#159 - Connecting Your Dealership To Wallstreet Money w/ Steve Burke

Good morning, good afternoon, Wherever, whatever time you may see us. We've got a special guest today. We've all had so many questions about Agora, Agora Capital, Agora insight. Today we got the CEO, Mr. Steve Burke. Thank you for being here today, Jeff.

What we got, we talked to Steve about a lot of great stuff. We're going to go over the Agora products. If you're a buy here, pay here dealer, this is going to be specifically geared to you or if you want to get into it, if you've got a portfolio, if you want to build a portfolio, if you want to finance and or sell a portfolio. We talk about all that. We talk about Agora's line of credit and the first ever crowdsourced capitalization. Steve, introduce yourself to the independent dealer community.

Sure. Hi, I'm Steve Burke, I'm the CEO of Agora Data and we're really excited to be doing this podcast and also to talk about our very first crowdsource securitization ever done, you know, anywhere in the United States or as far as I know, in the world.

Awesome. Here we go.

Welcome to the independent Dealer podcast with hosts Luke Godwin and Jeff Watson. A podcast by dealers for dealers. Here we go.

Crowdsourced securitization is we aggregate a bunch of originators into one securitization. And now I'll explain what that means. So traditionally the way a securitization works is it's a basket of assets, let's say in this case, subprime auto or buy here, pay here auto loans that are aggregated together by one issuer. And then Wall street sells bonds and those bonds are secured by those loans. That's a traditional securitization. So if you think about Santander, GM Financial, you know, large finance companies, JD by Rider, you know, Tree Calora, they all do securitizations where they are the issuer, they issue bonds, they get the money and that's how they finance their business. Same thing with banks. Bank of America does it, but it's a one on one relationship. Right. So it's bank of America bondholders in a crowdsourced securitization, we aggregate dealers that would not normally be able to securitize into a crowdsourced securitization. So 20 dealers, we would put their portfolio into a capital market structure, sell bonds against that. So our broker dealer on Wall street would sell those bonds, then that money flows right down to the dealers. And, and it's, it's a great question because it's never been done before anywhere in the world until we did on December 29th of 2020.

That, that is so interesting to me that just the Wall street side and the Main street side, how you're able to combine that. I know y' all got so much data and you. And you've gained this data over several years to produce this. Bonds are rated. And I wouldn't necessarily figure that the, this crowdsource securitization would be much worse than a lot of others. Can you go into that information?

Yeah. I mean, if you look at who does securitizations right now, you know, in, let's say the buy here, pay here space, right, you have drive time, you have tricolor, you have JD By Rider, you know, those, those kind of dealerships are doing securitization. And the way bonds get rated, it's. It's the reason why they call it a securitization or structured finance. And this is getting really in the weeds. But the way bonds actually get rated is when you have other bonds that are subordinate to the bonds above them. So if you think about an A tranche, the B tranche is subordinate, and then the C tranche is subordinate to the B. So when you build that structure, those A bonds are truly A bonds, even knowing they are supported by subprime or buy here, pay here loans. Very, very complicated structure. Which is why, you know, a typical buy here, pay here dealer can't securitize on their own. One, you know, they have to have a lot of paper, you know, like over $100 million. And two, they really have to have the sophistication in the modeling to structure a deal like that.

So how many this securitization, how many accounts loans were. Were in this securitization?

So in our December 29, 2020 deal, and it's called Acast 2021 is the official name of the deal. We had 20 different dealers in that deal ranging in size from as small as $11,000. So that one dealer had two loans all the way up to more than $20 million and everything in between. And people ask me, steve, why are you putting a dealer in with, you know, two loans, $11,000? Because it makes no sense, you know, financially to do that. And we did it just for full proof of concept, to have that proof of concept that we could do it from the smallest of small to, you know, a $20 million dealer.

Yeah.

So how many, how many loans was it, Steve? Do you know off top of your head?

It was just a little under 100 million. So it was off top of my head. I don't know. I want to say it's about 3,000 loans.

Mm. And these loans that go into these securitizations, they. They then go out and they're serviced by a separate entity, right? Yeah, yeah, we have somebody.

Yeah. We have a vendor relationship with Westlake Portfolio Management. You know, I mean, I go way back with Westlake. They're absolutely the best servicer in the United States. If not the best, one of the best. And then, then we use a company called Center Street Finance for portfolio management. So the dealer's paper is not only serviced by what I would call a best in class servicer, but then has a best in class portfolio manager sitting on top of that.

