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The RTO Show "Let's talk Rent to Own"
Welcome to "The RTO Show Podcast," your gateway into the fascinating world of the Rent to Own (RTO) furniture industry. Join host Pete Shau, who brings nearly two decades of experience to the table, as he dives into engaging interviews and thought-provoking discussions on the latest trends and innovations. With a blend of humor and realism, Pete explores the evolving landscape of Rent to Own, making complex topics accessible and enjoyable for everyone. Whether you’re a seasoned professional or simply curious about RTO, tune in for insights that will inform and entertain!
The RTO Show "Let's talk Rent to Own"
Securing Capital in the RTO Industry w/ Thomas Murphy of Capital Concierges
What if securing capital for your rent-to-own business was as simple as connecting with the right financial partner? Join us for an enlightening episode with Thomas Murphy from Capital Concierges, who shares his transition from the jewelry industry to a key figure in rent-to-own financing. With his wealth of experience and a network of 50-60 financial institutions, Thomas provides valuable insights into how businesses can secure the capital they need, whether it's for inventory, new locations, or partner buyouts. His pragmatic approach to navigating the financial challenges in today's economic environment will offer listeners useful strategies to manage cash flow and accommodate customers with credit challenges.
Thomas takes us deep into the unique dynamics of the rent-to-own industry, underscoring the critical role of tailored capital solutions. We talk about the hurdles faced by RTO businesses when traditional financing avenues aren't viable due to their perceived high-risk nature. Drawing from his own career journey, Thomas shares how mentors have been pivotal to his career development and how his experience in the industry allows him to provide practical solutions for entrepreneurs. From flexible payment plans to the concept of balance on rent, we explore the operational dynamics that contribute to the success of RTO businesses.
Aspiring entrepreneurs and existing RTO business owners will find this episode especially valuable as Thomas offers practical advice on crafting a solid business plan that instills confidence in lenders. We touch on the need for a financial safety net and explore options like express lines of credit and SBA loans. Thomas also highlights the importance of supporting small RTO dealers, particularly in challenging economic times, ensuring they are well-positioned for success when the economy improves. Prepare to be inspired and equipped with actionable advice to help you thrive in the ever-evolving rent-to-own sector.
Hello everybody. Listen, today we're doing a head-to-head and I want to talk to you guys about something that we don't always have here on the show. This is something unique, always important to rent, to own, but not something that we always talk about Right now. I'm talking to Thomas Murphy. Now he's a managing member of one of the companies that I think is going to be super important to you. Now. Capital Concierge is something that you don't hear every day but you need every day, and I'm so glad to have Thomas here. Thomas, how are you doing today?
Speaker 2:I'm doing really good.
Speaker 1:Thank you for having me, sir, absolutely so. I know that everybody's wondering. Right now we're talking about something that everybody needs a rent to own, but we haven't spilled the beans. What exactly is it that Capital Concierge does, and what do you offer to the rent to own industry?
Speaker 2:Well, thank you for asking that. Capital Concierge is a business capital broker, In other words. We have, we work with 50, 60 different lenders of all different types, depending on what the capital needs of the business is. And so what I do is if, when a client comes to me, I do kind of a soft interview with them. It's like okay, how much are you looking for? I need, I don't know, 400,000. Okay, what do you need it for? Is it for inventory? Is it for new trucks? Is it for a new location? Is it a partner buyout?
Speaker 2:So I'm going through peeling that onion back of trying to find out exactly what it is, because I have multiple lenders and by having multiple lenders, I have certain lenders that are really good at this thing and a certain lenders that are good at that thing. And so what I'm doing is peeling that onion back, interviewing the client and asking them what it is. I ask them questions about their personal financial situation How's your credit score? Lenders are very risk adverse and they're always. It drives me crazy, but a credit committee is always saying when this thing goes south, how are we going to get our money back? And that's an important aspect of rent-to-own and I can talk a little more about that. But again, what we're looking to do is I have a rent-to-own background. Don't know if you'd like for me to go into that a little bit, but-.
Speaker 1:Well, we do, because here's the thing when we're talking about and this is one of those times in the economy where everybody's like I don't know what to do Everything's getting expensive, capital's gotten more expensive, real estate has gotten worse, everything's more expensive. But I've got to figure out what's right for me. And when you're talking to Thomas, he's got the ability to help you out, specifically tailored to rent to own. And I don't know if you guys know this, but when you go into a bank, if you go into a financial institution, rent to own is looked at a little bit differently, because we handle business differently.
Speaker 1:Now, the RTO industry knows a lot about this, but you might not, and the truth is we have a lot of big guys out there. But then you have the guys that are trying to build their brand. For instance, myself, I would love to build a brand, but capital is something that I don't know a lot about. How do you raise the capital and how do you go about that? Well, this is the opportunity for you guys to understand how it works and, more importantly, how to get it. So you do have a rental-owned background where you understand how the day-to-day works before you got into Capital Concierge, correct.
Speaker 2:Yes, absolutely.
Speaker 1:So where did we start? Where did you start?
