Let’s start with the basics. Tell me who you are, what Morewood is, and why you started it.
I started Morewood Funding five years ago, after spending about 25 years on Wall Street, to help businesses access non-dilutive funding.
At the time, the pandemic was taking hold, and banks were increasingly backing away from supporting businesses. My premise was that many of these companies had good collateral – if not cash-flow – and that non-bank lenders would be interested in lending to them based on that collateral.
We work with a wide variety of businesses, from a company that just received their first purchase order to those with $100 million in revenue, across almost all industries and geographies – even cross-border.
Why wouldn’t a bank be able to help a business with $100M in revenue?
Sometimes a business has temporary losses. I recently spoke with a successful electrical contractor who’s been around for over 40 years. They lost money on a couple of large jobs, and as a result, their bank asked them to leave. Could another bank have stepped in? Possibly. But a faster, more flexible option was a non-bank lender. For about 3% more per year, they were able to secure a more flexible loan facility, no covenants, and no personal guarantee. The loan was collateralized by their receivables.
What other factors might make a bank not the right fit?
Time in business, industry type, lack of profitability, speed to close, or even just needing a higher advance rate (ie: amount of the loan as a percentage of collateral value)
I know and trust you, but sometimes when I mention alternative lenders to someone, their first reaction is sometimes, “Oh no, that sounds like a loan shark.” How do you help people get past that stigma?
That usually comes from people who haven’t borrowed before or don’t fully understand the lending landscape. Most of the borrowers I speak to fall into two categories, those that need funding to bridge a temporary loss or those that are dealing with rapid growth. In both cases, I’m trying to help them secure non-dilutive funding which means they don’t have to give away part of their company. For a fast-growing business, giving away part of the company is significantly more expensive than almost any debt solution.
You’re a matchmaker!
Exactly. I try to optimize three things: loan structure, cost, and speed to close.
Instead of a business owner spending their time cold-calling lenders, I already know the landscape, and I have deep relationships as I talk to these lenders frequently. That said, there are some businesses that are just really marginal. In those high-risk cases, capital is still available, but it’s expensive and reflects the risk.
I always encourage business owners to speak to a bank first. If traditional financing is accessible and makes sense – great. But the reality is, while banks offer low-cost capital, it can come with a lot of restrictions. Many businesses are willing to pay a little more for the flexibility.
Right—banks have to consider their risk tolerance.
Exactly. Even smaller banks that are trying to be more competitive still have limits due to their business model, portfolio risk, and regulations. They have capital requirements they are obligated to meet as part of their bank charter, whereas non-bank lenders do not.
What’s the typical premium someone might pay with alternative lending compared to a traditional bank loan? Is it 10% more? 50% more? And what factors drive that difference?
It is difficult to answer because the range is wide.
Let’s say a business could qualify for a bank loan but wants more flexibility or to avoid a personal guarantee. The premium might be minimal. If a bank loan is at prime (7.5%), a non-bank solution might be prime plus 1% or 2%. That’s pretty close.
Now, for a business with poor credit or a significant loss, but with decent collateral, they might be financing in the low to mid-teens.
If it’s a truly distressed business, what you might call a “lender of last resort”—then yes, you’re talking about rates in the 20s and beyond.
Of course, part of what I do is help clients figure out when funding makes sense, because if it’s not a solid business, throwing more money at it is a mistake. Have you ever looked at a deal and thought, “I can get this done, but why are you doing this?”
Absolutely. That happens maybe 10–15% of the time.
A big red flag is when the cost of capital is higher than the company’s margins. For example, if financing costs 15% but their margins are only 10%, that’s upside down.
That said, I always remind clients not to automatically annualize their financing costs. If you’re borrowing at 2% for 30 days and you make a 30% margin in that time frame, then it makes no sense to view that 2% as 24% annual cost. You’re not annualizing your 30% margins to 360%, so don’t annualize short-term financing costs either.
The key is to match the duration of the cost with the duration of the trade cycle
So if they don’t have someone like me, do you ever say, “This isn’t a good idea”?
Yes, I do. I’ll almost always suggest they speak with an Advisor if they don’t already have one.
Also, the responsible lenders I work with don’t want to lend into a situation where the path to repayment isn’t clear.
Now, there are cases where higher-cost capital makes sense, like a bridge loan to stabilize, and in that case the business will refinance later with a lower-cost lender. That can be worth it if the business is on a path to recovery and just needs to get across a valley.