Dealers like us, Buy Here, Pay Here dealers that say, hey, yes, I do want to participate, and maybe we should back up. And let's start with that. Tell me the reasons why a buy Here, pay Here dealer would ever sell their notes off. Maybe give us some of the. Of course, there's the obvious. Like, we want out of the business. We're done. We want to cash in our chips and head south. Or maybe we're struggling and we're trying to liquidate. Are there any other good reasons why Buy Here at Pay Here dealer would put their notes into something like this?

Yeah. So first, what we're talking about with our Agora Capital product, that's a financing. So the dealers are not selling their notes. They own their loans and get the full residual value from that. We have a product called Agora Trade, which is where they actually sell their loans and they have no upside. So just to touch on that real quick, you know, Agora Trade, we've sort of a little history on me first. For the past 30 years, I've been a very active buyer buying loans as principal in either the banks or finance companies that I ran and have bought many, many billions from Buy Here, Pay Here dealers and others. And usually when a dealer sells loans, it's for a variety of reasons. One, they just want out of the business, like you said, or two, they have infrastructure issues where maybe they can't grow beyond the size that they are. Maybe they want to mitigate risk and not get that much bigger. But when you sell loans, the loans are sold and there's no more upside. So you limit your downside. Loans are gone. You have a little bit of a recourse period after that. Loans are gone, but you have no upside with those loans. Our Gore Trade feature matches hedge funds and family offices with dealers that want to sell loans. So they get more money than you would normally get from a typical strategic finance company. Agora Capital is a financing, you're not selling the loans. So they're pledged into a trust and then securitized. And there are tremendous amount of upsides. One, you get an advance. And that advance that you get is called non recourse. So if you think about a traditional line of credit, when you borrow money, you have to true up every month with ineligibles. So if you have loans that go maybe over 30 days or 60 days, you know, they have to come out of your borrowing base and you have to either replace them with other loans or put in cash and always keep that borrowing base trued up. In a traditional, you know, financing the securitization, there's no such thing as that, it's non recourse. So if the dealer gets, let's say a 6, 70% advance of the principal balance, that advance never goes back into the securitization, it's non recourse. So one advantage is it's non recourse. So you don't have all that downside risk. The second advantage is you have full upside risk. So all of the cash flow from those notes are still owned and belong to the dealer. The next thing is, and this is probably the single biggest advantage to a securitization, it's the most abundant, elegant capital that anybody can get. There's a reason why banks and Santander and GM Financial and they all use securitization is because it's abundant, number one, and it's very elegant. It's a low cost, low rate finance. So for a dealer that maybe is paying in the high single digits or the mid double digits for their money, like 12, 13, 14%, we're half of that on rate. And the single best reason to take part in the securitization is if you have a deal that has a $3 million credit line, we would be giving them a $9 million facility. So it's typically triple what the dealer currently has in some kind of a credit line or warehouse line, you know. And that's the biggest single selling point is if you want to grow your business, it's the only way to grow your business unless you have millions of dollars of equity, you know, on your balance sheet.

So Steve, let me wrap my head around this real quick. The securitization has nothing to do with one company or this conglomerate buying your portfolio. You're keeping your portfolio, you're getting a 70% advance on the principal of your portfolio and then there's opportunity for back end on this as well. Is that what I'm hearing?

Yeah. Let's imagine you have a million dollar portfolio and let's imagine that that has a 25% interest rate. And let's imagine for a minute there's no such thing as loss, which we all know there's a right loss. But let's just to keep simple math here. So if you have a million dollar portfolio and we advance you $700,000, that leaves 300,000 of principal remaining and that leaves 25% interest on the entire million. 100% of that cash flow belongs to the dealer and is paid to the dealer monthly minus the interest rate that we charge and minus the servicing fee. So, so if you think about it for a moment, the full upside minus the interest rate and servicing fee is kept by the dealer and it's paid monthly. And there's no, you know, you don't have to aggregate a certain amount or anything like that. It's, it's. If a dollar comes in, a dollar gets paid.

That's okay, I got it. Now it makes, makes a lot of sense and actually it sounds like a pretty good deal for both sides.

What.