Speaker 2:Well, it started back in 1985. I was working in the jewelry business wearing three, three piece suits every day, and I wanted I was over on the East coast of Florida and uh, down Southeast and I wanted to get back to where I'm from, the land area, daytona beach area. And uh, a good friend of mine that I went to high school with was working for champion rent own. It was based it's a based out of Daytona beach. And he says, hey, well, we're looking for manager trainees. And I said, okay, well, what does that look like? And he says, come on and over an interview. And what have you? I interviewed they go okay, you look like a strong candidate, We'd like to hire you. And I said, okay, well, again, what does that look like? Well, you started as a delivery driver.
Speaker 1:I'm like okay, that's where you start.
Speaker 2:If grew up in the furniture business, when I was a teenager, working for a guy while I was going to high school and delivered furniture and appliances and what have you. So I felt very comfortable with that because I do well to do. It was a little bit of a transition going from working in a jewelry store to back on a truck delivering appliances and picking up furniture and things like that, but it all worked out. I did that for about six months. They said we'd like to promote you to a collector. At the time Champion had, I want to say I don't know maybe 60, 70 stores at the time. So I became a collector, worked for a guy named Wendell and he taught me the collection business. And you know I've been in sales pretty much all my life and grew up in a sales background. Father was a CEO or was a sales manager for a dairy company and so in collections it's a lot has to do with sales. Like, hey, I'm here to help you right now. You're past due on your on your payment. Payment, let me, how can I help you? Give me something to work with. So I was able to actually close my book at a zero delinquency one week. It was only one week, but I was. I still say that that was one of my uh. Never forget that uh. But working with customers in the rent to own business, you're providing a service that incorporates a product right, they need a washer but what you're really selling is weekly, biweekly, semi-monthly or monthly payments, because you're making that affordable into the guy's budget. How does he get paid is when you want to collect your money.
Speaker 2:So I did the collections job for about six months and then after that they promoted me to store manager. I'll never forget the district manager that promoted me. He's like I don't think you can do it. You'd be our youngest manager in all the stores. I don't know, but I'm going to have to give you a shot. I was like, wow, thank you for that vote of confidence, sir. Anyway, I was the youngest store manager in a small town called the Land. It was maybe 20,000 people and which. I went to high school there and what have you. So I knew the area very well and again I I crushed it.
Speaker 1:You know I did so how long? How long were you in this space of of actually being in the rent zone as far as operations concern?
Speaker 2:First three years I was a driver, collector and store manager and did that for three years.
Speaker 2:They transferred me to Kissimmee, decided that I was going to leave the company and start selling product back to the rent-owned industry, still staying in the industry. I did that for about two and a half years and I was selling to Champion, based out of Daytona Beach. And the director of operations at the time says you know, we really need a buyer and we think you'd be really good at that and what do you think? And at the time the company I was working for wasn't doing exactly what I wanted to do and not making the money I wanted to make. And I said you know, I'm willing to give it a shot. So I went back to Champion as their director of purchasing, merchandising and service At the time they had about 100 stores and was with them for three years as the director of purchasing, merchandising service. By the way, I forgot to say that Larry Sutton was my mentor. He was a Champion affiliate partner over in the Tampa area and Larry Sutton is a great guy and I call him my rent on mentor.
Speaker 1:Well, he still has the, he still has the moniker the Godfather rent.
Speaker 1:He's been doing this so long and I know there's so many people look up to him. Uh, I had a chance on opportunity to speak to him one time probably not as much as you have, but a great conversation and I'll be honest with you, every time that I have a chance to see him or listen to him speak or whatever's going on, read about him I have to take that opportunity because he has a wealth of knowledge and he loves this business. It's something that I really enjoy.
Speaker 2:And so I've got a little bit that'll tie the rest of this in, if you want me to finish.
Speaker 2:So in 1993, I was with them for three years again, six years total. In 1993, transamerica was the big finance company for the rent-owned industry. When I first started as a store manager, it was BorgWarner. Transamerica bought out BorgWarner and in 1993, all of a sudden I started getting purchase orders turned down and I'm like well, what's going on? I talked to the CFO at Champion and come to find out Transamerica was exiting the rent-to-own space.
Speaker 2:Oh and so, which was an interesting time, because at that point so Champion started going to the bankers and saying to the bankers like well, we have a six, I don't know six or eight million dollar line with Transamerica and we'd like to, we're looking for a replacement for that. Like, well, what do you do? It's like, well, we, we offer furniture and appliances and bedding and things like that. We work with a credit challenge customer. And and the banker would stop and say, well, what you work with credit challenge customers, yes, sir. And the lender, the banker, would say, let me get this straight. You want me to loan money to you so you could loan it to somebody else that I wouldn't loan to? Yeah, you got it, great, no, thank you. Here's a coffee mug. Thank you for coming in today. So Transamerica when Transamerica exited even though they said if we were going to keep anybody in the space it would be champion, but they said we have to exit the whole space Shortly after that, there was a group of guys that bought a leftover portfolio from Transamerica called Texas Capital Bank.
Speaker 2:Texas Capital Bank was based out of, still is based out of, dallas, texas, and at one time they had over $200 million out on the street to the rent-to-own industry for new store startups, inventory, all the different things like that. From what I understand and it's from what I understand is that eventually the people wanted to sell the bank and the acquiring banks didn't like the rent-owned. The bankers kind of look at rent-owned as a little bit of a, not a selective, not one of their more sought-after business. It's a high risk, high risk, yeah.
