How this Serial Entrepreneur Recovered from a Bad-News Loan Broker
Editor’s Note: The business name has been omitted from the piece to avoid confusion with Mr. Krabill’s franchisees.
Kevin Krabill is the definition of serial entrepreneur. He has spent the last 30 years starting and running different businesses, taking only a 5-year break to work at accounting powerhouse Ernst & Young.
What keeps him going? Entrepreneurship is in his blood. Growing up, his mother owned a local restaurant, where Krabill himself worked. It’s what he’s always known.
Inspired by his mother, he went on to start his first business while just a freshman in college. In fact, during his four years at school, Krabill started seven different businesses.
Retail is what Krabill knows, and retail is what Krabill loves. So, that’s where his business focus has always been. While in school, he started exploring the shopping malls in little towns, seeing what spaces were available. He’d open a cookie shop, a hot dog shop, a pretzel shop, whatever was needed in the shopping center. Sometimes it worked. Sometimes it didn’t.
He then graduated, entering the corporate world at E&Y. A great experience — giving him incredible financial management skills for his future businesses — after five years at E&Y Krabill knew it was to time to rejoin the entrepreneurial world.
He took the plunge (again), opening four other retail businesses. They each experienced either success or failure, but one of these ventures, in particular, really took off. Krabill quickly recognized there was something special about this fast food restaurant, and decided to start franchising the operation.
That business is now 19 years old, with franchises stretched across six states.
Small Town, Big Bucks
What does Krabill think is the key to this particular business’s success? “The location of the restaurants,” Krabill answers without pause.
Krabill’s restaurants focus on finding homes in small town America, where other big franchises don’t necessarily want to be. When there’s not a lot of competition, and he’s the only game in town, it means good things for Krabill’s revenue. Granted, the revenues of these locations are smaller than you might find in a larger city, but the expenses are so much cheaper, it evens things out.
Tackling Challenges Head On
Of course, Krabill didn’t get to where he is without overcoming a few challenges. And, he still faces new ones every day.
Having so many fast food restaurants naturally means that Krabill has many, many employees. He knew from the beginning that he would have to develop a hiring process that could be easily replicated across his franchises. People would make or break these businesses.
After trying a few different things, Krabill found PeopleMatter.com, which transformed how he hires and manages his employees. In addition, Krabill also started doing a lengthy personality assessment with each applicant. By doing this, he was able to develop a statistically valid model for who works best at his company. He even has some applicants who refuse to take the assessment, as it’s too much trouble. This helps Krabill eliminate poor fits immediately.
Krabill has the definition for success down to a T. You will continually face challenges throughout your entrepreneurial career, but how you choose to approach and solve them will define the outcome.
Financing is Always Where it Hurt Most
Outside of day-to-day challenges, Krabill firmly believes the most challenging part of starting a business is “getting the money to do so.” But, as Krabill reminds, “This struggle never goes away. The struggle to find good financing options remains throughout the life of a business.”
You wouldn’t think this was the case, though, as Krabill gets 3-4 solicitations a day from people trying to sell him on short-term financing deals. But, Krabill’s emphasis is on “good financing options” and his story proves that just because the money is available, doesn’t always mean it’s the right option.
A Quick Solution that Came with a Price
During the recession, Krabill found himself having to take some restaurants back from franchisees who couldn’t handle the economic downturn. And, at this same time, he was already in the process of pursuing another business idea. He started building that business, but it didn’t take off like he’d hoped. He ended up losing money on the new venture, which meant Krabill needed financing to take care of his primary business.
He needed money and he needed it fast. So, Krabill started paying attention to those daily solicitations, connecting with one individual who could “pull it off” quickly, given Krabill was in a pinch. And, the commercial loan broker came through. “We successfully secured the financing, and things turned around a little,” says Krabill.
But, after some time, Krabill quickly learned the cost of short-term debt. “We were paying and current on everything, but we were struggling to be there,” he reveals.
