How do you raise a $100M debt facility as a first-time founder?

welcome to episode 29 of fundraising demystified today we have Gustav do founder and CEO of efficient Capital Labs a crossb fintech that provides working capital to SAS startups around the world he's raised a $10 million seed and $100 million debt facility as a firsttime Founder kastav shares his background as head of risk for American Express and several other unicorn startups and how it led to him identifying a gap in crossb financing we died into weed what types of alternative financing are out there for startups at different stages and this episode is a must listen for all founders to get a master class on accessing work Capital now as a reminder be sure to get notified of our weekly podcast and newsletter by subscribing at join. thunder. VC again that's join. thunder. VC now on to the show all right welcome back to the show everyone if you're host here Jason Kirby of fundraising demystified and today we have Gustaf dos CEO and founder of efficient Capital welcome to the show thank you Jason thank you for having me excited to be a part of this podcast no I'm excited to have you on and and share your story and I'd love for you just to give a quick background to those that are watching today a little bit about you and how your Mis Mis riskmanagement background led to you uh building this company and kind of where you're at today amazing um again thank you so my name is Cav I'm the CEO and one of the co-founders of aici Capital Labs we are a revenue based financing company and we specialize in helping SAS companies and their growth journey and another speciality that we have is we focus on us and South Asia and Southeast Asia Corridor we're going to talk about a little more of it what exactly is our USP unique selling proposition uh for me as a Founder I have uh as you rightly pointed out of an extensive risk background uh being in Risk Management domain for 21 years started my career with American Express an entire American Express I did everything to do with commercial risk I did small business I did Merchant uh I did Pure commercial risk and after 2008 and N crisis I was one of the first few people to start the fintech division of American Express I was a chief credit officer for all non- guard lending started off with Merchant financing and then eventually we did working capital and supply chain financing and from then um I jumped on to become the chief risk officer of cabbage uh which eventually by the way I left by them but got acquired by American Express uh but I had I had moved on beyond that so was with um cabbage for three years um being a part of the amazing journey that cabbage had seen it's it's SoftBank funded one of the Premier and primary fintech lender platform um in those days then I played multiple Chief risk officer roles till end of 2021 I was the global C for a buy now pay data company and after 2021 is when I jumped on this journey of building Revenue based financing through fishing capital and I always give this example that my wife says that it was being bit with entrepreneurship bug so i' had worked for many smart Founders I advise I still advise many many of the fexs what I wanted to build was something that not only plays to my strength and Al but also solves a business problem and that is how the efficient Capital Labs germinated in which we focus on Cross bers SAS companies and our entire intent is to make Capital border agnostic like whenever you think about South Asia southeast Asia and whenever people think about raising Capital whether it's Equity or debt cost of that debt capital is lot more expensive than any developed market like Europe or or America and what we're trying to do is bridge that Capital graph and you know at this point you know how long you know did have you been running this business how much Capital have you raised to date and in your case you raised equity and a debt facility so you kind of share a little bit more about that yeah so we have raised around $ 10 A5 million dollars of equity which is a c drown and a pre-series a um we've got amazing VC backing us we've got QED and 645 Ventures to Premier we've got quite a few of mediumsized VCS that have also impa us like everywhere Ventures Riverside Ventures S capital so amazing set of VCS it's great to get ratification so that's where we have raised 10 and a half million doar of equity we have also raised $100 million of debt facility through cim right and for people who may or may not be familiar so I will explain the difference of what is an Equity capital and what is a debt Capital because sometimes $100 million sounds overwhelming but uh it's a very important uh Nuance difference between what is an equity capital and debt capit so simple way of thinking about it an equity capital is you can use it for whatever you want you can use it to lend you can use it to buy a laptop you can use it to hire people you can use it for AWS anything that you as a founder or as a founding team you want to use it for that's where you can use equity Capital there is an unhinged way of of using it a Deb facility on the other side can only be used for Lending right if you are a lender A lender means you can be of different types of lender you can be working capital you can be supply chain you can be factoring company you can be a credit card company it really doesn't matter if you're a lender you use the debt facility and again not getting into there there could be different types of that it could be a warehouse facility you can you can do a forward flow there are different ways of raising Capital when it comes to the debt part of it so we raised aare house facility with cim which is a $100 million debt facility which can be used for Lending and unlike Equity a debt a debt facility comes with covenants what that means is what you can or you cannot do just because you can lend doesn't mean that you can lend wherever whatever whoever you