Can I Sign Ohio Banking Form

Can i industry sign banking ohio form later

hello and welcome to another episode of well capitalized I'm your host Bobby Kingsbury managing director at MCM Capital Partners and today we're gonna be continuing our education on the due diligence process and today we have with us kelly lamb ran from Key Bank talking about Bank diligence so Kelly thank you very much for for joining me yeah if you wouldn't mind just give us a little bit of background on yourself and sandy key and then we can start sure so Kelly lamb Hren I'm the regional credit exec at a key Bank and I've been there for coming up on 22 years so I've been there my whole career I started at key right out of college I went to Miami University I started there in their credit training program and did did a bunch of training to all throughout the summer and then got into the middle market space as an analyst I took a sidestep into the corporate bank for a couple of years I hated that job and then I came back to the middle market as an associate for a couple of years and then got my credit Authority about 17 years ago and so I was a junior credit officer and I just expanded my credit role throughout the years from the Cleveland market and Cleveland and Akron in Columbus and now I have a team of folks that helped me manage middle-market credit for the Great Lakes which four key is all of Ohio Indiana and Michigan so it's a lot of windshield time yes yes so how does key just for the viewers at home how does key define the the middle market what size businesses are you typically underwriting key to finds the middle market from about ten million in revenue to about a half a billion and the majority of our borrowers fall in that tend I would say less than a hundred million in revenue the outliers of the big companies there there are a handful of them but in terms of volume its it's definitely in that 10 - less than 100 million dollar revenue space great you know that's all other stuff up front you know that's very helpful on on a diligence side what about after the transaction you know what what reporting requirements do or reporting to ski bank require it depends a little bit but for the most part we will require quarterly financial statements with a compliance certificate certified by the CFO and the reason for that is we really want owners and everyone to know what is in the documents and so they need to be aware of their covenants and their their performance against those covenants we don't ever want to it to say well you know to come to the borrow and say well you were in default and they would say well what covenant you know so we want them to be cognizant of that so that we're all on the same page and also we want our calculations to match sometimes you know people go through the calculation and they come up with something different than we do and there can be nuances into in those definitions so we want to make sure that that are our calculations match and that's the point of that compliance certificate will want Lisa quarterly financials and audit generally speaking once it flips and there's more leverage on the business through the statement requirements will increase to an audit which matches with I'm sure wait yes you know you what you're hope he's want out of that as well depending on the business we could require a borrowing base making sure that the working capital assets match up with what's borrowed on the line or the revolver that can be hit or miss it depends on how working capital-intensive the business might be if it's just if all there are receivables and there really isn't any inventory you know you know that reporting means a little bit less at that point and I also try to tell my team and we believe that making sure that we're not just asking for paper you know I don't want a bunch of information that I needed like a bunch bunch of boxes and stuff that people aren't going to read you know but we put in our documents and at any time we could request additional items as if an AR aging sort of receivables aging or maybe an inventory report or a payables aging you know I generally don't like to see those on a monthly basis unless there's a need for that but I would put in our documents at any we could request that and and we'll probably spa check it once a year when we do an annual review but it doesn't necessarily need to be part of the monthly package so then who is generally speaking with the bank from the company who is the bank working with is it generally are they working with the private equity firm or are they usually working with the controller CFO it's the controller CFO you know if they need some help we we will go to Kevin usually does a really great job of putting a package together a template if you will for the CFO or controller because he knows exactly what we like to see and how we like to see it so the formatting is the same so that that's helpful but not required and but you know we look for someone in the controller CFO position to be able to put those reports together and really to put them together in a timely manner so we just need to make sure that we're checking those within 45 60 days of quarter end if you're getting them any later than that you know sometimes that's a problem the old adage is that sometimes bad news travels slowly you know so we need to make sure that we know know your client know what's going on with your borrower right yeah I know when we were talking we were sharing some stories and one of the questions that came up from some business owners was who is responsible for paying the debt so it's not the private equity firm no I mean the business the business repays the debt and it's no it's not the private equity firm but you know we need to make sure that we have a good relationship with the private equity firm that they are able to help a company and navigate if there are any problems or also to come to us when there's growth scenarios as well just you know that growth eats cash you know so we need to make sure that the business is in good shape but going back to the whole character you know one of my mentors early on in my career told me companies don't repay loans people do and so we really need to make sure that we're banking the right people because we will go through another recession nobody and obviously nobody knows when I keep hearing the you know we're in the seventh inning of a nine inning game and we've been there for a handful of years now and not that anyone's looking forward to a recession but we need to make sure that we're with the right people that will help us navigate through that and that support their businesses and I mean I've been parts of deals where that