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Podcast is now starting all attendees are in listen-only mode all righty hello everybody and good afternoon or good morning depending on where you're calling in from thank you for joining us today for our 2018 exit planning summit insight webinar my name is drew English I'm the program coordinator here at the exit planning Institute and I am with our speaker today Gerry woods who is the vice president of commercial lending with byline Bank before I turn it over to Gerry today a few housekeeping notes for me first off the webinar is being recorded and the recording will be sent up to you later today so this looks for an email from me with that attachment and make sure to download the recording too if you have any questions comments concerns anything like that during the presentation on your drop-down menu of GoToWebinar there's a questions box go ahead and type your question in there and then I'll be more than happy to facilitate those over to Gerry at the end of the end of the call today so before I turn it over to Gerry one I wanted to speak on kind of why he's here so in September at the end of September the 24th and 25th we're holding our summit down in Nashville Tennessee and Gerry is one of our one of our sponsors one of our exhibitors that we're going to have there and so we do these webinars so that people could come on and kind of get their toes wet and and and see who's gonna be all there and in person at the summit so if you are not signed up for the summit and want to get some more interest on it please go to WWE conference comm and all the information will be on there for for the summit or if you have or if you just want to give me a call as well I'll be more than happy to to direct you in the right right position so with that I'll go ahead and turn it over to Gerry he'll give a little bit of background on himself and and we'll go into the into the call today so Gerry it's all yours all right thanks drew and thanks everyone for joining us here today let me just give you a little bit of background on by line bank I don't have a slide on this but I'll just tell you we're four point eight billion dollar bank headquartered in Chicago and I'm coming to you today from Franklin Tennessee which is right outside of Nashville so I'm looking forward to welcome welcoming everyone to my adopted home here down in the green hills of Tennessee next month at the summit byline Bank is a national preferred lender for SBA we have 28 individuals like myself scattered throughout 10 cities around the country all of us travel all over the country doing work for transition planning and transition lending a funding of SBA loans throughout the country we list ourselves here as a top 10 SBA lender in the country truth we know we're probably in the number 5 number 6 slot that changes all the time we do about a half a billion dollars of SBA approvals each year so in a significant portion of those our transition type of financing deals so we we are very very involved in this we we do partner buyouts family transitions and arms-length type of transaction third party transactions you know we a little bit of background I guess all SBA lenders operate under the same procedures the standard operating procedures or the SOP as you will hear and those are rules that we all follow and the rules are very very important and we adhere to them very well now that is the box that we operate in every bank is a little bit different in how they will how far they will go how concert' they they can be more conservative than the SOP cannot be more liberal than the SOP so some banks will choose different their own credit policies outside of the the SOP SOP is like I say is the foundation of their their lending policy and to such areas as collateral some will do more unsecured portions we are one of those that will do more unsecured portions where a cash flow lender and not a collateral lender that's what the SBA is for and in in transition financing change of ownership financing that's extremely important because as you all know that you know so much of what we are financing is goodwill and much of that is it's not you know have collateral behind it at all the other is the range of SBA products that are offered we do make use of most every one of the SBA loans include cluding lines of credit which I'll get into later in the presentation so let me move ahead here if I can there we go and this is a portion a small portion of a larger workshop that I do around the country for exit planners we work with exit planners a great deal it's probably 90% plus of my practice in banking and you know I've been doing this for many many years but you know exit planning has become an extremely important part so we work with exit planners all over and we tend to get involved very early because the the actual transition of the of the business that's that the very end of it but we get involved very early with the creation and maximization of the enterprise value so as I tell exit planners all over the country you know the sooner we can get involved in in an opportunity and a client we can start steering those type of exit plans for the ultimate financing objective at the end so that's that's very important for us so we have both the creation and then ultimately yes the conversion of that enterprise value upon the consummation of the sale of the enterprise a little bit about benefits of SBA financing utilizing that for for the creation and conversion the ways of the SBA financing come is to maximize organic sales growth potential and cash flow so on the front end of creating enterprise value for the company we're providing long-term and short-term both temporary and permanent working capital to the enterprise so that they can grow sales move in the new geographical areas that type of thing we another important piece of it is the minimization of debt service demands on the on the company as well so because if if you financed this working capital but doing do it over a one or three year period it's not going to help the company grow quite as well because you're going to be paying back more below you know on a faster basis so we like to preserve that working capital so so that the the company can continue to grow hire more people build inventory