want to there are certain covenants that you and your facility provider agree with and then you have to stick to that uh during the course of that um facility that you still own now I want to unpack that a little bit more um so when it comes to getting a deficit now your business in particular actually let's take a step back for people that aren't familiar with Revenue based financing can you give a quick uh education to to Founders on what Revenue based financing is and how those deals are underwritten sure sure so a revenue based financing simply put and it could be a retail or e-commerce Revenue based financing or it could be SAS we focus on SAS is we upfront your Capital so let's think about let's say that you are a platform company and you an HR Tech platform company and let's say City Bank is using your platform for all HR related purposes and City Bank for usage play $20,000 every month for using the platform so you make quarter of a million dollars or $240,000 from City Bank for the platform usage what we will come and say that we'll upfront a portion of that Capital so that you can use it for whatever you deem fit right especially for a growing company especially for companies that preed se series a series B getting that upfront capital is the the ROI of getting that upfront capital is lot more than getting it every particular month so that is what we do so in this particular example of that $240,000 let's say $120,000 we pay you up front now you use that Capital to build more features you use that Capital to go and Pitch to another bank you use that Capital to go to a GTM for another market so it's a utilization then so we upfront your we frontload the money that you would have got from a particular contract we give that to your front and how does that hit the balance sheet you know is that see seen as like collateralized debt is it seen as you know accounts payable how does it impact a Founders balance sheet first you use the words collateralized right so most Revenue based financing companies uh would not it would not be collateralized and collateralized is a little bit of a Nuance tub right and I'll explain to what that means sometimes when we think about collateralize we think about you have to give something like a CD or a letter of credit a certificate of deposit or a letter of credit is the usual definition of collateralized but in the legal definition of collateral you can also file a lean and if you file a lean it is also deemed to be collateralized but there are certain Revenue based financing companies that makes it uncollateralized what that means is there is no lean filing there's no upfront letter of credit or certificate of deposit that is there but there are also certain other uh players within the revenue based financing space especially the ones that does much bigger amount especially the ones that does uh longer tenor without getting into names some of them do file for uh leans right and that is what makes it collateralized right now in terms of balance sheet right so in terms of balance sheet depending upon these are all current liability right especially if you have to pay it off in less than 12 months uh it is going to be part of your current liability sometimes um as I mentioned some of these Revenue based financing companies can actually uh give it to you for 2 3 4 years then it not only becomes your current liability which is the 12-month portion of what you need to pay but it is also a long-term liability for um what needs to be what needs to be uh paid back right so that is how it will it will show up as your current liability on your balance sheet no I'm glad you shared that I just feel like a lot of Founders don't know how RPF works and from like a payback period so yeah usually less than 12 months sometimes 18 some times longer but it's not necessarily really an interest rate it's usually a percentage of future revenue is how most of them are underwritten how do you guys determine what percentage to take and and how do you determine when it's officially kind of paid off taking into consideration your percentage that you need to make in terms of Interest so there are three types that are there and not to make it lot more complicated the first one which some of the people would call it like a merchant cash advance it is a percentage of your Revenue so what does that mean and there are pros and cons to that the percentage of a revenue what that means is if you are volatile if your if your revenue is not as predictable it can potentially help you because in certain months let's say you do 50% of it you don't want to pay a fixed amount because the revenue that you have made is not as much as you made in the previous month so the amount that you're paying back Falls or goes up depending upon the revenue that you're making for the month so which is a percentage of your Revenue now that's the advantage what I give you is the advantage right so it means that there are certain months in which you're not doing that great you're the amount that you need to pay back goes down the disadvantage is if you're a growing company where most of the company that we go after are growing companies right which means that your Revenue per quarter is growing up at a certain point in time when you're estimating when a usual RBF players are going to estimate they're going to estimate looking at your growth till that point in time and they are going to calculate if it's a 12 month they'll calculate what needs to be done for you to be paid back in 12 months but if you're a growing company what happens is that you end up paying it depending upon a growth rate 6 7even 8 n months so what you are doing your effective APR or your effective rate that you're paying becomes much higher than what you anticipated it to be at the point when you got it so that's a disadvantage of it right so when you are a growing company you may not want to take it as a fixed percentage of your Revenue because