Speaker 2:What they don't understand is the business owners tend to be blue-collar millionaires, but they're dealing with a credit challenge customer. But they also know how to deal with a credit challenge customer by knowing that when is your payday? We need to make your pay. You get paid twice a week. We want you to pay twice a week so that they know how to manage that cash flow. That's that providing a service that incorporates a product. The customer needs a washer, but they need that financial management situation where they can break that wash machine up into an affordable weekly, biweekly, semi-monthly.
Speaker 1:Well, affordable chunks. I mean, we're dealing with people that are having situations in their lives where, if they could go in and buy it, they would have, but instead they're allowing us to at least own it for payments on end, depending on, however it is 52 weeks, 78 weeks, 24 months.
Speaker 1:That they can own it eventually Exactly end, depending on, however it is 52 weeks, 78 weeks, 24 months that they can own it eventually with the option to return, and I'm sure that that plays a part in it as well Not only the option to pay over 78 weeks over something that they probably wouldn't have been able to get credit on, but now they also have the option to return it, which means that you're not locked into getting that profitability. They do have the option to return it, and then you'd have to sell it to somebody else. Does that scare a lot of lenders when you're talking about getting capital?
Speaker 2:Well, you start talking to lenders and they start dissecting the business and they want to learn more about it. The fact is that the balance on rent, which is all the remaining weekly, biweekly, semi-monthly or monthly payments can do, is called the balance on rent. Most stores average store 500 accounts will have $1.5 million, $1.6 million or whatever remaining balance on lease. But for gap purposes, the accounting purposes, they don't recognize that on the balance sheet, and so bankers' balance sheets are one of their. It's, like you know, the standard issue three-piece suit for a banker, and he understands a balance sheet. So when you start talking about rent-owned and the fact that the customer can return the product at any time and stop the financial obligation, it's like well, wait a minute, you know how does that work.
Speaker 1:Well, there's a thing called a keep rate.
Speaker 2:There's a keep rate in industry somewhere averages in the 50 percentile, whatever it means. Out of a hundred people that come into the store, 50 of them will retain ownership by paying it off. The other 50 are going to return it because they couldn't afford it, they don't need it anymore and things like that, and so rent to own is the king of recycling product. I've taken pressure washers to sofas and chairs that were really in bad shape and amazingly they come out beautiful. So the bottom line is that as you start talking to a banker like that that doesn't compute in his head, he doesn't understand it. One of the values of Capital Concierge.
Speaker 2:Because of my rent-to-own background, I also owned a lease-to-own company, which is like creating a virtual rent-to-own store in a furniture store. There's many of them out there now, like Progressive and what have you, but the bottom line is that being able to talk to a banker and explain to them how it works and what happens in case of default and the different things like that, I've been able to tee up lenders that understand the rent-to-own business and I've done a ton of deals with them and they've all worked out fine. So I get a certain amount of respect with the lenders that I work with because I understand the business and I understand talking to the dealer and what he's going through. So I'm like a go-between right the banker. I have multiple lenders and I have a client.
Speaker 2:Like I was telling you before is that when I speak to a client and client will tell me, like okay, I need X, y, z, like how much money are you looking for? What do you need it for? Is it a partner buyout, is it a new location? Is it a need inventory money, all the different things. So I have different lenders that I interview that client and then decide where's the best place to take it. The nice thing about Capital Concierge is that if you come to me and we and I present you to one particular lender and that lender says, no, I've got other lenders.
Speaker 1:So you're? You're basically a one-stop shop for somebody who needs capital for the rental industry specifically. So let's say I wanted to go and I wanted to open up my own business. I can call you up. I mean, I have the operational knowledge. I understand how to rent weekly, bi-weekly, semi-monthly, monthly. I know how to pay bills.
Speaker 1:But getting it open that requires capital. Right, I have to find a building or I have to find a lease space. I have to get trucks available. I have to make sure that I have a certain amount of capital away so that I can pay my labor for such amount of time. I have to find product and talk to vendors and say, hey, I need this much product at start and I'll probably be ordering from then on. And then, instead of going everywhere for all those, I have the ability to come to you. We can discuss numbers, because you understand what it takes to open and what is a good amount for what I'm looking for, and then shop those around and find the best deal for the both of us, right, something that you can say is presentable and something I can say I can afford.
Speaker 2:Well, I work with several different rent to own franchise uh companies, um, uh, and, and because they know I understand the rent to own business, you know there's a, there's, there may be a store manager out there that's been a store manager for 10 years and he's like you know what? I'm ready to be an entrepreneur now. And so they'll go to the franchisee. They'll talk, they'll share with them the franchise disclosure document that'll show some estimated costs to start up and things like that. And then he's like well, wow, I didn't realize it was quite that expensive. I don't know that I have the capital for that. It's like well, we work with a gentleman named Tom Murphy with Capital Concierge.