Does each dealer have a different interest rate or is it just based on the securitization?

Yeah, and you know what, that's. Luke, that's, that's a really great question. So the technology that we developed at Agora, and the only reason that this is even possible is because of a lot of the AI technology that we have and a lot of the data. You know, we have data on probably about $13 billion worth of loans right now. We have many billions currently on our platform. And what we've been able to do is really, with a very fine scalpel, understand the loss curves and the prepayment curves and build that at the dealer level. So one dealer may pay 6%, another dealer may pay 6 and a quarter, another dealer may pay 675. It's all going to be, you know, we're not like your rediscount lenders out there where it's going to go from 6% to 18%. It's all within, you know, a 6 to a 7 range, but it will vary based on the analysis we do on loss.

Are there any charges, like hidden charges of where you need to have audits every year like traditional lines of credit would have?

Yeah, you have to have audits every year, but we don't charge for it. The only, I don't want to call them Hidden charges? Because it's definitely not hidden charges.

Yeah, I'm sorry, is your normal.

Is your normal pass through fees, like repo fees and stuff like that? The only thing that we actually mark up is the repo fee gets marked up slightly $175, but other than that, everything else is just a true pass through.

And where does that repo go? Does it come back to the dealer if that happens?

No, it goes to the auction.

Okay.

Yeah, it goes to the auction. Now we have. So we have an interim sort of vehicle that we call our lsv, which is just a loan servicing vehicle that loans go into to sort of gestate for 30, 60, 90 days before they actually move into the securitization. When they're in what we call LSV vehicle, then yes, the dealer can have back the car once it goes into a securitization, it really has to be sold, you know, properly through an auction.

Right. And I understand, actually it's probably beneficial to a dealer for that car to be sold through Westlake's channels at the auction. So that makes a lot of sense.

Yeah, and not only that, Luke, we have a lot of analytics that show first loss is best loss. You know, a lot of times a dealer will take back a car and recycle it. And I get that, that, you know, that may be their business model, but we have a lot of data that shows the first time you repossess it and sell it again, you'll have a higher default the second time. And then if you do it a third time, you'll have a much higher default. And then the fourth time, you know, it's just a daily rental. So, you know, that said, typically first losses is best loss.

Yeah, we've got some of those that are going on their fourth lifespan. And yeah, we don't anticipate them being out there that long.

But the real interesting thing about it is we triple a dealer's revenue with our program. So getting back and recycling a car, it's almost like pennywise pound foolish. I like to say. If you're a dealer and you're booking 50,000amonth in revenue, and now you start booking 150,000amonth, you know, getting back a couple of cards here and here or there is really, you know, not relevant.

So if I wrap my brain around this to summarize the securitization part me as a buy here, pay here, dealer can pledge some amount to the loan servicing vehicle. You'll take my loan, service them for 60 to 90 days. Kind of as a, you know, honeymoon phase, but at that. And then once they move into the securitization, there's up to 70% paid out upfront, no recourse, and then you've got the back end, 30% that may or may not come in, depending on how your portfolio performs, minus interest rate and servicing fees and repo fees and losses.

Right. And the only thing you left out, the only thing you left out is that the interest on those loans also comes to you. So it's not just the principal. Yeah. It would be the 25% APR on the full, you know, portfolio is yours as well.

Okay. So as a dealer, if I say, hey, I know historically how my loans perform, I expect this kind of a loss ratio or, or maybe even better because maybe Westlake is better, more aggressive, whatever, than my collectors have ever been. That should be my benchmark of what I'm going to lose. So here's the potential that I'm giving up by letting these guys have it. Or not the potential I'm giving up, but maybe my deferred amount or what I might. But I'm getting this money up front now to continue to grow and make my next package of securitizations that I'm going to sell off in 12 months or something. That's kind of the way the dealer could look at it as a. And the benefit to that, as opposed to just selling, is there's basically no back end participation. So any of you guys who are CAC dealers, credit acceptance, they have kind of two similar programs where they have like their, oh yeah, sell your note, we're going to give you a huge discount up front. Or we have our collection only package where you might participate in the back end but you're going to pay all these collection fees. Probably a similar sounding program, but you guys obviously do it a lot cleaner and in groups.