hasn't happened and it's it's really tough it's really tough and it doesn't feel very good that's it I think that's a good transition to another question probably what's on some business owners Minds is you know during recession or you know what if I have a terrible year you know and I'm missing my my debt covenants what happens so you know like I said those are meant to bring us back to the table and what I always look for and it's a big benchmark for us is that okay I can't do anything about the history right I'm not carrying around terrible quarters going forward but can management and the company adjust that they can cover there they're fixed charges going forward so maybe not on a trailing 12-month basis which is something that we look for but what is the outlook can they right size things so that for then okay so then for the the March quarter they were fixed charge positive and then we'll add another quarter onto that and another quarter out of that so we will and often sometimes we have to do that we have to reset things they had a lawsuit or I know something really bad happened in that quarter but what we're looking for then is okay can they fix that and can they right size that if things get really bad and they can't do that there are other agreements that could take place we'll reserve our rights saying hey we're not gonna do anything for right now but we reserve our rights to do something going forward and you know there's a very there's a lot of things that could happen during the more often than not you're trying to work with the company more than anything right you know so that will get down to a waiver you know or a waiver in an amendment so sort of what I was talking about before in terms of not carrying around some old quarters with what we have to make sure going forward we're and a good headspace and that will require an amendment but you know we just need to know the information and we need to be able to work with you to you know with your team as well as as the management team of the portfolio company to assure that things are on the right track appreciate that mm-hmm and we've worked through a couple of situations like that so we have fortunately they've they've worked out right yeah but you know there's been a good relationship and it has been were we're very grateful so are we and then from a business owner standpoint some you know prior to sale might be using more of a community bank you know what they've had a relationship they started you know backing them when they're extremely small now moving forward it's a more institutionalized Bank what what are the benefits of you know working with a a larger institution like key well the relationship that we have with you guys is one of definitely one of the benefits we also have our capital markets folks who have industry expertise that we leverage and we could make lots of introductions to help grow that business let's say that there's another client or somebody else in the industry we can help provide a lot of that knowledge our products and services are generally speaking a lot more technologically advanced as well he's invested a lot in technology platforms our our treasury services are better we really you know we really try to get we've invested a lot in those platforms so which can speed up your cash cycle which saves you some money right but less paper more fraud protection you know I sat through it just happening more and more I know unfortunately I sat through a fraud presentation last week and it was a woman in the fraud group from Grant Thornton she said she'd never put her money in a savings and loan she said that her credit union I think was probably what she said it was a credit union not a savings alone but a credit union just because she said it's just too much paper floating around and it's account numbers are out there and that the protections and services just just aren't as great and fraudsters prey on that kind of stuff yeah you know so the dangerous time that it really yeah it really is but you know we've got we've got um you know technology to help combat that as well so you know that we encourage all that protection because that can be significant and you know we also that's part of diligence too that we asked about not necessarily that we perform yeah but we definitely ask about your cyber security and systems and whatnot I mean that's meaningful because that can interrupt your cash flow yeah you know it can interrupt a performance when you you've had a big fraud where you know ransomware is huge now too and so we really want openness yeah we really need to make sure that companies have the right securities in their own systems to prevent that from happening we're actually gonna do a video you know in all portions of the diligence and one of them happens to be the idea that something that we look at more and more now absolutely you have to in detail and so the point of all these is is business owner education and then I would love for you to leave the business owners with some piece of advice on how to prepare you know as they go to exit from a bank diligence standpoint what can they do to prepare themselves they can make sure that their financial reporting is in good shape a lot of the times they made their controller what an hour bookkeeper even if you will make sure that they have a good education process and that you bring them up to speed on what's going to be expected because the last thing we want to do is close and then turn to say okay well where was the finit where the financial statements and the covenant compliance and or the receivable aging or whatever and the controller was like what yeah you know like well I didn't know I had to do that or what you know so walking through some of the calculations and what is expected just to make sure that the reporting is in good shape and I really encourage business owners to ask as many questions of as they wander can things that they think of and even after the process like I don't I don't want it we never want it to be where you know we close and then they never hear from us again that's you know that's not the way it is and it hasn't been but they should feel free and we encourage them to form relationships with a bank as well because we can help in a lot of different categories and you know we're there to make sure that that it goes well what can we thank you so much for taking the time we really enjoyed that business owners would get a lot of thank you thank you I appreciate it thank you for taking the time to watch another episode of well-capitalized please subscribe to our channel below if you have any additional questions please leave them in the comment section thank you