We make credit sexy(ish) this week with Mike Luebbers, the Chief Credit Officer of Novel Capital. We brought Mike onto the team at Novel after we worked closely with him as he led the underwriting on the credit facility we raised. We learned so much in that process that he was our first call when we decided it was time to hire a Chief Credit Officer. Mike is a world-class credit investor, having been Chief Credit Officer at both Bridge Bank and Lighter Capital. In this conversation, which I pulled from the archives, Mike shares his unique point of view on how to do RBF deals (having done hundreds in his career). Mike also shares some great tips for folks to learn how to think about alternative capital and RBF investing, how his experience in the tech sector inspired him to leverage tech for efficiency and creativity in underwriting, and the key metrics Mike looks at when thinking about an RBF deal.

Key Takeaways

[4:00] Mike’s career trajectory from commercial tech banking to RBF.

[5:48] The difference between the sales and credit guy.

[6:05] Mike’s duties as the Chief Credit Officer role at Novel Capital.

[8:31] How Mike made the shift from bank to fintech startup.

[10:17] Where Mike sees RBF fitting in the landscape both with customers and companies.

[12:01] The key factors of predictability of revenue and customer base in determining the appropriate amount of RBF to provide.

[16:08] How RBF fits with the entrepreneur’s growth goals.

[19:52] The difference between Merchant Cash Advance and the typical RBF.

[22:18] The other key metrics Mike looks at when thinking about an RBF deal. What are the bare minimum criteria that he thinks are important?

[27:41] Deal killers in RBF and when it’s not a “no”, but a “not yet”.

[30:30] How do you know when to attribute it to luck vs. good underwriting?

[34:02] Q&A: What role does Mike see RBF playing post-pandemic recovery of non-software small businesses?
[44:02] Companies that offer a profit share rather than a revenue share. Indie.vc, Earnest Capital.

Thanks to our sponsor for this episode:

Husch Blackwell - Husch is my go-to law firm for everything related to raising capital, building companies, deploying capital, and everything in between. The partner I work with, Ed Wilson, understands the alternative capital landscape and I can’t recommend him highly enough.

Resources:
RBF Network
Keith’s Twitter

Keith’s Linkedin

Lighter Capital

Bridge Bank

Guest:

Mike: LinkedIn | Novel Capital

Happy Holidays, my friends! Today we’re rereleasing a fan favorite - my conversation with Ruben Alonso, CEO of AltCap. AltCap is a mission-driven community development financial institution (CDFI) operating across multiple states and based in Kansas City. Ruben has propelled AltCap's growth for 15 years, channeling over $300 million in alternative financing towards underserved communities and often-overlooked entrepreneurs. Noteworthy is Ruben's recent launch of AltCap's RBF loan product, opening new avenues for entrepreneurs. Ruben's unwavering dedication to democratizing capital access is deeply rooted in his family's own immigrant story from Cuba during the late 1950s and early 60s. Join us as Ruben provides valuable insights and firsthand experiences in advancing financial inclusivity and fostering small business triumph.

Key Takeaways

[3:31] The journey from corporate America, to the Peace Corps, to AltCap.

[5:53] How Ruben’s family roots from Cuba informs his desire to help build other businesses.

[8:57] How AltCap got started and how it has grown.

[12:48] What CDFIs are, and how they operate.

[16:30] Lending is a volume business, and maintaining the impact ethos.

[18:48] How they built and evolved their underwriting models.

[19:49] The character based lending approach.

[22:19] The benefits of using Ned’s end-to-end system to originate and manage loans.

[25:00] Examples of RBF deals they have done and where RBF can be a powerful financing tool.

[26:45] The KauffmanFoundation provided them a $5.3 million program related investment to launch an RBF loan fund to help prioritize entrepreneurs of color.

[29:14] The relationship between a funder and borrower.

[35:22] Lessons learned from building a tax credit program to $250M+.

[36:21] The psychology of RBF.

[40:03] Capitalizing AltCap for the future.

[41:26] What entrepreneurs should know about CDFIs.

[47:01] Ruben’s advice for building an alternative capital platform.

Thanks to our sponsor for this episode:

Husch Blackwell - Husch is my go-to law firm for everything related to raising capital, building companies, deploying capital, and everything in between. The partner I work with, Ed Wilson, understands the alternative capital landscape and I can’t recommend him highly enough.

Resources:
RBF Network
Keith’s Twitter

Keith’s Linkedin

Novel Capital | Ruby Jean’s Juicery

Guest:

Ruben: LinkedIn | AltCap | Twitter

Keith welcomes Bryce Butler, founder and managing director of Access Ventures. Bryce shares his unique journey from the military and being a pastor to becoming an impact investor and advocate for innovative capital strategies that empower local communities. He discusses the concept of “access and agency,” emphasizing the importance of providing not only access to capital but also the tools for individuals to make informed decisions about it. Bryce also explores the community round funding model, explaining how it democratizes investment and strengthens local economies, particularly through his work with WeFunder and the Community Match Fund.

Key Takeaways

[2:50] Bryce shares his military experience as a tank officer, leading soldiers, then his journey through seminary and eventual transition into family offices and impact investing.

[6:52] Bryce describes his role as an instigator, challenging the status quo in local philanthropy.

[8:10] Overview of Access Ventures as a multi-asset, mission-aligned nonprofit.

[10:32] The importance of access to capital and the agency to make decisions.

[12:33] Access as an impact multiplier.

[13:05] Assets under influence vs. assets under management.

[14:01] WeFunder’s community round match fund and its impact.

[17:27] A range of tech, CPG, and yes, even a cookie company (Please & Thank You) benefiting from the investment strategy.

[18:45] How founders decide what type of capital works for them.

[21:14] Raising awareness about the community match fund.

[26:02] The difficulty of getting traditional chambers to support innovative capital solutions.

[29:22] Bryce’s work on policy design to help state-level economic development adopt new capital strategies.

[31:15] How community support plays a critical role in capital allocation.

[31:19] Removing the illusion of favoritism.

[31:49] Raising $240k for a Harlan County beer company.

[32:04] A playbook for launching community rounds in different regions.

[33:05] Bryce’s podcast, More Than Profit.

[35:20] Render Capital’s blended investment strategy for underserved entrepreneurs and raising $15 million.

[37:24] Working with Ross on the Blueprint Local opportunity zone fund.

[38:23] Bryce predicts the growing influence of revenue-based financing and reimagined term sheets for long-term business success.

[40:36] What has surprised Bryce throughout his career journey.

[40:53] The difficulty of moving traditional systems toward innovation.

Resources:
RBF Network
Keith’s Twitter

Keith’s Linkedin

Bryce: Access Ventures | Email: bryce@accessventures.org | More Than Profit Podcast