Yeah. You know, there's a lot of intangibles to what we do too. So if you give thought to your typical buy here, pay here, or just an independent dealer, they do not have real franchise value in their dealerships. Right. So you know, if you're a, if you're Joe's, you know, auto sales and you want to retire or you want to sell your business for whatever reason, most likely someone coming in to buy your company will look at the vehicles on the lot and they'll value them. Right. So let's make believe you have a half a million dollars worth of vehicles and you're in them. Right. And they'll give you Half a million for that and maybe have a $3 million loan portfolio that they'll figure, well, they're only going to give you 2 million for that. So you'll get 2.5 million and, you know, walk away after you pay, you know, off your lenders, and you don't really get any blue sky like franchise dealers get. So what happens in a capital market structure is the loans are no longer on your balance sheet. What's on your balance sheet is a residual certificate from a capital market structured deal. And that certificate adds value, franchise value, because it's now part of a structured finance deal. You know, the best example I could give you is I was a buy here, pay here dealer, you know, many, many years ago. And I opened my first finance company back in the late 80s, and I did a securitization where I raised $5 million and I paid $1 million to do that. And everybody said I was crazy at the time, including people in my family, and I probably was crazy. But I sort of was sold on the idea that once I'm in the capital markets, the intangibles that are available to me would be just so valuable. So I did the securitization, and two months after I did the securitization, I got a $50 million equity investment in my company from a rather large Wall street firm that would never have even known about me had I not been in the capital markets. So to be able to say that Joe's Auto Sales, and I hope there's no Joe's Auto Sales on this call, but I'm just using it as a name to be able to say that Joe's auto sales, with $3 million can be in the capital markets and recognized in the capital markets, adds an unbelievable amount of intangible or franchise value value to their dealerships.

I think that it's huge. I think that bringing this space to Wall street is probably. I mean, it's not the first time, but to do what you did is pretty unique because they probably know we're out there, but they don't know how big we could be. And I think this could bring on a lot of different, different avenues and different, different ways for buy here, pay here, to. To compete against drive time. That's a dirty word. Drive time and JD by rider, which. I mean, we all competed against them. But I really. I think that's great.

Look, I like to say, you know, and nothing against companies like BlackBerry or Blockbuster, right? But, you know, to me, traditional way. So. So car dealers, we started Agora Because I've always believed that the car dealer was an underbanked, underserved, and improperly treated borrower of money. And when you think about, you know, businesses that are at risk, right, Restaurants and bars are very high risk to lend money to. And then car dealers are considered a high risk too. But car dealers are some of the best entrepreneurs on this planet. I mean, they really are. I mean, I was one of them, you know, and car dealers are the best entrepreneurs, but yet treated very unfairly in being able to borrow money, paying high rates of interest or really tough loan covenants, right? Balance sheet tests, EBITDA tests, or tangible net worth tests. And then you see dealers going in and out of business all the time. Yeah, Wall street knows the buy here, pay here dealer is there, but they can't access them because it's too small. It has to be aggregated. Right. Wall Street's not interested in writing a check under 100 million. There's not a lot of buy here pay here dealers with $100 million. So what happens and the crowdsourced nature of what we did is it's the only way that somebody with a million dollars or 5 million or 10 million can access Wall street, get that abundant capital, not have a personal guarantee anymore, not even have balance sheet, sheet tests. We don't even have a tangible net worth test once the deal is done. Because the balance sheet, as crazy as sounds, becomes irrelevant to the structure.

Yeah, yeah. That's what's so interesting about, I mean, guys that are listening to this. If you are a buy here, pay here dealer, however you got into the business or got your capital, or if you're trying to get into it, you know that banks look at us like absolute crooks. And I've bounced between three different banks and recently the one that said to me, hey, it was a local bank that got bought out by a regional. And you know what's going to happen? Then all the regional guys look at it and say, oh, what is this loan here secured by subprime auto loans? I don't think so. We got to kick that thing out as soon as possible. So my banker comes to me and says, no, thank you, we don't want your loan anymore. And I said, I paid you perfect for, for five years and all of a sudden you don't want my money. And I look at other local banks and it's the same thing. You want a line of credit based on subprime auto loans. What are you crazy? You know, or you want to do what with this and it's such a dirty, un understood industry that they think is so horrible. What would you give advice for guys? Dealers that are trying to get started, you know, maybe they have a couple notes on their books, but they want to grow. They don't have enough to say sell, but they want to get access to like a line of credit or capital. Is that something they come to you guys for?