you'll end up paying lot more as a result of which the companies are higher the MC is are high the MC is are happy because they are getting a lot higher yield on that particular thing so that's one type of uh MCS that are there the the second type of MC's that are there is the which is what we do we do it as a fixed fee so what that means is it's we go after predictable Revenue so you exactly know every month what needs to be paid in terms of principle and what needs to be paid in terms of Interest right so there is no surprises so you can plan accordingly doesn't matter whether you're growing whe you're growing with 30 40 50% you be exactly uh what you need again the reverse of it is true if there are certain months in which you dramatically are lower it might pose a little bit of an issue in terms of repayment but especially for a growing company we always advise doesn't matter whether it's a friend or existing customers we always advise to take a fixed payment it it it helps you in terms of your eeld the third type of Revenue based financing company that are there is um it's not technically a revenue based financing company it's more like Loan in which is there's a balloon payment what that means is it's interest only for a certain period of time it could be a year it could be 18 months and then you repay that entire amount at the end of that period right and there advantage and disadvantages the the advantage is for that period of time you're paying interest only and you're not paying principal the disadvantage is especially in certain markets especially where we are right now that balloon payment puts a lot of pressure on everything that you have then you're looking at refinancing then you put yourself in a little bit of a pickle depending upon how big is those are the three typical types of rbfs that you would see I think that I really appreciate you sharing that and and breaking down the the different layers uh opportunities that Founders can at least start to think about you know how this might play into their business you know especially for Revenue generating businesses that uh want to look at this so so appreciate the education let's kind of take a step back you raised from some pretty prominent investors uh you preed seed and of course you know the Deb facility what was your strategy you know how did you go about getting in front of the right people what point were you at with the product to to go out and do that and yeah so and it's a good learning EX I like uh the way I said it's learning by doing I faltered I stumbled and then I learned um and if anyone ever comes to me for advice I can say what to do and what not to do so I started fundraising back in November of 2021 and we all know that in 2021 was during the he days of people uh being being able to raise funds so the entire thing and it's a very personal story so the entire thing the way it started was I started talking to a few of my BC friends people who were in entrenched to the market and the feedback that I got was cost of the idea is great with your risk background with AMX and cabbage and so on and so forth we were looking to raise around $5 million at that point in time it's going to be a breeze right it's just going to be a walk in the park don't worry about it and uh so November and December I spoke to only five VCS right the top five VCS um again without getting into the names like big names we spoke to only I would spoke with only top five right some of them showed QD was one of them so some of them showed interest some of them showed a lot of interest the other three said No at the very beginning and come I would say January 1st or second week which is two months two and a half months things were starting to get a little bit difficult the answer was no from all five right U including QED at that point in time so I was in square one like um what I realized was I did not and that was the learning I did not uh spread the net did not cast The Net wide I spoke to only five um of what I can considered to be top feces and I had wasted two and two and a half months of time just doing that right uh because another disadvantage that I had at that point in time was I did not have a product so it was me and my co-founder I had a great pitch Tech and I had my resume and I was selling those two things at that point in time right so after January I started casting a much wider net speaking to different types of VCS people who specialize in fintech people who are in New York that they can go and have a convers people who specialize at preed and Seed as opposed to going to multi-stage funds and I got introduced to amazing funds at that part in time and one of them was 645 645 Ventures and we immediately hit it off and we raised the first seed round with with 645 Ines right so that was one of the biggest learnings uh that I had is don't put all your eggs in one basket and uh try to diversify uh so so so 645 was the first investor we used that funding to build a really really good team we started building our first product sometimes it becomes the the chicken and egg situation when you are doing a lending it's a very important thing when you are doing lending it's always the Chicken and the Egg when you speak to an equity and when speak with a VC who knows fintech the first question they'll ask you is do you have a debt facility lined up right and when you speak to a debt facility player the first thing they'll ask you is hey do you have Equity lined up so because there's always an advanced trate concept so what is it so here is where my experience of knowing a lot of debt facility providers helped right given my background with cabbage and with petal and so on I knew quite a bit of a debt facility provider and was lucky enough that I had three people three debt facility providers who were willing to give us a directional term sheet right even without Equity right for me to show it to the equity players right that is one