Episode #249 – How To Get Better Funding From Credit Unions with Mark Ritter

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0:41 All right, hello, and welcome to this week's episode of the REI marketing nerds podcast. As always, this is Daniel Barrett here from AdWords nerds.com. And this week, I am talking to Mark Ritter, the marketer is the CEO of MB Fs, which you can find at M That's M as in Mary, B, F s dot o RG a new direction lending, he is an expert in all things, credit union and small business lending. Both organizations that he runs are owned by credit unions and are designed to help credit unions fund and more loans to real estate investors and small business owners. Now, Mark is a really fascinating guy, not only is he really knowledgeable about credit unions and the credit union ecosystem, which is, I'm gonna guess if this is not something you're super familiar with, it is far bigger than you probably expect. But Mark is also an excellent CEO and operator. And in fact, he turned MBFS, into a very successful company in the credit union space. But when he started, it was literally just him in a desk in a company with a business model that was losing money, unhappy clients, he not only turned it around, he's expanded it. And he's been doing it ever since. So Mark is one of these really unique people where he's got a really cool set of knowledge and mental models that you might not have typical access to. But he's also an excellent operator. He's a person that knows how to run a business. And he's got a lot to teach. So without any further ado, let's talk to Mark Ritter from MBF s.org. So for people who aren't familiar with you, or familiar with mbfs.org, tell people what you do give us the 30,000 foot overview of who you are and what you do today.

2:28 Yeah, sure. I'm the mark. I'm Mark Ritter, and the CEO of member Business Financial Services, which tends to be a mouthful. So that's why we just say MBFS. So what we are, is a bit different than what most real estate investors work with. And we are a credit union owned company, we're owned by 13 credit unions, and we work with credit unions all across the country. And the easiest way to think about us is, you know, picture the local banker, or whatever lender you work with, they have their own lender, you know, the your salesperson, they have a credit analyst, they buy all their software, you know, loan docs, systems, everything that goes into commercial lending. Well, what the credit unions did, is they thought, well, let's save some money, and form these companies kind of kind of regionalised across the country. And we've, we've all grown a bit. So there's maybe you know, 1012 of us across the country, that we are owned by the credit unions with the sole focus of bringing real estate investment loans to their members and to the community. And, you know, with our CO operative nature, and our structure, you know, we can do it a lot cheaper than then some competitors out there.

3:55 So when you say it's owned by 13 different credit unions, how does that work? Like, do you have you don't have like 13 different bosses, essentially. So like, how is it all parceled apart? Is it just everybody's kind of got an investment stake in the company? That's essentially how it works. They all provide funding, like what what does that structure look like? Yeah, sure.

4:15 We're an LLC. And, you know, I sometimes I report to one board of directors. But you know, as you alluded to, it sometimes feel like I have 13 different bosses. And just like any other company and other these different credit unions have invested in our company and own a piece of it, and they obviously use us as well. Then there's credit unions across the country that we work with that don't own us as well. So it's kind of we're kind of a no man's land, in that were this private company owned by not for profit cooperatives to support these financial institutions. At And it's questions like yours and some people who just don't know what the heck is a credit union or what it's like today? Oh, man, I didn't even know credit unions do this, which is why like they go on shows like yourself and talk to real estate investment community.

5:14 Well, so that's a perfect transition, because I think I want to get into your history with MBFS. Because I think your story of how you've grown, this is really fascinating. But let's go even back further, if an investor is listening to this, and they're not super clear on exactly what the dividing line is, what makes something a credit union, like what the advantages are of working with a credit union or trying to secure funding from a credit union? Why don't we dig into that? So like, if I'm an investor, right, first of all, yeah, hits me on credit unions generally. That's how you want to approach it and like to like, what are the advantages to me to working with a credit union versus the some other kind of hard money lender or something like that?

5:57 Sure, absolutely. So, you know, the first thing to realize that is over 1/3 of Americans belong to a credit union. And, and but I would bet, almost everybody within that 1/3 of America can't even really identify and tell you what a credit union is, versus the other bank that may have an account with, you know, many people have a credit, it used to be historically, credit unions did not do what I do. They help the local factory, they help the local military base, there was a group of teachers or a hospital, and you know, kind of each of these businesses had their own credit union. And once you lift it, when you lift up underneath what a credit union is, it's a not for profit, financial cooperative, there are no shareholders of the credit union. It is there's a board of directors that's elected by the membership each year. And it's run for the benefit of the members. So there's really two ways that the return and the value of that comes back. The first is credit unions can charge you a little bit less in terms of the interest rates and fees. So and then the other piece of that is they can pay you generally a little bit more on the on the deposit side to get you a little bit more of that money back. Heck, some credit unions even pay an annual dividend.