Right, and you and I have worked with clients like that, especially in agency models with sequential liability, they’re often dealing with net 60 terms that turn into net 150 or longer, meanwhile payroll is every two weeks. Sometimes funding is just a temporary fix to get through that mismatch between receivables and payables. But in other cases, the underlying structure is flawed, and they’re digging a deeper hole.
Exactly. Sometimes it’s just a bad business model and rising rates have exposed that.
And to your point, when a customer stretches payment terms from net 30 to net 90, they’re essentially using you for financing. That’s a dynamic all businesses face.
Even Costco does this. They pay their suppliers slower than they collect from customers, they literally have negative working capital.
So when clients say, “I don’t want my customers to know I’m borrowing,” I remind them, almost every business is financing. In fact, access to capital makes you look stronger from your customer’s vantage.
No one at Walmart or Target is looking into how or if you get financed. The stigma around borrowing is way overstated.
Let’s shift a bit. Your background isn’t exactly in this world. What made you pivot into this space? I love a good origin story.
Thanks! My background is actually in law, and then I spent most of my career raising capital for investment funds.
Over time, I started working with less liquid and more private credit-type investments, which introduced me to the commercial finance world
What I saw was a huge opportunity in financing businesses—especially those under $50 million in revenue—it’s an incredibly inefficient and opaque space. So I stepped in as an Advisor to help these businesses access the right funding.
What makes someone an ideal client?
Great question. It comes down to two things:
- Good collateral – typically one or more of the following: receivables, inventory, equipment, or purchase orders.
- A well-run business – clean, well-organized financials and a responsible leadership team that engenders trust and confidence
Aside from the red flags we already talked about, is there something a potential client might say or do right away that makes you think, “Nope, this isn’t going to work”? Like, no need for a second call?
Yes, if someone can’t clearly and succinctly explain what they do and how they do it, it usually means there’s a lack of understanding, passion, or authenticity.
Another big red flag? Poorly presented financials. It’s like showing up to a meeting looking disheveled. If you can’t get your own house in order, why should a lender trust you with their money? Financials that are messy or incomplete usually signal a deeper lack of organization and frequently in that case, management won’t even understand if they’re making or losing money.
You know I obviously agree with you there!
Is there anything I didn’t ask that you think people should know, either about your work or your approach?
When I started, a friend in asset-based lending told me, “If nothing else, you’ll see a lot of action.” Like your work, I get to see some very interesting businesses. I truly enjoy working with business owners- they have everything on the line: payroll, inventory, rent, debt. They have to make it work – they have no alternative.
What’s something interesting that’s come across your desk recently?
A shepherd who’s been quietly raising sheep just received a major increase in business from slaughterhouses to supply meat. He’s now on track to 10x his business this year.
Holy sheep!
He was literally running the business on the back of a napkin. I connected him with a lender, and now he’s receiving essentially unlimited funding to support his growth.
You and I have talked about this endlessly — especially during the pandemic, but it’s a great reminder of why we preach good financial hygiene. You don’t want to be scrambling to put together good financials in an emergency. If they’re ready to go, approaching a lender, whether it’s a bank or someone like you, is so much less painful. You can just hand over a clean, verifiable financial package. That makes everyone’s life easier — and you’re not juggling paperwork while also trying to chase down emergency cash.
Hygiene is the perfect word. If you’re eating healthy, you feel better. Same with business.
There’s a huge correlation, I’d say 95%, between companies that have their financial house in order and their overall success. If financials are clean, current, and sent quickly, it usually means the business is doing well. But if it takes a while or they aren’t produced, that’s often the mindset that got them into trouble in the first place. And to be clear, not every business I speak with is in “trouble”, but that delay is still a red flag.
People ask me all the time how they’d know when to refer someone to us. My answer? If you’re chasing to get invoices (or to get paid!) or someone can’t send you basic financial info — those are all signs something’s wrong behind the scenes.
And you’re right — they might not need someone like you yet. They might need someone like us first to just get their books in order. They don’t even know what they don’t know. They feel like they’re in trouble, but maybe they’re not. Maybe they just need better systems.
Exactly. You and I talk to hundreds, even thousands, of businesses a year. The ones that succeed know when to delegate and leverage the expertise of others. Don’t be afraid to lean on professionals. You handle financial hygiene, others handle insurance; someone else handles operations. The best entrepreneurs aren’t trying to do it all. They delegate smartly.
Couldn’t agree more! This was such a fun and informative chat as always! Thanks for pulling back the curtain on what business owners really need to know when it comes to alternative financing and growth. It’s clear that the right funding, paired with strong financial systems, can make all the difference for a growing business.