Krabill knew his business was in a good financial position overall, so he thought it might make sense to refinance the debt. “I went back to this individual who was brokering this short-term deal and told him I wanted to take this short-term deal and term it out over a couple of years.”
Krabill was in a position familiar to small business owners who have taken on short-term debt. It’s not that the payments are an issue, it’s just that it would be better for cash flow to pay on a monthly basis versus daily or even weekly.
The broker told Krabill he had someone who could make it happen but, “He didn’t tell me how. He didn’t want me to go around him.” Not to mention, Krabill felt unsure if the broker even had his best interest at heart. “I don’t think he wanted the refinancing to happen — it would cut into his paycheck,” Krabill confesses. The next thing Krabill knew, he had an application in with a medium-term lender, Funding Circle, and it was immediately rejected.
Waking up from the Nightmare
The inner-accountant in Krabill kicked-in. He knew something was wrong. “Our operating cash flow is strong. We were just struggling because of the short-term loans. I knew it was a financing problem.” Krabill decided to take things into his own hands.
“I started Googling different terms, found Fundera, and emailed them immediately. This was Saturday. Demetri called me on Sunday. Who does that? I immediately felt at ease.”
Krabill and his Fundera Customer Success Rep, Demetri Yannopolous, got right down to it. After going through his business and financing situation, “Demetri said I can’t promise anything, but I think we can get this done. He then put my application in with Funding Circle. But, it was rejected. Demetri knew this wasn’t right, so he called his contact over at Funding Circle,” details Krabill. “Turns out, the original broker had completed my application, forged my signature, and told Funding Circle that I wanted to keep the cash advances, and was applying for an additional $500,000. Of course they rejected my application — there was no way for me to support that level of debt.”
The reason Krabill’s application was rejected the second time around was due to the bad application put in by Krabill’s original broker.
Luckily, by the end of the conversation, Yannopolous had convinced Funding Circle to reopen Krabill’s file. And, it’s a good thing he did. When Yannopolous was able to clarify that he was looking to refinance the cash advance loans, and wasn’t looking for additional funds, all of a sudden Krabill’s application looked different to the team at Funding Circle. Krabill was able to speak with the Funding Circle team over the phone, and had a fantastic experience. He said they were diligent, asked great questions, and really got to know him and his business. Sure enough, “in a matter of 7 to 10 days I was funded. The weight of the world was lifted off of me.”
Sadly, the nightmare didn’t stop there. His previous broker got back in touch with him, and Krabill let him know he had successfully refinanced the debt and would no longer be working with him. Next thing Krabill knew, the old broker was “tearing up my phone, sending me nasty emails, indicating that I wasn’t telling the truth. He still tried to collect his fee on my Funding Circle loan, even though he didn’t help me with it at all.”
Light at the End of the Tunnel
It’s almost scary to think that if Krabill had taken the broker’s word for it, his business would still be struggling with short-term debt. Now, he gets to enjoy the convenience of monthly payments, at a much lower-interest rate. Switching to a longer-term product not only helped Krabill with cash flow, it lowered his overall cost of capital.
Unfortunately, Krabill is not alone. His story shines light on a major issue facing small businesses. While there are certainly brokers out there that are looking out for business owners, there are many brokers who put their own interests before their customers’ interests, putting them in situations that end up hurting their businesses instead of helping.
This is one of the very reasons we created Fundera — to disrupt the “offline broker model” and bring transparency to small business lending.
Krabill joins thousands in understanding how Fundera is changing the traditional broker model. “When I read some online reviews of Fundera, I struggled to find any that were negative. And based on my experience, I understand why. Hands down, Fundera provided over the top service without making promises they couldn’t keep. I could not have asked for anything better, period. Fundera does it right.”
Kevin Krabill is the definition of serial entrepreneur. He’s also the definition of the small business owner we fight for every day here at Fundera.
The financially-savvy Krabill has an exciting entrepreneurial career ahead of him, and we look forward to seeing everything he accomplishes in the future. We appreciate him so candidly sharing his story, which will help other small business owners navigate the Wild West of small business lending.
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