7:35 And is that purely just because because they don't have shareholders? They're not legally obligated to kind of like maximize shareholder shareholder revenue or something like that, is that absolutely, that's one of the core differences between a commercial bank and and a credit union is that we're there's not this, oh, geez, you know, we really got to bump up and make sure we hit the third quarter earnings. So we can provide the best dividend to our people, where we look at it that we're providing fair financial services to the communities that we serve, I really want to dig into your Tivat MBFS. Because I think, again, that story is really cool. And I know your focus is particularly on real estate investing. So I want to get into like, the kind of how investors can take advantage of programs like yours. But my question is, like how, let's talk about Mark Ritter, prior to MBFS. Like, what was your trajectory? Like? How did you end up first joining MBFS? Like, what what was your path to getting into the business before that?

8:43 I'll give you my origin story. Yeah, give me your superhero origin story, you know, if you got splashed with toxic waste, or whatever it was, whatever, whatever gave you these powers? Oh, no. So I grew up in the, you know, coal regions of Northeast Pennsylvania, kind of kind of a rough neck type area, and then got went to Penn State back in the early 90s. And then, like many people straight out of college, you know, I didn't have a dad, who, you know, planted me in some local investment bank, you know, or got me some fancy internship and then kind of moved on from there it was, you know, go get a job and fend for myself. And, you know, I had a business degree from Penn State and, and what one of the things I'll say lovingly about the coal region of Pennsylvania, is it's generally not somewhere that when you're young, and a college graduate, you stick around the streets can be a little bit rough, there's not a lot of opportunities. So, you know, I packed up and moved into this in the south, and I got a job in a training program at a bank.

You know, it was just I needed a job and you know, hey, These people. And when I was in the training program, you know, I would sit there and raise my hand and start like answering the questions and doing the math ahead of time ahead of everybody else. So I found that I was really good at the lending and interest rates and helping, you know, doing the doing the analysis. So I started to steer more towards your small business in a commercial lending path. And then that sort of transitioned into a job with a doing consulting, for commercial lending to banks. And then, right, I moved, and then this company from Tennessee moved me up to Pennsylvania, and right after 911, that the whole company collapsed, and we all lost their job. Wow, seriously. So and this was I just got married, and I had, I just got married, and my wife was pregnant and this whole thing, so I really enjoyed community banking. You know, I didn't want to go work for it. Because I really thought, you know, that's what I enjoy. I love that personal touch. And it was about that time, the Congress passed changes to the Federal Credit Union Act, that even a lot that really allowed credit unions to help out people who, for their business or real estate, where they couldn't before, before people would have their account, at the credit union, they would love their credit union.

And then when they went and bought rental properties, or that commercial property or needed something for their business, they said, Yeah, you gotta go down the street. Right. So when I first and so I start off with a credit union. And when I got into credit unions, the entire state of Pennsylvania where I'm located, had $13 million in business loans among every credit union in the state of Pennsylvania. And almost all of those were Amish loans. Virtually the it was almost all Amish loans, because Amish they did they let them make these Amish loans. Yeah, now there's over $2 billion just in Pennsylvania and commercial loans.

12:18 So that's between you're talking about like early two. So that's early 2000s. Two, so that's 20 years ish your retake? Wow, that is massive, massive. That's such a change. Yeah, yeah, it was. It was, you know, I like to think that I'm good at my job. But I also think, you know, I got into the right place at the right time. Usually, it's both right, you do little? Well, yeah, for sure. That's cool. But But what what what I found is there were so many people that had an account at their credit union, they liked their credit union. You know, let's face it, credit unions, most people don't have a combative or negative outlook of their local credit union. They think it's a place that they like, you know, they get their car loans there, they might have their kids accounts. And where where's the better place for real estate investors and business owners to look for? Financing, then where you have this nice account? Yeah, so we really built off of that base. And I was at the credit you this credit union in central Pennsylvania for 10 years.