Speaker 2:I do a fair amount of SBA loans, sba 7A loans Without real estate. It's a 10-year term, no prepayment penalty. The nice thing about the SBA is that the government guarantees that loan by 75%. So what's nice about it is you'll go to a lender. The bank is loaning you the money for the funds. But if they're a preferred lender then they can approve you and in case of default then their exposure is only 25% of that loan. So if it's a million dollar loan, the most that they can lose is $250,000. What that does is it gives the banker more confidence in maybe taking a deal Maybe they wouldn't do on their own as a commercial lender but with that SBA loan at the SBA deal it gives them more confidence.
Speaker 2:So a young gentleman you know he wanted wants to be an entrepreneur. He understands the rent to own business and he he's like. So what does that look like? So one of the things that I developed is what I call kind of a pre-qualification run where I'll ask him some questions about his personal credit score, his personal net worth, his available cash, different things like that.
Speaker 2:So One of the lenders that I do quite a bit of rent-to-own business with, actually typical SBA is prime rate, which is currently 8.5%. Typically the markup is 2.75. I have the one lender that will go 2.25, which is a half a percent off of the rate, which can make a pretty big difference after 10 years. They'll also lay a revolving line of credit alongside that SBA loan. So in other words, if they need a million, three to say a million dollars, for ease of math to open it up, it's a 20% equity infusion. So that's $200,000. They typically like for you to have a little more in your bank account in case things get in trouble. They know you got a little runway. But then they'll also lay $ 75, a hundred thousand dollar revolver alongside of that.
Speaker 2:So what I tell you know, when I was a champion, I was on the new store startup team, if you will. So we were opening a ton of stores at the time. You get one store that comes out of the gate really hard, and so I say that a new store eats like five existing stores as far as inventory-wise, yes, yes. And so, in other words, what you've got to make sure is you've got the capital to feed the beast. That thing comes out of the gate really hard. You've got to make sure you've got the cash, because the last thing you want to do is run out of cash and not be able to buy the inventory.
Speaker 1:Ultimately, they say in the industry, getting to 500 accounts is the big goal, because at that point you start cash flowing, your fixed expenses are covered and you start to break out and in order to do that, you have to have the capital to go to your vendors, to go where you need to go and say hey, I need more product, this is selling good, this is not selling good, so I'm going to buy more of this and more of that and then, before you know it, you have another showroomroom and hopefully, you're going to sell through that quite a few times because you're trying to get to that mark, which makes the tough I'm sorry to interrupt you.
Speaker 1:It just makes it tough if you don't understand how that works, because the capital needed is to refill your showroom every single time you sell through it, and if you're selling 500 BOR, that's quite a bit.
Speaker 2:Well, two, what you run into is a huge cash deficit when you open a rent-to-own store. You know, okay, maybe you'll sell a little bit of retail here and there, but that's not the game that we're in. So in the rent-to-own business you say your average cost of goods what? $400 these days. And then so you buy a piece of product for $400, a customer comes in and let's say it's a washer and dryer pair. Okay, let's say you get for the, you give them a deal for the first week. You get $10. Okay, you spent 400 and you just took in $10. You got a $390 deficit right out of the get-go.
Speaker 1:And that's that's right.
Speaker 2:Just getting even that's not any profitability, that's just getting your product cost back, and so when I work with rent-owned dealers, especially because of my background, we spend a lot of time talking about projections and business plans. Absolutely.
Speaker 2:Business plans is pretty much your plan, but, more importantly, the projections of being able to make sure that you've got your cost of capital covered, your rent covered, your pay factor coverage, your trucks, you know all the inventory things like that and so and that's one of the some of the things that the confidence that comes from the lenders that I work with, knowing that I'm helping them along Well, you're operation savvy. The nice thing about this, too, is that the most of the SBA lenders I work with pay me a referral fee, so my cost to the client is covered by the lender. Oh, that's great to hear. So I'm working for free, so to speak. But that also puts me in it to win it to with them. From a standpoint of I'm in it to win it. Their success is my success. So I get that loan across the goal line, I get them all squared away, they close the loan I get a little referral fee.
Speaker 1:So let me ask you a question, because everybody right now is talking about how things cost more. That's just part of life, and inflation happens. Unfortunately, inflation's happened a little bit more recently, but it's going on. So in a simple world, we try to keep it as simple as possible, because I know there's a lot more to it. If I was to come to you and say, hey, I'm looking to open a rent-to-own location, what is the general cost for a location now where you can say this is probably a safe number?
Speaker 2:that you'd want to get started with. A lot has to do with the demographics From a standpoint, are you in a small town? Are you in a medium-sized town? At what kind of competition You're better to be a big fish in a small pond, so to speak. Right and so at Champion, we were always like we went to Atlanta but we never went inside the perimeter. We were on the outside of these smaller towns or whatever like that. So work with one particular franchise, location franchise or that typically a startup store is $600,000.
Speaker 1:Is it six. Now. The magical number that I always heard coming up through the ranks was 500.
Speaker 2:Well, again, talking about the prices going up, different things like that. So typically they want to have a core base of 600. An SBA lender is going to look for 20% equity in that situation. They also like for you to have another 10% of that loan amount as in personal runway, in case maybe the thing ramped harder than expected or maybe it ramped slower than expected. Now you've got a longer time before you get to that magic number of 500 accounts.