Yeah. Can Agora help the small guy?

Hey, guys, sorry to interrupt the podcast real quick. Our sponsor this week is independent dealer podcast guys. So be sure you are A, sharing this with a friend and B, leaving us a review on Spotify or the Apple Store. Right, Luke?

Yeah. And just. Jeff, it is so important that we, that we get out there, right. Dealers need education. So we're not doing this for us. We're doing this to try to help. So if you ever need us, to reach out to us, if you ever need us for anything, we probably know somebody that can help or we can help. So we're here to help y'.

All.

Huge. And Our email is infoheindependentdealer.com it's in all the show notes stuff. So, Luke, should we get back to the episode?

Let's do it.

Yeah.

No, absolutely. So we, we recently came out with, and I say recently, we did our first credit line a week ago Monday. So we came out of the program called Agora Credit. The reason why we came out with Agora Credit was not only to, you know, exactly the scenario you just painted of a guy just getting started in a business. Agora Credit is a feeder into Agora Capital. Right. Because capital is the lowest cost, least restrictive financing that any dealer can get. I mean, let's face it, banks get their money from the capital markets. So, you know, why even go to a bank when we could take you right there? But what we had was a problem because you've got banks and you've got rediscount lenders in the space today that don't want to allow their borrowers to refinance their portfolio into Gore Capital, right? If you're a lender today and you're collecting 13% from your borrower, the dealer. And that dealer calls you up and says, hey, I want to refinance my loans with Agora at 6.5%, that lender is going to make it as hard as possible. And I understand that. I mean, they're protecting the turf. They're going to make as hard as possible for that car dealer to leave. So what we've done is we've come out with a Gore Credit, which is a very easy to get credit line, traditional line of credit, we're the lender, so it's directly from us. And you could transition then from your high cost lender that you have today into Agora Credit, which is similar in cost to what you have, and then two months later, transition that right into Agora Capital. So if you think about it, you may pay 13%. I'm just making these numbers up, you know, 13% to your current lender. Get Agora Credit and pay 10 to 13% for that or maybe a little bit more, but that's only for two months. And then go right into a program where you're at 6%. So the interest rate savings are phenomenal. The other big benefit that I mentioned is you may have a $3 million line of credit right now with a lender. Right. And we give you a $3 million Agora credit line to replace that, but then we give you a $9 million facility to grow to $9 million. And not only that, we. And this is going to sound crazy, but when we started Agora, it wasn't. Our goal was not making money. Our goal was creating community and creating a place for buy here, pay here dealers to thrive and small finance companies to do the same. And then by default, we'll make money. And we are. So our goal was first to help the industry, and then we know we'd make money. So we put in place the who's who of compliance, the who's who in legal, the who's who in accounting, digital marketing teams, social media teams, inventory acquisition teams, customer retention teams, and all of that is available to any Agora member free of charge. We charge nothing for those services. And we provide all of that, you know, to our members.

That's actually what I want to talk about next was the data that y', all, y' all have access to. And so I've been approached and I think a number of, y' all have maybe relationships with a number of dmss. What's it? I know the benefit, maybe long term is to, for y' all is to get dealers who use the data to come on board. What's the, what's the idea for the buy here, pay here person who really never looks at trying to get capital. Why should they be using your product to look at their data?