And we built it up to where it was one of the top 10 in the country for credit union financing. And, yeah, we really built it into a powerhouse. And it was going and smooth. And then some friends of mine had this company and BFS and, you know, they had a CEO opening. And I quickly figured out why they had the CEO opening because so I was the fifth CEO in five years. And at last month, money continually. So we showed I showed up and there was three people in this company, people who used us didn't like us. And, you know, it was to say it was underperforming is the understatement of the year. Right? You know, and since then, that's over 11 years ago, we really built it into a company of about 55 people we work nationwide, we we service almost $3 billion in commercial loans. And you know, we were really proud of of this, you know, what we what we've kind of built here to help people out.

14:35 So yeah, I want to ask, this is the the part of the story I really wanted to get to because I think this is really fascinating. And I'm sure it didn't happen exactly this way. But I love the idea of you walking into the office on day one for your new CEO role. And just everything's in shambles when people are crying and it's all you know, like terrible and stuff. You really walked into a situation where err, like you said it had to be a complete one ad and had to go not just in a different direction, but go quickly in a different direction. So I have questions about this. I guess my first is when you get into a situation like that, like you said, losing, not just the losing money, but people don't even like you. It's not even like, Oh, we love you guys. But we can't just make the numbers work, right? Like it was it was really struggling. What was task one for you? Like, when you go into a situation like that? What is the first thing where you're like, that's what we need to work on, that needs to be our priority? And how do you figure that out?

15:39 What I quickly figured out, my first task was to shore up and really make sure the operations were sound that we were that we were underwriting loans correctly, we were having the right car, I thought I could just lift everything up, and bring it to it and set it down and keep moving. And I couldn't have been more wrong. And because really, I spent my first year and a half, just on what I call the kindergarten basics. And it was talking to the clients about their experience, talking to the staff about why we do things the way we do, but also focusing on so many little operational items that were huge pain points for everybody. And I'll give I'll give you that my quick story of the best example. Yeah, I always used to hear from our clients from our staff, that we were really slow with mail and posting payments for all the businesses. And I watched it, I watched them get the mail and I watched them put it in and I didn't think anything there. And then I put sent mail home with everybody and had him put it in their local mailbox and bring everything in and everything came in fine. And then I finally figured out the zip code that we had on our billing statements was one digit off.

So it would go to a different post office, circle through the entire postal system, then come to us. And it was just a revolutionary moment and change people's perceptions of us by just fixing the littlest pain points that had nothing to do with the core business. It was just trying to get wins to show people, yes, you're on the right direction. And yes, you're moving forward and focusing on employee sad, what can we do for our employees? And then what can I fix for the clients, that's their number one pain points that had nothing to do with the core business. And that's what I've really focused on is the incremental wins on a daily basis, and not revolutionary sweeping changes, that it's the little things that people worry about for your business. What I take from

18:19 that story is that's even though you came into it, so you came in, and it's like you're losing money, like you said, like clients aren't happy, there's all these things happening. You really just focused in on the tiny details of the work that was already being done. And just saying, being on the ground, literally moment by moment and watching it happen and saying to yourself, how can this be improved? How could this be better for everyone concerned? Is that Is that a fair statement? Absolutely.

18:50 It was focus on people's pain, focus on why they're not happy. And really, there's just those basic client satisfaction needs that have to occur. Yeah, and it's really the same thing for a real estate investor. I mean, I have some investments and I deal with enough with my kids in college, that it's the little basic things that are people's pain point. That if you can solve you have a lot happier appliances that have nothing to do with your property and clean it most of it is just little things around the edges that really determined satisfaction or people leaving you I love that I always say like this podcast is ultimately very selfish because I just steal everything for my own business. So I'm definitely going to steal that for my own business because I think that's super useful.

19:51 Let's find motivated seller leads online but don't know where to start. Download our FREE motivated seller keyword report today. AdWords nerds have spent Over $5 million this year researching the most profitable keywords for finding motivated seller leads, and you can grab these exact keywords when you download our report at www dot AdWords nerds.com/keywords. So we're gonna fast forward MBFS goes from basically just you at a desk to, you know, like you said over 55 employees, you're working nationwide, and I know your focus is on real estate investing now. So give some advice to real estate investors like why should they start thinking about working with credit unions as a source of funding for their deals? Right, like, what are the advantages to them? What are the strategies they can use to maybe get funding from credit unions that maybe they don't know about? Sure.