advantage that I had so I always say that I was very well covered on the Deb side I was absolutely not covered on the equity side and uh during the during the due diligence uh 645 spoke to one of these players that was there and that gave them a lot of confidence because they knew that we already had a term sheet from a debt facil provider that is one thing Founders need to keep in mind that when you are doing anything to do with lending that how do you solve for the Chicken and the Egg and by the way we did not do it but another way of solving for it is you raise a certain amount of equity and you use the equity to so you build little bit of the book with that equity for Lending then you go to a debt facility Provider by then you have a product by then you have a platform but by then you'll have customers you have something to show so anyway so that is that is how our journey went then with the equity we were able to close our first debt facility back in November with cim it was a smaller facility which we call a promiser note it was a $15 million promisory note but that particular term sheet that we got had economics which which would uh unlock if we raised another round of capital and the economics would become lot better the interesting thing again another learning and this is another learning that I heard from our VC friend is Raising raising capital is almost like joining the dots right so what I did this entire one year of 2022 was I picked certain VCS and when I was not raising capital I kept on presenting to them the best sign of present and this is a is when you're not raising Capital so I kept them engaged and one of them was QED so even though QED did not come in during the during the first round um I kept them engaged and we we showed them the growth we showed them that we closed a debt facility in the 15 Milli promisory note and they came in for a pre-series in December right and that is when we closed um with qedd and 645 645 continued to believe and invest in us and um qedd and 645 closed the pre- series A which was a $7 million pre series a that we raised in December and it's it's always like Exel fulfilling and because we were able to close the pre-series of $7 million we then went ahead and was able to close the $100 million debt facility in July with cim back again right now now that we have closed the $100 million debt facility with cim our conversations as we're going for a CVC becomes easier because now we are completely covered from the debt facility side at least for the next two years maybe even for the next two and a half years so for for a financing company you always are in a capital raise mode but it is like the debt helps the equity which again helps the debt which again helps your Equity raise I think that's something the the chicken and egg problem is something Founders complain about all the time and I think it's that strata like where you kind of get a little bit of commitment the other side you kind of like play Both Sides I think that's a a crucial tip to to share and you being that this is this is a competitive space like you're not the only player in in this type of financing solution albe it I think the Market's in growing and I think more and more Founders are looking towards ass option so I think it's bigger pie that's you know cumulating how did you differentiate yourself I think you have the the southeast Asia you know element to it but beyond that is there proprietary underwriting uh you know that you have is there you know Tech like what how did you kind of go out and differentiate uh in this space the biggest differentiat Jason is we are the only Revenue based financing company we are not only crossb but we do a risk cross water too right so we have got like entire infrastructure built in different markets to the risk assessment not just in one market because we solely focus on crossb and that is that is the biggest differentiator we just don't focus on one market we don't we've not built an infrastructure just for one market we built an entire platform to look at multimarket when we are doing risk underwriting gotcha and okay I can see that because that op you up to a whole larger amount of opportunities than just businesses that are just doing business in the US um now appreciate you kind of adding some insights there and when it CES to you know what you look for in terms of underwriting deals and like you know just for the audience here that might actually want to use you guys what are you looking for in a company you know what's what's the typical criteria that you guys look for so we are very flexible right like um again I cannot speak for the other there is no one condition that eliminates you and there's no one condition that approves you right so just because your net margins or a beta margin is negative severely negative negative doesn't eliminate you or just because your margins are positive uh doesn't mean that uh you're going to be approved we look at we look at a bunch of things right we we look at your banking data that gives you that gives us view in terms of your Revenue in terms of predictability um we look at your other accounting data that gives us view in terms of your debt capacity like you know how much you already have how much you think you need to pay we look at your contracts like we look at stuff like is any you could be a $2 million company er but what if the $2 million 1.5 is coming from one particular company there's too much of concentration risk what exactly if you lose it so we look at we look at contracts we look at whether you know you VC funded or not whether for how long you been pin PES but again I don't want people to leave with the impression that if you're not VC funded it is bad it's actually not you could be uh we've got 20% of a company that are bootstrapped right and um it helps in a way if you're bootstrapped also so there's no one condition that eliminates and there's no one condition that makes you