Q&A With Idea Financial CEO Justin Leto
We sat down with Idea Financial CEO Justin Leto to talk about how the company started, the ways Idea Financial is bringing small businesses new value in a dynamically changing financial services sector, and some business tips to start the year off right and succeed in 2019.
First of all, tell us a little bit about you. What led you to this sector?
I’m a lawyer. I graduated from The University of Miami Law School and I’ve been practicing law since 2003. I established my own law firm in 2009 and also invented an insurance product based on the idea of insuring lawyers for losses at trial. Through that experience, I really ignited my entrepreneurial spirit.
In 2016, some banking friends who my co-founder, Larry Bassuk and I knew through our legal work asked us if we were interested in starting a small business lending company that focused on lower rates and fairer terms. Those discussions resulted in the launch of Idea Financial in 2017.
What need or opportunity did you all see in the financial services sector that led to the launch of Idea Financial?
We started with one idea and it evolved based on needs we saw in the market. We started out with the goal of providing financing specifically for lawyers and law firms, but as we continued our market research, our vision changed. We saw there was an opportunity for small business lending at a much more reasonable rate than a lot of our competitors were providing. We were out to compete more with credit cards and banks, which was more unique in the space. By focusing on customer experience and acting as a true partner to our clients, we sought to be more than just a lender.
What do you think Idea Financial can offer small business owners that other lenders can’t?
First, the speed of our product. Small businesses can apply in minutes, receive a decision in hours, and start borrowing within a day. Second, our rates are better because our product is a stronger product. A lot of other competitors offer high-rate products that can drown the business in debt. Our whole purpose was to provide a small business financing product that could help a business when they needed it, but wasn’t going to strap them with a lot of unsustainable debt.
Many other lenders provide term loans and merchant cash advances where the customer is forced to draw the entire amount and it must be paid back in full with a pre-determined interest cost, no matter when it is paid back. With our product, our customers only accrue interest on what they draw, so there’s much more flexibility. There are no pre-payment penalties and the financing is used as needed. There are not a lot of other small business lending products that can be used in that way.
We are trying to impress upon people that our user portal experience is really streamlined and easy. Our user portal allows people to see details of their loan through easy to understand graphs and charts. Customers can initiate draws, make ad-hoc Payments, review loan documents and contact us with questions.
What are some of the biggest mistakes small businesses make when it comes to lending?
Business owners don’t have a lot of time. They are busy. Because they aren’t focused on the details of some of these alternative financing arrangements, many get stuck with the wrong small business financing product. With some small business loans, the moment that they miss a payment – even if it is a bank error – then that can be taken to court and be collected against. Someone’s business and personal life can be destroyed because of a minor error. Sometimes I think business owners enter into these agreements because they don’t realize there are other products out there. They just go with whatever is the easiest product and not necessarily the best. People who do not know their options can be taken advantage of. By working with Idea Financial, it’s our goal to elevate our customers by providing them appropriate and affordable solutions.
How can small businesses get the most out of their financing/lending experience?
By not over leveraging themselves. Stacking is when you get multiple loans from different companies. Idea Financial prohibits this. People should control themselves when it comes to financing and borrow responsibly. Over-leverage is the easiest way to take a good business and destroy it.
There is always going to be someone who will give you money, but the house of cards will fall eventually.
Are there any small business success stories that come to mind? Are there any businesses you’ve seen really blossom thanks to their relationship with Idea Financial?
We hear from people all the time that because of the speed and the cost of our small business financing, people can buy more inventory, initiate capital expansion, and grow. One of our customers is an online seller and he experiences constant inventory turnover. He is successful and very busy. But there is a cash drag which prevents him from buying more inventory and fulfilling orders. Because he was able to get financing from Idea, he was able to increase his inventory quantity, fulfill orders, and make more money.
The best success stories are people who can get the financing fast, make an investment (such as purchasing more inventory), generate greater profits as a result of the investment they made, and pay it back quickly. These are small businesses that are using money to make money.
Do you have any recommendations/advice of how people can start the year off on good financial footing?
The beginning of the year is a good time to plan. Set up a good budget and know what you need to achieve your business plan. Budgeting is critical. Planning is essential. And discipline is so important.