Speaker 2:So you know a lot of what I do is spend time with the client and you know what are your expectations and are you prepared? Do you have other access to cash? Because you know I've had franchisees come in and say I don't think I need $600,000. I think I can do it for 450,000. And it's like, okay, what happens if that thing comes out of the gate really hard? And you because basically we break down, like on the FDD, for example, on a franchise, it'll say you need so much for the, for the trucks, you need so much for your initial showroom inventory, you need your backstock, you need your computers, your counters and signage and all the different things like that. So we break those buckets down into into what we call a sources and use form. So here's all the things that you have uses for and here's excuse me here's the, here's the, the sources of where that money's going to come from. So then I always tell them you need a contingency plan of the unexpected, if you will.
Speaker 1:So now cutting into this, because that was a really broad question how do I open one up? And you're saying it costs this much because there's so much involved in that. But then you had said earlier it's also possible to dissect it and say I need this for vehicles, I need this for a buyout, I need this for just furniture or, let's say, product. Someone can do that as well. So it's not just for somebody who's looking to open up their own brand, their own store and into the RTO industry. It could be for somebody who's already open, saying hey, I need capital for a specific item or a specific thing. I need it for vehicles because I need new vehicles or new vehicle wrap.
Speaker 1:I need it for more furniture, I need it because I'm running out of space. I know that I can do more business, but I need to lease somewhere else. I need more floor space, and so I'm going to need some capital for that, because now I've got to build out only for build out, though I don't need it for everything else, because I kind of have everything else. I have my brand name, I'm copyrighted, I have all that, so our trademark, but now I just need it for this so they can still come to you, thomas, and say, hey, this is my specific goal with RTO in mind, and you can still go into it and say let's take care of it this way.
Speaker 2:If it's an existing dealer and he's two years or older business-wise, and has a FICO score of, say, 700, maybe a little less, but preferably a little more I have a special, what I call an express line that's up to $150,000 that I can close in as little as two weeks. So it's up to $150,000 on a 10 year term, no prepayment penalty. So if he's like, look, I want to move into a new space, it's bigger, going to need a little more inventory, but I've already got 450 accounts, but you're going to need new signage and probably going to need another box truck and those things are not inexpensive by any stretch of the imagination.
Speaker 2:But what's nice is that if he doesn't feel like he needs 150, he only needs 95 or 100, we can do those and it's an affordable payment over a 10 year term. The key to that is it's no prepayment penalty. So he gets a year down the road and he's got into the new location and he's grown his accounts by 200 and he's really cashflow and great. He can pay that thing off early and stop the interest rate. So that's part of that whole interview process where we're trying to dissect what the guy really needs and what he really wants to do. Because, you know, I almost like a consultant for being able to say did you think about this, did you think about that? Did you? You know, maybe we need to, maybe you need to plan for this or what have you. So you know most people when they, when they come up with a plan, maybe they didn't think about all the points that they need to. So I try to dialogue with them to let's uncover all the let's left no stone unturned to make sure that you you know you said you wanted a hundred, but based on what you told me and we've started that bucket, we started building okay, we need so much for this and so much for that and so much for this and so much for that.
Speaker 2:So part of what I am is a salesperson to the bank. So in other words, you come in and you want to open a new store and I get all your information. I'm helping you build the story that goes to the banker, because what the banker is, he's the salesperson to the credit committee. So we do a really good job of selling the banker on you, your background, your personal financial situation, all the different things like that. So we build that story. I call myself a storyteller, but part of that storytelling is being able to understand one, how to communicate with the client, but two, also know what that banker's looking for, what kind of points do we need to make sure that we hit and sometimes maybe a client's a little bit softer on one of those points that we need to make to the banker, but he's also stronger on multiple. So my job is to sell the banker and then the banker's job is to sell the credit committee on why this loan makes sense and how this gentleman will be successful and different things like that. Absolutely.
Speaker 1:So what you're doing is making sure that whoever is in the need of capital, they're not just walking in and saying anything to anybody. They've got you to prep them, sit down and talk with them and say, hey, these are the cases, these are the things that they're looking at, these are the touch points that somebody in this situation is going to be looking at, and so what you want to do is be ready for those situations by doing this, saying this, and you want to bolster up exactly what's going on, but you want to put it in a way where they understand. You're okay, you might not understand everything right now, but let's sit down and we'll talk about it. So at the end of this one, we do go into talk to the bank or whatever loan institution there is. They feel as comfortable with you as I do, and that's how you make it work. From Capital Concierge.
Speaker 2:And part of what I started to say is that when I get a client, I do basically an interview, and then what I tell them is that I'm going to send you a personal financial statement and a resume. And a resume is not something that you would go find a job with, but it's more like I worked here and I did this and that's showing the rent to own experience. So, uh, and. And then on the personal financial statement, you know, oftentimes they don't fill them out, right, you know. So it's like okay, so that's coming to me, I'm, I'm getting that information, I'm reviewing it with them. It's like hey, you know this. I think this is the wrong spot. The you know this over here, by the way, do you have, is this, do you have any home furnishings and do you have any jewelry? Do you blah, blah, blah? Okay, we need to put that on there as assets. What we're doing is we're we're building that store building and so that that I'm looking at it before it goes to the banker.