better off that are that so the the best thing to do is is kind of see if one you need this type of you know need additional funding and applianc see where it goes to kind of see what options might open up that's something that we help founders with all the time is like okay like how much Capital do you really need to kind of Hit the next Milestone and you really need to go out and run a fundraising process for for venture capital or can you follow uh going after you working capital RBF ger Lo these types of things to kind of see if you can in most cases get Capital quicker uh in a lot of ways and H you won't get maybe as much because there's certain caps based on Revenue what not but maybe you don't really need that much uh and you can kind of do right right so one thing that I add is that what we try to do is we avoid being the lender of Last Resort right that is one thing we do not want to be the lender of Last Resort what that means is you've tried raising PC it has not worked you've tried raising debt it has not worked you've tried going to other places and now you've got one month of Runway your Revenue might be exploding but you just have one month of Runway so that is something we we tend to stay away from that we never want to be the lender of Last Resort and another important distinction like there there are three types of capital that you can raise right and Jason probably you know this but for other there's VC there's a venture capital then there's a venture debt and then there's alternative Capital right alternative Capital it could be Revenue based financing it could be working capital financing it could be U supply chain financing fing whatever and there's a subtle way of differentiating right a venture capital the way I explain to people is always a multiple of your Revenue right when you are looking to explode when you're looking to grow when you're looking make it a hockey stick growth you're looking for multiples of your Revenue you can never substitute it with the third part of it right you can substitute a part of it a revenue base financing or alternative capital is always a fraction of your AR right it's never a multiple so that's one good way of doing it and there are pros and cons in each one of them as I mentioned like right now the VC Market if you if you might be raising multiple but you're giving away an arm and leg in terms of your company if you don't need to do it you shouldn't do it right you would rather get to EV valuation you would rather get to that one particular customer You' rather I always consider us not the lender of Last Resort but your last mile so that last mile to help you get to that valuation your last mile to help you get to that ER your last mile to help you get to that Enterprise contract before you explode so we are an enabler of that last mile that's a really good way to look at it and that's how I see it it's just like you know hitting that Milestone you just need a little bit more to to hit that certain you Ma count user count or you know Revenue metric I think is a really good way to look at it and it's how Founders should be looking at their business anyways you know they should be looking at you know the Milestones that they need to hit to achieve um you know a capital Razer be you know attractive to a more formal Capital raise did you know that most Founders waste days of their lives chasing the wrong investors well as a Founder you know your time is your most valuable resource don't waste it on the investors that aren't going to write you a check here at Thunder we built a free tool that identifies exactly which VCS are worth your time to pursue we score your company against 3500 VCS and family offices that have been vetted and are actively writing checks into 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VC now let's get back to the show when it came to uh your experience kind fundraising the de facility you know you mentioned the firm you have a background you know you've been in the space you probably already had a couple lined up how are these Deb facilities structured if you can kind of Enlighten you know the the audience here because you there's a couple starts I've worked with in the past that have sought this out but again another big learning is even though I thought I knew a debt facility right which I would say that from a regular person I probably might be a little bit better off but there was a lot of things to be learned which I learned during the course of it I understand the basic thing what is an advanced rate which people may or may not know right like what is sof for plus this and what is it that you need to negotiate but there's so many other small subtle things that we learned and we that needs to be kept in mind so my advice that I would very strongly say that if somebody is going for anything to do with debt or going to a debt facility try to think of getting a fractional CFO or a fractional Capital Market Sky no matter how smart you are there are many things there many nuances and these debt facility uh term sheets that you site are long-term term sheets these are not uh 6 12 months they're 2 three year four year term sheet what you're signing right now you have to live with it for the next 2 three four years so it is imperative for you to know some of the nuances imperative for you to understand this and it is okay for you not to know everything so that's why I would always advise for somebody who's getting into lending to invest certain amount of money maybe not to hire a CFO I understand or maybe even not to hire a cro but to invest in fractional CFOs or to invest in fractional Capital markets people the value ad for that the ROI for that is a lot more which will only realize after we have gone to the term sheet negotiation so that's another very strong advice that I would give anyone who is thinking about doing a fintech which includes or which involves lending in this lending world like there