Sure. So, you know, first of all, we don't charge a dealer anything. Right. So they could come onto our platform. There's no contract, there's no credit card, and it's very simple to integrate. You know, we have 11 dealer management systems that were API digitally integrated with or connected with. So a lot of, lot of benefits. Like to start with our Agora Insights platform. Agora Insights, we created the first ever book value for loans. So first of all, a little bit background on me. I've bought more than $20 billion of this paper through my 30 year career. So I bought a lot of papers. So I have a lot of data. And not only do I have that data, we have, you know, newer data too. And what we've been able to do is you guys are car dealers and others on this podcast use different value guides all the time. Whether it's Manheim or Black Book or Nada or JD Power now they're called or whatever guides you use as a car dealer. The one guide that nobody had was a book value for a loan. Doesn't exist. So we built this unbelievable, it's called a Monte Carlo probability model and put a bunch of machine learnings, machine learning models around it or modules around it. And we ingest so much data and analyze that data every day. Run 10,000 probabilities on each loan on our platform and push the information back to you. So we'll pull a JD Power. I know I can't use the word nada anymore, but we'll run an NADA value, we'll run those 10,000 probabilities and then push back to the dealer. Real time of value for that loan or a value from their portfolio doesn't exist. So it helps them value it. If you want to sell loans, it helps you discount between the dealership and the rfc. You know, it really provides a lot of insights there. Full stratifications we have on Agora Insights. The ability for you to shuffle between two loans and see why one loan is more valuable than the other. So you can go ahead and prospectively now originate slightly different maybe to increase your value. We have insights on there of which loans maybe to work a little bit harder than another loan to also increase the value. It's all value driven on Agora Insights. We also have benchmarking. So if you're a dealer in South Carolina and you want to see how other dealers in your market are doing compared to to you, it's totally anonymous, right. So you're able to see their APRs, their loan to values, you know, and all other relevant information. And then to a lesser extent we're a great disaster recovery backup tool. So when your data is sitting on the Agora platform, if something happened, you know, some of the systems out there are not cloud based. We are. So you have great disaster recovery and. And backup as well. So I think by pushing insights and analytics back to the users, it gives them stuff if they want to sort of have that scalpel to really understand your portfolios and how to make them better. And that's just, again, free.

Steve, the one pushback I was given to y' all when we were talking about getting involved in this was my data. You know, it's. It's my customers. It's. It's all this stuff, and I'm just. And I've spent a lot of money to. To get them, and I'm just kind of. I'm taking that data and giving it y' all to analyze. I'm afraid the next thing I know, y' all gonna be marketing to my customers. Does that go on? Is that something that somebody should be afraid about?

No, not at all. Our terms of use prohibit us from doing that. None of your data leaves our shop, period. And we don't use your data to market to anyone. First of all, we don't market to consumers. You know, we're strictly dealing with dealers. We'd be violating our own terms of use and terms of services if we did that. So we just don't do that. There's nothing that we sell to a consumer to even think about doing that. And, Luke, your data is currently sitting on your dms. There's no difference between whether it's on DMS or on Agora.

Yeah, I looked at it like, Luke, I know I had that same concern. And the reason I'm looking up, if you're watching this on YouTube, is I'm going through my Agora dashboard, which I rarely ever do, ever since I got set up. But it is so interesting, as Steve talks about, I wasn't slicing and dicing my portfolio like this. I didn't have the ability to do these kind of valuations and. And these comparisons and to look. And it's like, man, I go through their stuff and I'm like, Geez, Louise, I'm 16% Ford, 14% Chevy. 19. 9% Dodge, 7% Toyota. Here's my body style breakdown. Here's the age of my collateral. Here's my seasoning, my delinquency. It's like, I didn't have any of that stuff. I don't even think that. I don't even think my DMS can spit out this stuff in this. It can. If I was rocket science and I could run their reports, but these guys give it to you so simply. So anyways, super interesting. Steve, let me back up and ask you one question, a follow up on that line of credit. You said the line of credit was available for two months and then it goes into the capital markets. Is that, does it have to go into the capital market? It's not an open revolving line of credit that we can have access to through Agora.

Yeah, no, it's an open revolving line of credit. When I say good for two months, it's a 12 month commitment of a line of credit. But what we want to use it for is the feeder into Agora Capital because that's the lower purp cost financing. That's the sole. The sole purpose of the line of credit is really just one of two things, right? It's to get you away from your lender. If they don't want to let you refinance. You know, if your lender currently wants to let you refinance, there's no need to leave them. Keep a relationship with them by all means. But if they won't let you refinance at a lower rate and you're tired of working for your lender at a high rate, then, you know, that's what Agora Credit does. It easily transitions you into the capital markets.

Yeah. So tell me if I'm wrong, Steve, but if I look at this as a buy here, pay here dealer, so for myself, I don't have an additional line of credit. Right. As I talked about earlier, the bank said, hey, no, no, so we don't like you no more. So I can only self fund. I think I'm like 25 deals a month, right. That's kind of what I can self fund my buy here pay here with my cash flow. So I'm almost limited to doing that amount of deals. But if I really wanted to put the pedal down and grab row, I could almost use you guys as a buy here, pay here quote unquote lender and say, hey, I'm going to keep my 25 loans here. I'm still going to put 25 loans in my portfolio. But what I'm going to do is an additional 10 or 20 that, you know, quote unquote will be pushed over to Agora's capital program and they'll be serviced by Westlake down the road. But it would be the same as me sending those buy here pay heres to Lobel or Westlake directly or cac. Am I wrapping my head around that? Right?