Speaker 2:I made a mistake early on in my career at capital concierge where I sent all these forms to a gentleman asking him to fill them out, and never looked at them. Hit the forward button to an email and the lender calls me and says, tom, did you look at all this? At all this makes, makes absolutely no sense. There's no way this guy's going to get a loan and I'm like wait, wait, wait, wait. And then, after going back to him, he filled it out wrong. But I made the mistake. It was one of my first deals. I just hit the forward button, send him all the information to fill out. I hit the forward button and it wasn't. So again, I am part of Capital Concierge is being able to build that story. Build a story, tell the story, make sure it's clear and accentuate the positives and not that I would ever hide anything from a lender from an integrity standpoint. In other words, when we're building that story, we're telling that story, we're going to obviously accentuate the positives the best we can.
Speaker 1:But we got to see it on the right light. I mean, when you're doing that, you don't want somebody to always say, hey, there's a lot of risk, there's a lot of challenge, there's a lot of adversity going on, and not see what we have to offer on the other end. We're doing this a long time. Yes, the product comes back, but we also refurbish it, we take care of it, we also put it back out. And it's a possibility that, even though we had this amount that we were going to set for it, if we really take care of it, we really refurbish and we put it out there, we could actually make more than those margins that we expected.
Speaker 2:I remember when I was a store manager looking at now I'm really going to date myself perpetuals which is basically it was all of a paper scenario before we went computerized. Rent-to-own industry is experts at recycling product, touching up the wood and cleaning it up and making it look as presentable as possible. And the nice thing about it is, on a pre-rented unit they discount the term. They don't discount the payment right. So if it did cycle out and go out for three months and come back, they didn't lose any revenue because they didn't discount the rental rate, they discounted the term on it. So I think it's a phenomenal business and certainly it's got some bad press in the past and people like to say you're taking advantage of poor people and what have you?
Speaker 2:At Champion, I was fortunate enough to be a part of focus groups where they bring in customers and I'll never forget this one lady. We were behind the glass where they couldn't see us and the moderator's asking this lady. He's like well, mrs Jones, we see that you have a Whirlpool washer and dryer here. Yes, yes, I do, and that's $34 a week. What have you? Whatever the number was back then, okay, and the moderator said Mrs Jones, do you realize that you're going to pay twice as much for that washer and dryer pair from Champion than if you went and paid retail for it. And the lady says listen, honey, I'm a single mom with three kids. I got two jobs. I'm not dragging my kids down the laundromat at 11 o'clock at night and one of these days that Whirlpool washing dryer is going to be mine. I know what I'm doing, don't insult me. And that kind of for her, that kind of changed my life.
Speaker 1:Well, I mean, it's one of those things like I think that a lot of people see it just from a monetary standpoint, right, they say, if I was to walk into some place and I gave you money, I should get this. Okay, granted, when has that ever happened? When's the last time that you went to any furniture dealer and you just put money down and you didn't have to worry about delivery? You don't worry about warranty, you don't worry about how long it's going to last you? You're going to make all of this payment at one time, or are you putting it on a credit card? Because it's one of those things like if you don't understand it, then you don't know it.
Speaker 1:It's easy to say that, sure, I could pull out a credit card and I could just pay it, or I could do it in just cash. And what am I not paying? Because I'm doing it by that, some people say, well, it's easier to pay in cash. Well, if all of us had cash, we would just be doing cash transactions. Credit would be nowhere to be found, right, we wouldn't have things like Progressive, where you can buy it. That way, people buy payments. Well, that's the thing is that people settle on the payments because that's what they can afford. It's easy to say, hey, I have my whole check and I'm going to take my whole check and put it on my sofa. That's beautiful. And if you can do that, that Now you've got a phone bill, now you've got a car bill, now you've got insurance, now you've got water, you've got light. So if you had that ability, it would be easier. We wouldn't have these programs.
Speaker 1:And then, on the other side of that is when somebody puts it on credit, the first thing you see is what you bought. I bought it for $799. Taxes, it comes to $860, it doesn't go down to $820. It'll go down to $859 and $39 is going to go towards whatever interest rate that you're paying. Okay, so it doesn't look like it because you're not seeing all of it Now, as you go down the line in adverse situations compared to rent to own, where you can say this is your balance, this is what you're buying, but this is your balance.
Speaker 1:You have 78 weeks at this payment. This is what you're buying, but this is your balance. You have 78 weeks at this payment. This is what the cost is. And, as you come down, this is what it's going to be, and you probably have an early purchase option where you can pay it off for less.
Speaker 1:Well, guess what your credit card is going to say. This is your statement. It doesn't look like it's going to be any different Next month. It doesn't look much different Next month. It doesn't look much different. It goes down a little bit and a little bit. The only time that you're really going to see big chunks is when you're down into the last 10%. How much have you spent? I don't really know, but you know what your rental-owned agreement tells you what you're going to spend. Your rental-owned agreement tells you that I'm not only going to do that for you, I'm going to deliver it for you, I'm going to service it for you, I'm going to to help you with the price. You can do that with your credit card company all you want to, but it doesn't make a difference.