there's got to be essentially a spread like you have a cost to Capital you know on that to where you I imagine there's maybe some you know fixed cost and when you deploy that Capital because essentially it's not like you get a hundred million doar in your bank account you're drawing upon that when you're doing deals and I imagine there's probably some kind of fixed cost you don't have to share obviously the exact numbers but there's some kind of fixed and then maybe some performance upside to back to the lender to kind of juice their returns like is that kind of what you experience or there other types of ways that these Des facilities ultimately and not make m I mean this is this is a very typical debt facility in which there is a fixed cost that is there it could be a fixed cost and now given the uh markets have become lot more volatile so most of the debt facility providers would do a percentage plus suur right suur is is the Fed rates which it's not prime it's a little bit different but like it keeps on changing every month there's a one month sofa there's a three Monon Sofer and so on and depending upon it could take a one month or a three month sfur so most of the debt facility providers have moved away from the fixed cost now it's a variable cost in which there's a fixed component and there is a variable component which is the software that is there and the other thing to keep in mind would be you have to get Confidence from the debt facility providers through multiple things that are there first is product right what type of product that you have whether they deem it to be risky or not if you're doing a product that's four years it's lot more risky than it's a three-month product right the product itself second thing is background of the people right whether if it's not you whether it's a risk officer it could be you the background of people who is eventually going to be responsible for managing risk right it's extremely important to Showcase that when you're speaking to a Deb facility provider they are evaluating you no matter how smart you are you could have raised uh 50 70 million of fund you have to understand that there's appreciation for risk right and you have somebody to back it up right the third thing is you have to walk the talk what that means is you have to Showcase your policy is reflective of what you understand what you know and you're not skimming it what I say what I mean is that you're not skimming it you may know it but when you're starting off you're not doing the entire nine yards you're just getting the financials you're just getting you have to walk the talk of your knowledge and and reflect it on it these are the three very important things that you need to keep in mind when you're raising what is the product that you're thinking of the second thing is you need to have a team to back it up to Showcase that they understand they appreciate and they're going to be the flag holders that the debt facility people can go up to and the third thing is you need to Showcase that what you are building is reflective of what you claim you're going to do and for for Founders to know and also just for my own curiosity like what kind of downside protections do you put in place to you know mitigate any kind of loss or full loss of capital deployment to your your clients it is not so for us as an example it is not a collateralized loan right so the downside protection technically speaking is going to be your underwriting right so the downside protection is going to be where you are in terms of the money flow right the the downside protection would be you do a pull from their bank account and not wait for them to push for their bank account the downside protection would be how an early warning you get get when the customer is probably detoria and not wait for it to become worse and not repay you so those are some of the downside the you do not have as it's not a collateralized loan you do not technically have that um downside protection in which you're covered completely right there are certain there certain aspects of it uh there are very few players that do it but there there certain players that do it like for example you do a lock box so a lock box would be when your end customer is reaying it goes into this mutually owned bank account where instructions are given that what money can move in and what money can move out so what that means is when the money comes to the log box you tell them that hey I'm going to be paid my percentage first there a fix for your percentage and the remainder of it goes to the customer the SAS customer that's another downside protection again as you can imagine the the SAS customers they don't like it at all a lot of friction but sometimes you need to leverage it to protect it not a whole lot of comp are doing that today I think this is like such valuable insight for a lot of Founders because there's there's so many tools out there like there's stripe and Shopify for those types of you know companies that using it where they just here you get half a million dollars or whatever like instantly but they don't really realize how it works you know what kind of protections are there and how the payback periods work and interest rates and those types of things all work so I really appreciate you kind of sharing your your Insight Jason that that is a very important point that I try to educate people right stripe uh stripe Capital Square Capital Merchant financing and American Express um it's a very very interesting product but you need to understand the nuances of what is the effective apepi so I always encourage people that whenever they say a 6 months payout and I take only 25% or 30% of your Revenue but you paid it off in 6 months what you are thinking is cheap for you is actually a 24 25% APR that is there maybe even higher I'm not even talking about the MCS I'm talking about about some of these uh Merchant financing companies through square and