Yeah. I mean it's better than sending it directly because you keep the upside yeah, yeah, 100% better.

But why say no to those buy here, pay heres when I have to say no to them now? Because I don't have the capital to do those deals. I'm limited to my 25. You guys would allow me to say yes to those people that I'm turning away or be more aggressive with my marketing, because I do have this overflow or this backup capital source.

Yeah. I'll give you a great case study. You know, we had one dealer in our last deal, in our first deal and last deal on December 29th that had a $12 million portfolio, or, excuse me, a 12. Yeah, $12 million portfolio was at max. They were paying 13% to their senior lender, and they could only originate their runoff, Right. And their runoff was about 2% a month. So they could originate about a quarter of a million dollars a month, and that was it. So basically, they were treading water at $12 million, maintaining 12 million all the time. So we moved their $12 million into our ACAS 2021 deal or securitization and paid off their senior lender. They kept their senior lender, right. And now, since December, they've already originated another $3 million. So by the end of this year, that $12 million that they were maxed out at and treading water, by the end of this year, they're planning on having 24 million, and all the revenue from that 24 million comes to them. So literally, they were treading water, doing very well, making good money on the 12 million, and now doubling their revenue this year to make revenue from 24 million and actually reduce their expenses because of the servicing. That's what costs were higher.

Did they. Were they able to get rid of their collections team? You have that big portfolio, you probably have five or six collectors and a mess of hiring and training. That's gone.

Can I ask, since we're talking about collections, I don't want Westlake servicing my accounts. Right. I'm not in a position where I've got to go get capital, but if I were, and I just built this process to where I believe that I service accounts, I think I service accounts better than Westlake. Maybe I don't, but I believe I do. Is there a way around that, or is that just the way it is?

That's the way it is. And there's reasons for it. So, you know, when you do a securitization, there's a lot of reasons why a car dealer of a certain size can't securitize. Right. They don't have the asset size, they don't have the balance sheet, and maybe not the sophistication in the servicing to be able to satisfy Wall Street. So I hear from a lot of, of dealers that I service better or I don't service better or I want to keep my customers or whatever. So, you know, a lot of, a lot of the way I explain that is, you know, first of all, you know, it's really not relevant whose service is better. And I'll explain that. It's going to sound crazy, right? But it's really not relevant if the game plan is to make money. Because if your growth is capped at the 12 million example that I gave you right, earlier on another dealer, and they service fantastic. And on that 12 million, their revenue was two and a half million dollars a year, right? And now we get them $5 million a year in revenue. Servicing is not relevant. They're making so much more money. The other thing that I like to talk to dealers about is when you think about risk factors on regulatory issues and legal issues, right? Especially with our new administration. And the CFPB is going to get much more active and other state agencies, not other, but state agencies will get more active. Car dealers have lots of risk factors, right? How you sell the car, you know, how you advertise on the Internet, what you do when you're closing the deal and financing it, how you move that loan from the dealership to the related finance company. Those are all risk factors, right? And then the other risk factors you have are how you service it, how you manage your gps, you know, what you do. So there's not much we can do because you do sell cars, right? So we can't, we can't do that for you. But the servicing part, you're mitigating all of your risk by moving that off to a third party, all of your risk. So. And then I could go on and on about servicing better. So, you know, we just went through Covid, right? And we had dealers that had only two collectors and both were out sick. So who collects their accounts? You know, there's no redundancy, there's no backup plans. So, you know, all of that gets eliminated. And then, most importantly, I've worked with a lot of services. I started a large call center for BB&T when I worked at BB&T. And the issues with servicing are everybody thinks they do it better until they see what all the technologies there are out there to service and all of the work that goes into doing that as a fit, efficiently and smoothly as possible. And you'd be surprised at how it's done. One of the pretty amazing things that I also speak to dealers about is we at Agora Capital, unlike when you sell loans, we want you to keep a relationship with your customers. Do not give up that relationship completely. Service them, just don't collect from them. And there's a big distinction, right? Don't send them a 30 day past due notice or repo their car or don't do the nasty stuff, but do all of the good stuff. Do all of the customer service functions that you should be doing, but don't do the collection functions. That doesn't really help you anyway. Right. It's always a nasty conversation. It's adverse.