Speaker 2:I got another story for you. I got transferred to Kissimmee, which is out by Disney, what have you and this lady would come in every week and she had opened her wallet out and she had I don't know six accounts and she's paying us like $220 every week, wow. And I noticed that she had American express gold card in her wallet and I uh three, you know, every week she'd come in. You know, when you're in a rent owned store, you get to know. You get to know your customers and build a relationship and after about the fourth week I couldn't take it anymore.
Speaker 2:I said, ma'am, I have to ask you a question and it's probably the most stupidest thing I've ever done in my life. She's like, well, what's that, tom? It's like you come in here, you, you, you have a history, you, you. You have done 20, some accounts, and now our kids are getting older, so suit for herself because she's passing that one down to her children that are about to come out. I said I've got to ask you. You've got an American Express gold card in your wallet. Why are you renting to own? And she says, tom, let me ask you a question now. What would you do if I called you up here? What time do you close at night, seven o'clock. What would you do if I called you at 6. Six, 59 tonight and told you my refrigerator's not working? Well, I'd load you up a refrigerator in the van and I'd bring it out myself. He said you just answered your own question you can't find that anywhere else.
Speaker 2:I'm here for the service. I know that I I know I'm paying a little more for it, but you guys take care of me. Anytime I've got a problem, you guys take care of me.
Speaker 1:Well, that, just that just speaks monuments to the RTO industry, and that's one of those things where I like to. I really would like to say there are people out there. They're young minded people who are hungry entrepreneurs that are ready to kind of make that jump and say, hey, you know what? I've seen enough rent-a-centers, I've seen enough errands. I've seen enough of the big guys. I want to open a brand too. I want to put my stamp on the RTO industry and enjoy this space along with everybody else, and so I see Capital Concierge as a way to get that done. So how did you end up there? You're in the business, you're doing operations for a long time. What made you decide I want to fund the RTO industry?
Speaker 2:Well, as I told you, I owned a company called U-Own which is still in existence, which is basically what I call a virtual rent-to-own. We'd go to retailers and for their credit challenge customers when they got turned down for the five year no interest presence they sell and we would be an option for them. As I'm working with all these, these furniture stores throughout the United States, you know they're always saying you know I need you to pay me as quick as possible because I need money.
Speaker 2:And I kept hearing that over and over and over again of how you know, I got you, got to pay me quick, because this is pay me as soon as you can, because I need cashflow to go out and buy some more inventory. And so, after hearing all this, I didn't grow up. I'm not a banker. I didn't grow up with a finance degree or anything like that, went to college but I didn't have a finance degree. But at the end of the day, I was like there's all these dealers out there that are needing money. You know, and you know I'd like to try to figure that out and credit card processing and all the different financial services. I offer other financial services alone, just besides capital lending. But at the end of the day, I you know.
Speaker 1:You saw a need and you decided to fill it. I saw a need and I decided to fill it.
Speaker 2:You know, sometimes along the way I've questioned what you know. Did I make a great decision or was it? But at the end of the day I enjoy helping people, and that may sound corny.
Speaker 1:No.
Speaker 2:But I and I know more about how not to find lenders and how not to find capital for for people that I do probably know how to, but but because it was challenging and and as as there was more of a need, you know, in the rent owned space, again you're you're dealing with a single store operator, a multi store operator.
Speaker 2:Again you're dealing with a single store operator, a multi-store operator. What I found from a marketing standpoint is that I do what I call spider web marketing. I help the guy that has one store because he goes fishing with a guy that's got three stores, that sits on the trib board or an APRO board, that's got 10 stores or whatever, and so I know that if I help a small guy out and if you go to my website, capitalconciergecom, you'll see recommendations on there. Like Tom really spent time with me, understood what I needed and helped me do what get done, what I needed to get done, and to me, you know, yes, we all need money to pay for our groceries and what have you like that, but I really do enjoy helping people.
Speaker 2:I really do so, you guys got to understand.
Speaker 1:Going through the, the RTO world, I come across Tom's booth and it was. It was really interesting to see because in this situation, like I said, there's not a lot of people pushing this instance. I've got people pushing furniture and, and you know, different rugs and hey, this is a, this is a new GPS software for your whatever and your drivers. And, as you're going through, I think you were really the only one there with that mindset.
Speaker 2:For the last, to my knowledge, the last, I don't know six or seven years. I've never seen anybody that would what I consider. You know I also work as a business development for a debt buyer. So when rent-owned stores have these charge-off accounts that are set in their filing cabinet that don't generate cash, I have a debt buyer that can buy those charge-off accounts and turn it into cash. It's another way for that company to gain capital.
Speaker 1:Now that's so you're turning out to be a guy of many traits here, many hats, and so when you were talking about an SBA 7 loan, you were talking about a quick, express loan. It sounds like you have an arsenal of different things that somebody can use to get funded for different situations. I do. How many different loans are there available so that somebody can say, hey, you know what. You probably do have something tailored to me.
Speaker 2:Well, again, we go back to the client interview, onboarding processes, if you will. I'm a trip vendor as well as a nationwide member vendor as well, but I put out a loan recap, you know, depending on what your situation is. Do you have an 800 plus FICO score? Do you have? Is your, how's your net worth?