20:48 One of the pieces that with credit unions, you know, first of all, if you're in the top 10%, financially, of real estate investors, you can always get what you want, anywhere you want. Yeah, but many of us, particularly when we're starting out or different environment, interest rate environments, you want somebody to talk to, and one of the things that I'm most proud of, you know, is I have to get the financials, I have to get the tax returns. But for anybody who wants to have a conversation, so that we can understand your story, a credit union is a great solution. If you're in the bottom 10%. And your credit stinks. And you're really struggling and you know, they're about ready to go to sheriff sale, I can't help that that's not me. Right. But for the vast majority in the middle that want to talk to we don't lend in a box, you know, we don't crunch your numbers and spit out a yes or no, you know, we want to understand the numbers. But we also want to understand the story behind you to make sure that we understand this transaction, but where you're going to so that we can help you in that future.

And now Now, that's a nice fluffy story. And and I think that's what a lot of people want. But, you know, for dealing with credit unions and what your product is, we are very fair in rates, we are very fair in fees, you know, we don't try to be the cheapest, we don't try to be the most expensive, we try to be fair. And in this market right now. You know, the market right now is much, much different than it was two years ago for a real estate investor. And one of the nice things about working with a federal credit union is nothing that we do will ever have a prepayment penalty. Now, in 2020, when we were doing loans at three and a half percent, nobody cares. But interest rates have cycles. And now we're at I think we're at the top of the market. Oh, really? Yeah, I don't think we're gonna go much higher. I don't think we're gonna go higher than then where we're at now. But if interest rates in 2024, drop a point and a half, which is very realistic, it's not out of line. With many lenders and structures, you're locked in? Yeah. Without paying a large penalty with a federal credit union, you can refinance that at no, no penalty. Wow.

23:30 So it seems like with that as context, right, particularly if I'm, if I'm newer, or I'm a smaller investor, or whatever, like you said, I'm earlier in that process, I'm not in that top 10% of people who are already totally crushed it or whatever. And that kind of business is more vulnerable to uncertainty and unpredictability in the economy generally, right? It's just, I have less of a buffer, you know, I'm not hand to mouth necessarily. But, you know, I don't have as much protection built into the structure of my business yet. It strikes me that given what you're saying about sort of re financing there, that makes working with a credit union kind of an extra layer of protection, because that way, you know, if the new sort of tide changes beneath me, I can adapt to that rather than being stuck or whatever I did before. So is that fair? Like summary? Absolutely.

24:21 I've been in plenty of interest rate cycles, where when the rates drop, they drop hard. And there's nothing worse than paying eight and a half percent for a loan, when the current markets are six and a half percent, you know, because interest is really your primary cost of goods sold. You know, if you you can get that interest down down at the time. You know, that's just that that difference is just money in your pocket. Yeah. Which can be really the difference between success and failure for a smaller business. Do you feel like people have misconceptions about credit unions flight Do you think? Do you think that investors have sort of opinions or thoughts about credit unions or ways that they think about them that are just not accurate in today's kind of economy or market? Yes.

25:13 And credit unions are not monolithic a monolithic institutions, right. Part of our challenge is there's, there's 5000 credit unions in America, which is a few times more than the number of banks. And there are, there are still what I call order of the factory credit unions, you know, maybe it's in your local church, they're very small, they're very unsophisticated. Most credit unions today are not like that. And they, they may have grown up in a time, where, if you need a credit union, that's where you get your car loan from, if you need a bank, you know, if you need your your 10 unit property finance, you go to a bank. And and really, it couldn't be farther from the truth today. You know, credit unions last year, credit unions financed a little over 52 billion in commercial loans. So we're out there. And they also, one of the things that people don't understand about credit unions is credit unions cooperate with other credit unions, much, much better than the commercial banking industry. And for a real estate investor, that is crucial. You may love your local credit union, you've had a great relationship. But maybe they only have a one or two branches. And they have a limited lending capacity. That's where we come in. We're not just helping these credit unions, we're bringing the credit unions together. And they fun cooperatively with each other. So just because you need a two and a half million dollar property, which is where you're at in Connecticut is not a large property. Nope.