What, what is the collection cost?

What's the percentage?

Can you disclose that?

You know, I ran out on the podcast. I mean, that's something I would like for folks to talk to us about because it's not just so. And I want to explain. So it's not just collections or servicing. So the reporting, like Jeff, you just said you went to our website and you looked at some of the stuff. But the reporting that happens with servicing is so granular and so informative. There's probably 50 to 60 of the most cutting edge reports that we make available on a real time basis. When you log in, you will see everything there is to know about those customers, real time. So it's not like you're in the blind on anything. You know, you're. And I mean it's so important that you're involved in all that because they're your loans. You did not sell the loans, they're your loans. So we want you involved. And then lastly, you know about servicing. So we're as concerned, if not even more than our dealers about servicing to make sure it goes well because we are putting our rubber stamp on what the performance of that securitization is going to look like. And a big part of that is servicing. It's not just the underwriting. So when we put that rubber stamp on it, we're just as concerned to make sure that it performs well.

Yeah, I think about sometimes I think I can service better than like, you know, I look at my CAC portfolio and what credit acceptance collects on and I'm like, what is going on? Why is this so horrible? I could have collected on these people better. But what I forget is those are actually the people I didn't want. That's why I gave them to cac where as opposed to with you guys, you would be taking you Know, people that I would typically do, I would think that they would just be a better caliber of customer. I don't see why y' all couldn't collect the same. I would collect. One question we had, Steve, that the dealers wanted to ask. Does any of this apply or does Agora, do they service or deal with lease here, pay here dealers?

Yeah, not yet. We'll look at that probably in the third quarter of this year. You know, lease here, pay here has been, you know, coming on, on and off strong for years. Right. It seems to, you know, develop its life and then fade away. And develop its life and fade away. But, yeah, we. We recognize it's an asset that we're going to want to deal with. So. So probably in the third quarter quarters, when we start looking at it today, we do nothing with. With leases.

Okay.

Strictly retail and that.

Yeah. Luke, are there any other questions I missed?

You know, this is very interesting to me, and I think we've gone over everything, you and I. I mean, you and I have talked about this. We've talked about this during 20 group. I've talked to many people at Agora, and I believe I probably will end up getting the data because I want to see. I want to see it for myself. I don't think there's anything else, Jeff. I'm sure we missed something.

But, Steve, if dealers want to learn more, if they do have more questions, specifically, who do they get ahold of there? Who do they talk to? If they maybe want to get their DMS integrated and start looking at their data, or maybe they need a line of credit. I know that's a big thing for dealers, and if they can get hooked up with someone that will give them a respectable line of credit and not, you know, really take advantage of them, who do they talk to?

So a couple of things go to our website. It's agoragoradata D A t a dot com. And on our website, you know, you could. You could look at all our different features and products, and then there's a place to fill out sort of for an inquiry, and we answer all inquiries the same day. So if somebody fills out a submission form, they'll get a call back that day. They could drop me an email@CEO goradata.com and I'll make sure they get handled immediately. That's probably the best two ways of doing it. We have a lot of folks and we're hiring even a lot more. We got 30 job openings. So I like to say that on a lot of the podcasts, I do. We have 30 job openings right now. 40, 20, 21. And don't have to be in Arlington, Texas, almost anywhere in the country. You know, a lot of what we do is remote work anyway. But yeah, I think that's the best way is go to the website, agoradata.com Sounds good, Luke.

Sell your portfolio to them and then go work for them.

And then I'll go work for you. How about that?

That works. Or don't sell the portfolio. Finance it and you'll have like a residual income, you know, without even having to open a dealership.

I like this idea. Maybe I can get out that way.

Yeah. Think about this guys. There is a reason that all the big groups, the Carvanas, the Drive Times, the JD by writers, the Santander's, the Bank of America's, the cities and I could go on and on and on. There's a reason why they all are in the capital markets. And now the same exact capital is available to Joe's Auto Sales.

Awesome. Thank you, Steve.

My pleasure, Luke.

So glad you joined us. Please take a minute to leave us a review and share this podcast with a friend, the Independent Dealer. Podcast Dealers Helping dealers.

Sa.