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Small business lending is going through a strange stretch: some companies are thriving, others are struggling, and banks are lending and pulling back at the same time — sometimes within the same institution. To make sense of it, we sat down with Joe Camberato, CEO and founder of National Business Capital, which has deployed over $3 billion in financing without ever taking on private equity. Camberato talked through where banks are retreating, how non-bank lenders are adjusting their pricing and risk appetite, and why he thinks the “doom and gloom” narrative around small business credit is missing a lot of good news. Here’s the conversation.
Rita Garwood: Your company has deployed over three billion without taking on private equity. How has staying independent shaped what kind of lender you can be versus competitors who did lean on outside capital?
Joe Camberato: It’s given us the ability to really focus on delivering for our customers — businesses — and for our employees. I’ve never had a gun to my head for shareholders, so that’s been nice.
Garwood: So as a marketplace sitting across dozens of lenders, what do you see in real time that a single bank or a single lender simply can’t see?
Camberato: We get a really interesting seat and view where we are. We see over a thousand loan applications a month, so that alone is a lot. We look at them internally, we’re funding companies directly, and if it doesn’t make sense for us, we have our whole lender network that we’ve built over the last twenty years. We get to see just how things are shifting — where lenders are tightening, where they’re opening up. You can start to see where things are getting tight in certain industries, and I think that’s what makes us great at what we do. It’s really good for our customers, because at any given moment we know which lenders love a certain type of deal or a certain industry, and we also know which lenders are tightening up. It helps us get to the right lender out of the gate and pull the right approval together for the business owner.
Garwood: Where have you watched banks retreat during the last six to twelve months? Which deal sizes, industries, or credit profiles are they saying no to that they wouldn’t have said no to two years ago?
Camberato: I don’t think it’s any one industry — it’s across the board. I don’t really remember being in a time like this where you have a lot of good and bad happening at the same time. You have companies that are crushing it and companies that are getting crushed, all at once. At the same time, you have banks that are lending and not lending within the same bank. So it’s not really a matter of industries, although there’s certain industries — with so much AI and software happening — that banks are really putting a magnifying glass on. But at the end of the day, banks are digging deeper into the financials, adding more covenants, which you really have to watch as a borrower, and they’re continuing to want larger and larger deal sizes. It used to be million-dollar deals, then five million, then ten million. Right before COVID, that deal size was heading toward the five-to-ten-million-dollar range. Now it’s twenty-five million to even fifty million, depending on the bank. They want to work with larger companies, or they want to lend to non-bank lenders and let them deal with the underwriting on the smaller deals. So banks continue to move toward larger and larger companies, which leaves a real gap in the market for the smaller business — the lower middle market.
Garwood: We’ve seen so many changes since SVB and everything that followed. Across your deal flow, is non-bank pricing compressing, or is it still carrying a real premium over bank products right now?
Camberato: Whether you get a deal from a bank or a non-bank lender, we’re still in a higher-rate environment. But over the years, non-bank lending rates have really come down, and the spreads between bank deals and non-bank deals aren’t that far off anymore. Depending on the opportunity, the profitability, and the convenience and speed brought to the table, a lot of our clients are happy to pay the difference because they can move and execute on their opportunity. When you’re looking at any deal — even comparing bank to bank — if you’re just focused on rate, that better rate is great, but how long is it going to take you to close, and what’s the opportunity cost? We have situations where we can close a deal in a week or two, where it could take months with another lender or a bank. If it’s going to take ninety days versus days or weeks, what does that do to your profit margins for the year? Maybe you saved on the rate, but if you delayed your opportunity for three months or longer, those numbers can actually work against you.
Garwood: So true. What’s the fastest-moving signal you track — something that tells you lender appetite is shifting before it shows up in any official data or surveys?
Camberato: You can see it in the approvals and declines, or requests for additional information, or overstipping. I think we’re still in an environment where lenders are optimistic but cautious. They’re underwriting well, but they’re still lending and they’re not fearful, as long as they can get comfortable with the deal. There’s still not a shortage of money out there. If you have a business, an opportunity that makes sense, and you’re not in a really bad situation, the money’s out there — you just have to go to the right places.
Garwood: We’ve talked about banks — when it comes to non-bank lenders, are you seeing them tighten up in any particular sectors?
Camberato: It’s a mixed bag there as well. Some lenders tightened up because they made poor decisions through COVID and thought things would continue, then the market shifted, or there were drastic shifts in industries a few years back that showed up in certain lenders’ portfolios. At the same time, some lenders are actively lending and aggressive, opening up their guidelines. It really comes down to the lender — no two are alike, whether it’s a bank or a non-bank lender. There’s so much going on in the media now with private credit, and no private credit lenders are really alike. It all depends on what they’ve been lending to in the past and how disciplined they’ve been in their underwriting. If you haven’t been disciplined and you’ve been too much of a cowboy, you’re probably tight right now and having challenges. If you’ve remained diligent through the recent years, you’re focused and still deploying capital pretty efficiently and effectively.
Garwood: Let’s shift back to NBC. How do you actually decide which lender a deal goes to? Is there meaningful differentiation across your lender panel, or is the market consolidating toward a handful of funders who set the pricing benchmark for everybody?