and build a accounts receivable all of those things and then lastly here is financing rollup opportunities and we do a great deal of that as well we may be working with your client who ultimately wants to sell his business some five or ten years from now but in the interim we'll be financing these rollup opportunities so that the exit plan can be done in such a way and that they can hit their objectives that they're setting out in the plan other conversion of enterprise value is beneficial loan structuring for exit the execution of the exit plan and we'll talk a little bit more about that briefly minimize equus equity injection maximize the cash to the seller at closing that's always important you know especially for your clients they do not they don't want to be a banker you know they want to obtain you know the vast majority if not all of their sale on the day of conversion and that's very helpful for them too we will like we said before we want to minimize the debt service and maximized by maximizing the loan term and most importantly for the change of ownership is finance intangible unsecured assets by utilizing the guarantee of SBA and I might say USDA we also are very active and key in that product as well create additional value for the the enterprise we provide working capital there's both long-term like I said and short-term we provide lines of credit that are 10 years in duration or temporary some are asset based some are not asset based and are not secured and they can be utilized over that 10-year term which is very important and to growing that business additional is to improve the business efficiencies through financing increased production needs financing equipment financing real estate all of that is done very very well through this program you need you know in creating value of this company increasing that capacity getting to that magic number in that magic date that is in your exit plan for your clients very very important that we take a look at all of those things sorry I'm moving pretty fast err because I know our time is very limited as far as financing roll up opportunities for your clients we do partner buyouts to acquire a hundred percent of the existing enterprises we do competitor acquisitions you know in these roll ups to have sales and cash flow while enhancing the market share or buying talent and long with market share we use SBA to leveraged the leverage of SBA to acquire additional sales and cash flow with minimal equity injection we'll talk more about that and acquiring companies with superior competencies like we're saying before market segments assets geographical diversification all very very important in adding value enterprise value - your clients company getting it ready for that ultimate sale you know converting the the enterprise at at the end of the exit plan is minimizing that equity contribution that is typically 10% of the purchasers of the purchase price that is donated or I should say contributed to you know into the deal 10% of the acquisition including costs and such it can be done with as little as 5% we like to see 10 but it can be done with as little as five if the seller is willing to take a note back for the other 5% but I find that most sellers do not want to wait 10 to 25 years to get the the difference and if there's a way of obtaining that we were very creative and getting with that structure sell our notes to be subordinated to the bank in the SBA for the life of the loan as I said may have you may have more than one seller note and that gets very creative you may have that 5% note that is on subordination and standby for the life of the loan but the other note be that is starts to amortize on the second month it depends on the strength of the of the company and then also retention of working capital assets because in most asset sales as you know most of that working capital leaves with the sale of the business so we do need to replace that on the transition as far as the terms go 25 years for real estate 10% for equipment and working capital where we get creative is when there is all types of different uses inside of that acquisition for both working capital equipment and real estate will either do a weighted average calculation or if the real estate portion is 51% or greater than the overall loan amount if that purpose is real estate is 51% we do the entire amount over 25 years which is tremendous for cash flow during that transit period and love to share more with that about you at the at the conference when I see you bar is replacing working capital I'll just breeze through this because we talked about it before we offer both asset based and non asset based permanent and temporary working capital we have both products that we will utilize and plug in for your clients and you can spend quite a bit of time just on that one there so wanted to run through and then to being cognizant of our time here some examples very quickly as far as the and these are live deals that that I have closed in the last o 12 to 16 months say and we'll just walk through these as example and I tried to pull out three of them that kind of encompassed everything else that I talked about here in the previous previous moments together first one was financing a partner buyout so we had partner one with 36 percent interest in the business buying out the majority owner of 63 percent the value of the enterprise pre-buy on this was a smaller deal was a was seven hundred and eighty thousand dollars but as you know there's always a minority discount so post acquisition immediately that minority interest discount is eliminated and we go up to nine hundred and fifteen thousand dollars the selling partner put in two different notes one that was payable over ten years as you see there and one it was payable over two years so we used a split seller note so we could work on that equity contribution of the buying partner was zero in this example and then we also added to the working capital to grow this company further we added another hundred thousand dollars of working capital so the buying partner could really take this to where he wanted to go with it a little bit more about this one it was an SBA loan that was done over a 10-year basis short-term seller notes paid out over two and ten years ten years total