Speaker 2:I'm always, I'm always asking questions to and part of that sometimes can feel a little intrusive to some people, or what have you. But at the end, you know, do you have any charge offs? Do you have any bankruptcies in your, in your past, things like that. But what I'm doing is is I'm, I'm, I'm putting all the puzzle pieces together in my mind as I ask you, I'm, I'm clicking through lenders and saying okay, let's say nope, nope, you can't go to that guy. He just said this. But you know I've got, I've got bank financing that if somebody that's an 800 plus FICO score, I can get them bank rates or basically prime, prime rates, which is currently eight and a half. We're hoping the feds are going to drop at 50 basis points, which is a half a point, sometime late September.
Speaker 1:Let's see, let's see, we're hoping.
Speaker 2:But late September, let's see, let's see, we're hoping, in other words. But I've got things that that go down like the like the express line for up to $150,000. That's what I call light documents. Sba can be a pain sometimes, depending on what, what it is that you need and how much you need in your circumstances. I've got, I've got, I've even got a process for someone that that's needing a sizable amount of money but has a high debt to income ratio on their personal credit. I've got a process that can help them pay off their existing personal lines to get their personal credit score up and then, once they qualify for the loan, then that process is paid back. It's called a new. I call it the revolving balance advance program. So I'm trying to figure out ways of how I can help people.
Speaker 2:One of the things that I have found in this space is that there's a thing called merchant cash advance, which I related to a payday loan for a consumer, and those things can be a wheel that you get on. It's just really hard to get off because it's just like a payday loan for a consumer, and so I have I try to do everything in my power not to do that If a guy comes to me and said I need $50,000, I need it really quick. But I also explained to them that it's a very high APR. It's an advance on your receivables. So they don't call it an APR, much like in the rent-owned business. There's no APR in rent-owned, there's lease fees.
Speaker 2:So, this is an advance fees. But I ran across rent-owned dealers that will call me and go man, I've got five MCA loans and they take weekly payments out of my account. Uh, as it cause, it's an advance and it's crushing me. Can you help me? I was like, oh man, I hate to see that. Let me see what I can do. So and I've talked to some clients that that are in some trouble, so to speak, with MCA loans. It's like let's develop a plan. I can't help you right now, but I can tell you what you can do to get yourself in the best place where I can help you. So I I do a lot of pro bono work, I guess is the best way to say it, but at the end of the day, I believe that my reputation is is one of my strongest, what I hold near and dear to my heart, and I would never want somebody to say that, tom Murphy steered me wrong.
Speaker 1:Well, I mean you've got what you said was 85, I believe you said you started in 85?.
Speaker 2:In the rent-owned business 1985.
Speaker 1:So you've been in the business a long time. You've probably seen a lot more than some other people have seen. You've seen both sides of the fence from the vendor side, from the buying side, from the operation side. Now, from the capital side, you're offering a lot of different sources of knowledge to get somebody funded for a lot of different things that they need in the RTO industry, which is absolutely amazing. And if you guys want to know more about it, tom, how can they find?
Speaker 2:you Capital concierge with an? S dot com is my website. I am a trib vendor. I'm a nationwide member that has run direct as well.
Speaker 1:I did see an 800 number on there as well, right, yes?
Speaker 2:800-897-1409. My email address is Tmurphy at capital concierge with an S. I didn't realize how difficult concierge was to spell when I came up with the name. I love the name, but in other words, it's one of those weird spelling names Concierge C-O-N-C-I-E-R-G-E-S. Some people leave off the S, off of the concierge, because we're multiple people, so we made it plural. So, but I'm truly here to help. If you've got any of your listeners have questions that they just want to ask me a question, I'm here. I'm here to help in any way I can.
Speaker 1:You've got the information to reach out to Tom, but if you have a question and you want to ask the show, or if you want to ask the show so that we can bring it up in a later conversation or so that we can bring it up to Tom, feel free to hit me up at Pete at the RTO show podcastcom. That's our email. But you know, as always, you can always find us online. You're going to find us on Facebook, instagram, linkedin and, of course, now YouTube. Look us up anywhere you want to the RTO show podcast. We're everywhere that you want to be. Also, make sure that, as you're doing this, you let somebody know hey, do you need anything? Do you need any capital? Do you need anything that's going on right now, especially to our dealers that have one, two, three stores. They might be in a crunch right now and this is one of the most important times that we've got to get through because, listen, rto industry is super needed in America right now and if they can make it through these hard times, that'll be set up prime time for when the economy kicks back in, and hopefully in a couple of months. That's exactly what's going to happen. Regardless of which way you pitch. I want you guys to know that we're rooting for the RTO industry and that's why Tom's here, because, listen, there's nothing more important than capital when it comes to making your business run. So if you guys again have any questions, please feel free to hit us up.
Speaker 1:That's Pete at TheRTOSHowPodcastcom. You can hit me up online as well at TheRTOSHowPodcastcom. That's the website. You can see us here. You're also going to see this interaction here on our videos as well as on YouTube, and, tom, I can tell you I really appreciate having you on the show because, out of everything that we do talk about whether it's operations, whether it's collections, whether it's sales we seldom talk about the background and it's so important to know that we have somebody out there who's helping us out and funding this so that we can make it happen. So, guys, we appreciate your time and I will tell you, as always get your collections low, get your sales high. Have a great one, thank you.