Camberato: When you get to a certain type of deal — especially super A paper — with a group of lenders, pricing winds up very similar and terms will be very similar too. But every lender has their own caveats for industries and things they look at to score a deal, so you have to really understand those, because it can make the difference between an amazing deal and just an okay one. We have a built-out proprietary system — all that information goes into our system, and we have a deal review process. That’s a combination of using our tech, which speeds things up, and having a great team here with a whole program guide of lender guidelines, and that information is constantly changing — daily, weekly, it feels like recently. We’re constantly updating it. Because we do so much volume and see so many loan applications, there’s also a feel that you get, but those responses are going into our system too, and it helps us pick and get businesses and applications to the right place. It’s not just one thing that makes that work — it’s a combination of great people, great technology, and product guidelines that are being updated consistently.
Garwood: There’s a lot of consolidation going on with lenders — we’ve seen it with banks for a long time, and now with non-bank lenders too. Does that make your marketplace model more or less valuable to borrowers?
Camberato: I think everything going on in the market just makes us more valuable. When I started the business back in 2007, I started working with non-bank lenders then too — non-bank lending has been around for a very long time. Private credit just became such a buzzword, and it feels like almost overnight there’s all this non-bank lending, but it was always there. When I started the company in 2007, most non-bank lenders didn’t have a website, so it was very hard to find them. You really had to have a good advisor in your corner — an attorney, a debt advisor, an accountant who was in the non-bank lending world. Fast forward to today, there are so many options out there that it actually makes it very complicated to navigate. If you start doing Google searches, there’s no shortage of lenders that do different things, but how do you go to the right one? And then there’s the aggravation of applying — filling out an application, gathering your financial docs, submitting it into underwriting, and if you get an offer you don’t like or get declined, going to the next lender. We take all that aggravation out of the business owner’s hands. We’ve created a simplified process where you can apply in one place. We’ll review it internally, and if it makes sense for us, we’ll put together an offer. If it doesn’t, we’ll go out to multiple lenders — that happens with the click of a button at this point. Then we bring those options back to the customer and help talk through, explain, and answer questions. You apply with us, we have a conversation, we want to understand your business and your opportunity — that happens in a pretty quick phone call. From there we’ll say, based on what you’re looking to accomplish, here are your options, here’s what the market is setting for rates and terms, and here’s the documentation we’re going to need to get you an approval. We’ll help package all that up and present it to underwriting, and work through the back and forth — sometimes there are questions, sometimes a phone call, sometimes additional info needed. We’ll get an approval, and sometimes we’ll bring multiple approvals to the table and talk through the pros and cons of each. We’ve been told we should charge for those services. We don’t charge any upfront fees — we don’t believe in it.
Garwood: That’s awesome. If banks and non-banks keep moving in opposite directions through the rest of the year, what does that do to the capital stack for a typical small business over the next year?
Camberato: It all depends on the bank and lender you’re with, and the changes they’re making. We’ve had people come to us and say their bank doesn’t want to be in a certain industry anymore, or doesn’t really know what’s happening but they’re being politely asked to leave. So as a borrower — especially if you’re relying on your bank to fund your working capital and cash flow — you really need to be proactive in your conversations with your financing partner. If you have a review coming up where you have to reapply or submit docs, get ahead of that. Look at your growth plan — are you going to need capital for that? Get ahead of it. Get six months out, if not a year out, so you can have those conversations today, know what’s going on in the market, and plan accordingly, because sometimes things take longer than you realize.
Garwood: What’s the one thing about how small business credit is actually getting deployed right now that most people outside the industry get wrong?
Camberato: There’s just so much negative news in general lately — in private credit, but really everything. We’ve been in a very doom-and-gloom environment. I really think the reality is there’s a lot more good happening in the world, at least in our country, than people realize. There are a lot of businesses being very proactive, a lot of opportunity out there, a lot of acquisitions happening. There’s also this huge amount of baby boomer businesses that are starting to change hands as owners age out and retire — trillions of dollars of acquisition opportunities. So there’s a lot of good happening — you just have to get out of the news and into your business, into what’s working for you and your industry. If you really focus, you can find a lot of opportunity. Those entrepreneurs are coming to us, and we’re financing great deals, great acquisitions, great growth opportunities. But it’s a mixed bag — you have companies doing really well, and companies that haven’t figured it out since COVID. So depending on who you talk to, it can really change how you view the world. Talk to a business owner who didn’t move quick enough during COVID and was hesitant, and their business might have fallen behind — that might be a negative conversation. Talk to someone who’s been proactive and taken advantage of opportunities, and they’ve probably continued growing through this weird environment. So who you talk to right now really matters.
Garwood: Good advice. Those are the questions I had for you — any final thoughts?
Camberato: I can’t stress enough how important it is that, in this very unique market, you stay focused. There’s still access to capital out there, and a lot of opportunity — if you seek and explore, you will find.
Garwood: Great way to end this. Well, thank you, Joe, for being on the podcast — appreciate you taking the time.
Camberato: My pleasure. Great to see you, Rita.
Garwood: Great to see you too.