stripe and American Express that are there you need to understand I always encourage people to understand that what is the effective V ask that question and more often than not they will answer you and you'll be surprised that it's a lot higher than what you think it is yeah it can be very misleading especially because they it's not like a Term Loan where it's explicitly clear that you're paying like 10% 20% whatever and I also think just people haven't realized this how much interest rates have gone up you know we were so used to like hearing these 3% 5% you know type terms but even like they're thinking like mortgage loans which are very very different than what business loans you know come out when you're raising you if you if you got a mortgage when it was like 3 point you know 3% businesses are still paying like eight to 10 and you I think there that you know education wasn't really there for a lot of Founders that never went out and pursued debt uh and now you know I seeing interest rates I'm seeing Venture you know debt loans between like 18 to you know 30% Venture debt loans starts off from mid teens and higher yeah mid up mid teens and higher starts off and yeah I was just looking at a deal we're helping a client right now uh find a new lender because you know they didn't read the fine print they're like oh we got an 18% interest rate it's not too bad I was like well you got to read the covenants and what triggers the failure of the covenants and what happens when you default and basically the covenants are written to default like there's no way it was absolutely impossible for them not to default and then effective interest rate post default would be closer to 20 7% plus like a penalty on tap and so it's just like well your actual interest rate is 27% because the moment this they give you the money within the first month you're going to defa with how this is written and and so being able to read that you know fine print being able to understand what the effective real rate will end up being you know is is something that I think a lot of Founders really need to spend time you know when they consider debt uh options very very interesting point that similarly with Venture debt like even for the best of of best like people who would not like an SBB is great in terms of venture debt that is there they wouldn't have clauset like governance that are there however there are other fees that people don't add up like for example there is a closing fee your headline could be ABC it could be 15% there's a closing fee there are warrants that are given right warrants have fees right it could be 25 basis points to 100 basis points then there are Concepts like minimum draw so what that means is even if you don't need it you need to take the money and then there's a minimum draw there is a concept of unused fees what that means is if you're not doing it you have to pay fees so there's a lot of nuances as you rightly point pointed out and Venture debt that you need to be aware of and not be enamored by the headline oh I'm getting it at 16% or 17% there lot other fees that stack up very quickly yeah it's 100% true and it's something that I you know spend a lot of time educating Founders because a lot of Founders come to me because they they want Venture they or they have race Venture and they're familiar with this like VC that is you know they know that eight out of 10 of their bets probably go to zero you know it's just like that's the name of the game whereas debt they don't lose money debt like lender debt lenders don't lose money that's like the you know it's the opposite of venture they have very predictable you know returns and they have lots of downside protections to prevent you know losses or mitigate losses or underwrite a portfolio of Investments to you know ensure that principles never sack uh and so with that comes these additional fees that you know Founders need to be aware of and do their homework on we we talked a lot I know we kind of picked your brain on you know kind of all these different topics I find it to be very interesting and more Founders need to know about these options and know what could be out there for them but what's the best way for for Founders to learn more about you and and what you're doing at efficient capital I mean like the easiest way would be we we take pride in the fact that our website which is EAP labs.com is fairly self-explanatory like people can reach out to me I love talking to Founders because I learn from them I learn a lot uh happy as I said I still advise for six different fexs um around the globe love to see if people want to learn anything beyond this 45 minutes in our conversation see if I can be of any help whether it's SAS nonas fintech non-f Tech but if people are very keen on learning very specifically about Revenue based financing if people are very keen on learning specific about EAP efficient Capital labs they can go to EAP labs.com and they can always reach out to me at Costa at EAP labs.com fairly open to any sort of conversation where it can be of help no I really appreciate that and from what to hear our guest of and get uh hit up for various different things once the episode goes live so uh you hopefully Founders take this as an opportunity to to reach out and learn from you and and build a relationship with you with that might um so I really appreciate you being on the show sharing your insights sharing your knowledge I found this to be a very informative and educational episode so hopefully our listeners uh do as well really appreciate the fact for giving me an opportunity and a platform to talk about it thank you for joining us appreciate it thanks for listening to the show today we hope you learned something valuable and if you did be sure to let us know in the comments or by hitting that like button and if you're a Founder looking to raise Capital then join us at thunder. 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