27:10 Now, those those true your credit union is will work with other credit unions and bring you the funding you need. And you don't know any difference. But but that's the great part of what we do is, you may see your credit union as a small, very small institution, but collectively with the power of the industry and people like us, we work and bring you the financing you need. I think

27:38 that's really cool. I think what I'm hearing there is essentially McDo you may have an image in your head of like what your credit union your local credit union is, or what credit unions in general are, but there is no harm in at the very least reaching out, figuring it out, talking to them seeing what's possible, right, because I think there's a lot more going on under the surface and may be obvious to people. I want to ask you, because look, you you have really, you've been through, you know, you're talking about just just the the growth in Pennsylvania low in what credit unions do in terms of business lending, but then also like your own journey of MBFS, which again, you know, we mentioned this before, but m BF s.org.M as in Mary right. mbfs.org is the website, you've really taken that company very far. I'm curious, like what you think of or what you see the future is looking like, like, what is the goal? Now you guys have grown significantly is the is it to double that? Is it to just double down on what you're doing right now? Like, where do you take it from here? What's the goal? Sure.

28:48 And what where we really see the credit union marketplace going is much more sophisticated services with depository needs. There's a lot of credit unions that have been so flush with cash. And they have the basics. They have your online, they have checking, they have your online business accounts. But we really see a lot going forward with that piece with the PPP loans of 2020 and 2021. There's a massive expansion for Small Business Administration loans. So we see a lot of businesses were started up in the pandemic era. And many of them as they grow, will need additional financing as they mature. And oftentimes, that's a small alone through the Small Business Administration. But we've actually kind of also developed this little niche of you know, we're nationwide, but Puerto Rico has over 100 credit unions in it. And we've actually started working with Puerto Rican credit unions as well. That's cool, which is kind of that so you know, I make sure that Is it there in the winter?

30:02 Yeah, yeah, we're just talking about you're in the mountains of Pennsylvania. But every now and then check it out Puerto Rico sounds pretty awesome. That's amazing. Yeah. So so we do, you know, we do the smallest of small loans. And I always want to make sure we do that, you know, but but we're do we've done loans up to about $40 million within our network. And but but I really, you know, focus on that technology piece. And, and as time goes on, commercial lending, and real estate, investment lending is the worst industry in terms of technology. It says old school as it gets, you know, we've all everybody who's listening to this, you know, you're you're taking your files, you know, you're printing them off, or you're sending Pete, and it is a manual process on the back end. Yeah. So that is really starting to change and what technology is available to shrink down the decisions and analysis and costs. So

31:05 Alright, so we've mentioned the website, it's mbfs.org, for people who are listening this that might be curious about working with you, who is eligible, who should reach out, and how should they find you. So we have a whole network of credit unions nationwide. I don't have 100% coverage of everybody in the entire country. But we have great relationships with companies like Austin with credit unions across the country. So if you want to check out and see who's lending in your local marketplace, if you contact us, we'll introduce you to somebody who's either our lender, our credit unions, or somebody that we're friendly with, to get you the financing you need. So you can contact us and put the inquiry right on the website. And let us know where you're at and kind of what you're thinking about. And we'll connect you with a credit union to talk to in your area.

32:02 I mean, here's the thing, when you're just saying this, this is like part, that's like a huge part of the benefit of working with a company like yours, you're apt to actually talk to a real person, which is pretty awesome. Seems like it shouldn't be a selling feature, but it really is. So I would definitely recommend anybody listen to this. Again, if even if you're just curious, reach out. So the website again, is m b, f s dot o RG MS and married B f s.org. For people who are curious about you, Mark or maybe want to follow up on what you're doing. Is there anywhere else? You want them to find you? Yeah, sure.

32:40 I'm very active on LinkedIn, Mark Ritter ma, ma, r k r i TT er, you can also check out my personal website, Mark ritter.com. And it will send you to a lot of the same links. Alright, cool. So that is Mark Ritter again. Alrighty, Te r.com as well as MBFS dot orgy. Mark, thank you so much for coming on the show. Man. This was really interesting. And I don't know. I mean, you sold me on credit union. So I'm gonna look up like where my local credit unions are. Because I don't know that. I think it's just a really, really fascinating field that I didn't know a lot about. So thank you so much for sharing me and I really appreciate it. Awesome. Thanks for enjoying the conversation.

Hope you enjoyed my interview with Mark. I know I did. And as always, you can find more information about me over at AdWords nerds.com. We help real estate investors find more leads and deals online for their online, their real estate investing business. And I'll tell you what, folks, we've been doing this for over a decade now. It is no accident that we have been in the market for so long. This is all we do. We love helping investors. And we'd love to help you too. You can jump on AdWords sears.com. Grab a strategy session with our team and we'll help you put together an online marketing strategy for your market. I hope you're doing great. I hope you're having a wonderful end of your year and I will be talking to you very soon. Cheers.

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