that happens to be every day, that's pretty nice.
Mike: So, we talked about the fees for the instant advance basically being like 1% per week is the instant access fees similar, or is it a different structure for that?
Vicky: So, the instant access fee is fee on your gross sales, it's normally starts at around 2% of gross sales. But for people listening to your podcast, we are doing 25% off. So we're going to share the link and all that layer where you can sign up. And if you sign up through the EcomCrew Podcast, you can sign up at a rate of 1.5% of gross sales and get a $200 sign up bonus. So, you are going to get a discount for listening to the show and signing up. And it is on the gross sales so it is on your total sales coming out of Amazon?
Mike: Got you. So yeah, the link just since we're talking about it is EcomCrew.com/payability. It is not an affiliate link, we're not getting anything for that, it's just something that Payability was nice enough to offer our audience for having them on the show. So again, it's 25% off the fee, so instead of being — I was wondering where this came in, because you had put this in an email but I wasn't sure exactly what this meant but now I do. So, it'll be — instead of it being 2% of gross sales, it's one thing 1.5% and then you'll get also a $200 bonus. So, back on that example that I was using before, if it's $10,000 in sales of throughout the course of a month, the person would be paying in this case 1.5% or $150. So, it's $150 basically monthly fee to be able to get your payments every day or 80% of your payment every day at least.
That makes a lot of sense. I mean it's just something like you said you can build that into your cost structure, you know you're getting your cash I guess on average seven days sooner. And one of the things we talked about, there's another podcast we’ll link to about just inventory turns in cash flow. If you're optimizing your inventory the best that you can, you should be turning your inventory about every 13 weeks, and this would allow you to get more inventory, you have an extra basically shave an extra week off that cycle of cash flow to inventory which can increase your overall business probably somewhere in the 8% range or something, that was kind of like what we calculated out.
So, it's pretty significant and so I mean in theory you'd be making more money by having more cash available and turning more inventory than like significantly more money four times more money than the fee of advancing it. Is that sound logic?
Vicky: Yeah absolutely. That's definitely how a lot of our clients [inaudible 00:21:26] as well just to get more inventory turns in and just make your pie a bigger pot so that your piece of the pie is bigger. Does that makes sense?
Mike: Yeah no it definitely makes sense to me. Awesome, so I guess to kind of end the show here a little talking about like other success stories or ways people are using stuff like this. Do you have any examples of things you can share? I’m sorry to throw you on the spot here but a way people have used this so you can talk about that might apply to some people in our audience?
Vicky: Yeah, and you're not putting me in the spot at all, I know my success stories. So, we've one client called Elevate Nutrition. It was two vegan bodybuilders like really couldn't find a good vegan supplement that was effective and safe. So, they decided to make one of their own I mean, like a beacon shake, it is on this powder nutritional supplements that bodybuilders use. So they created it and it really took off on Amazon. And there were a lot of people looking for the same type of thing. But the problem was that they couldn't keep it on the shelf, they're maxing out their credit cards trying to fill inventory, trying to keep up with that demand and really just losing sales and losing money.
I mean, I meant to touch on this earlier that the cost of a missed opportunity is really high, especially as Amazon gets more and more competitive. So you really want to want to be able to be making every sale you can possibly make and taking advantage of every opportunity to pick up inventory that you can make. So, they decided to go with Payability and that really took what really seemed overwhelming, keeping the product on the shelf.
That took that off their shoulders completely. They were always able to order a new product when they needed, they took advantage of every sale and because their business wasn't paralyzed with just keeping that one product on the shelf, they were actually able to launch a nutrition bar and another product as well. So they expanded their business just from getting paid daily and having that cash flow and they stayed out of debt, they did this all debt free once they signed up for Payability.
Another customer, we’re actually shooting a video with her down in Atlanta in a couple of weeks to tell her story. She created an affordable allergy test for I think it works on humans, pets, horses and it's a really cool product and she really wanted to get it in the hands of more people. So she was able to expand her business with the daily payments, she's used no other financing. So she's able to run her business her way the way she wants it, because she gets paid daily.
And she said, it really helped her get out of a tough spot in December when sales went up and she needed to order a bunch of more boxes, and more packing materials in order to cover those orders and in order to cover the shipping too which were kind of unexpected costs because she really didn't expect to sell as much as she sold. And she was able to do that just at the drop of a hat without even thinking about where is this money coming from and she grew her business. She actually made every sale she could possibly make.
Mike: Yeah, and one of the things you just mentioned there just the missed opportunity of not doing this, especially on Amazon. This was another way that I was able to wrap my head around getting financing when we did as well. But when you extrapolate out, this is like the compounding interest effect. And you extrapolate out the new products that you're buying with that financing. And what those products will be a year down the road or 18 months down the road once they've been established and have a good sales history, etc. and what they add to your bottom line on an incremental basis, it way outweighs the cost of the financing by like exponentially.
And the other thing to keep in mind is if and when you ever do want to sell your business, interest is always an add back. So that expense would be an add back to you. We get that money back basically and it would not be a part of the seller discretionary earnings when you go to sell the business. So, it would not be something that you're like taking a hit on if that's your long term plan is to sell your business. So, I don’t know, it's just something else I wanted to mention, because it was another thing that they helped me get some comfort with it. And again, without doing, and I can connect the dots to where we are now at 7 million versus where we were at 1 million when we started taking financing and it just wouldn't have been again mathematically possible without it.
Vicky: Yeah, absolutely. People want to buy big businesses and to grow you need some financing.
Mike: Yeah cool. Well, that's all the stuff I had on my list. Before we run, did you have any other things that you want to mention real quick?
Vicky: Oh, no, I can't think of anything. This is great.
Mike: Awesome. So, just real quick to remind everybody again, it's EcomCrew.com/payability. And that's P-A-Y-A-B-I-L-I-T-Y, EcomCrew.com/payability. And they're offering 25% off their instant access fee, which is normally 2% of gross sales. With going to that link, you would pay one and a half percent, and they also have a $200 sign up bonus that you would get. And again, this is not an affiliate link we are being paid to do this on EcomCrew or for anybody that signs up. So, just want to mention that because I think it's important to disclose this stuff. When we do do affiliate partnerships, which we might do in the future with you guys, we discussed doing something in the future potentially, but definitely not for this. And I appreciate you offering this to our listeners and also again for sponsoring 5 Minute Pitch. It definitely means a lot to us.
Vicky: Yeah, thank you for having me. [Inaudible 00:27:21] going to a lot of events this year. So hopefully I'll [inaudible 00:27:25].
Mike: Yeah, I'm definitely looking forward to meeting you at Seller Summit. So, we'll definitely get a chance to meet there as well.
Mike: Awesome. Thanks so much Vicky.
And that's a wrap folks. I hope you guys enjoyed this interview with Vicky. I want to thank them again for sponsoring the 5 Minute Pitch. They are not a sponsor of EcomCrew, but we do want to get them on here because I thought it was an interesting product and interesting guests for our audience here. Now, your mileage may vary depending on what part of your business you're in. You may or may not need this but if you do, I think it's a great service. You should check them out at EcomCrew.com/payability to get that discount. Again, that is a tracking link, not an affiliate link. We are not getting paid for anyone who goes to that link. You'll just get a discount on their services.
So go check that out today. And go check out 5 Minute Pitch just as importantly at 5MinutePitch.com where you'll find us on YouTube at 5 Minute Pitch. We’re getting some great early results in comments and we'd love to hear from you about that as well. 5MinutePitch.com. All right guys, I hope you enjoyed this episode of the EcomCrew Podcast. Until the next one, happy selling and we'll talk to you soon.