discounted collateral for this was 88,000 dollars with the unsecured portion being eight hundred and twenty six thousand dollars so we were only on a discounted basis we only had ten percent collateral so we were 90 percent unsecured on this deal debt service was very very good as you can see they covered that historically at 1.86 with the with the seller note and I just put this in here today because we've done a subsequent valuation on this company post close and now that company is worth two and a half million dollars so going flipping back here you can see that we started with seven hundred and eighty thousand dollars and now we are at two point five million dollars value a pretty good example there secondly the second example here was a third party arms link deal where the value of the hundred percent interest was two point seven eight two negotiated price was two point six so the buyer was picking up some value right out of the box and and then SBA loan for the acquisition interest our loan was two point three million dollars seller took a note payable over ten years for one four hundred and thirty fire put in ten percent of both the acquisition of the purchase price and the working capital that we put in for two hundred and sixty nine thousand dollars postscript after the acquisition the SBA loan was made over a ten year basis again sellers note was paid out over ten years with payments on standby for the first two years discounted collateral on this this deal was roughly five hundred and twenty thousand dollars with the unsecured portion of the loan being almost 1.8 million dollars unsecured so our discounted collateral coverage was thirty percent we were 70 percent unsecured on this so again a historical debt service was very good at over two times so that was excellent and the last example again I'm sorry I'm going through these so quickly to just have time with you when you're here Nashville to walk through these more in detail or or talk about your examples that you have so number three here is with real estate and this was a little more complex because the business was actually acquired with a 504 loan by another bank and they the company was purchased for the price of the equipment was the company was a fairly bad shape and it was relocated from east coast to the green hills of Tennessee and so then the the buyers equity injection for that was 10 percent or they put $100,000 into acquire their comp the company through that 504 loan we came along subsequent to that and purchased the building purchased more equipment provided a bunch of working capital to grow this company and so we did all that for 1.65 purchase price the building was nine hundred six thousand dollars buyers equity injection was eighty-two thousand dollars into it additional working capital that we added to it was two hundred thousand dollars so they really could grow this so the you know as you can see the loan was one point six five the purchase price of the building improvements was nine hundred and six and working capital was was two hundred there plus some equipment PostScript acquisition like I said was done through a 504 loan but what we did since the majority of the loan nine hundred six thousand dollars of it on one point six five the majority of the loan was for the real estate purpose we did the entire loan over twenty five years including for the equipment and for the working capital which really drove down that perch down that those monthly payments a great deal allowing that company do to really go national and their marketing efforts and and hire more people and just extend their their reach much further because there they weren't paying the loan down quite as fast so that's what really helped them a great deal total discounted collateral for the loan was a little over a million dollars with the unsecured portion being roughly six hundred thousand dollars again we had very strong debt service before before we did the purchase of the business it was one point or right at the purchase of business it was one point three eight and after the acquisition and relocation that went up to two point six two the cost of living in the green hills of Tennessee is a lot lower than on the East Coast and so there's some real benefits sorry for anyone that's on the East Coast here today in summation again SBA loans can be used to create and convert enterprise value and we are very involved with both sides of that coin we want to create a company for your client through the use of good financing to grow these companies smartly and and in a very disciplined way too so that they can achieve their values that they're looking for that you are looking for so they can exit that business in the manner that they had always dreamed of secondly the SBA use loans are used for the replacement or addition of permanent working capital that is critical because you can you know if we can finance the acquisition of a business but if we strip out the working capital at the time of closing and we don't replace that or augment that then either the company will fail it will run out of gas when when they run out of working capital or they won't be able to achieve the objectives and if there's a seller note bow involved in the situation that's bad news for everyone thirdly the SBA loans are used to minimize equity injection maximize seller payouts SBA loans are used to provide long term financing ten to twenty five years and lastly SBA loans are used to minimize debt service allow the business to grow more rapidly and organically post the acquisition so that's the the end of my time I wanted to get through this as quickly I'm sorry for rushing one to leave some time for questions and answers like said I will be I'm sorry for the picture there everyone I know it's lunch in some places but I wanted to provide everyone with my contact information and I will be there here in in Nashville when y'all are here and love to introduce myself personally my contact information is is there and at this time I will turn it back to Drew and let's see if there are any questions and that we can answer in the remaining moments of our half-hour perfect thanks Jerry I appreciate you going through that and hopefully getting some toes wet in the water in there a little bit so there were a question that came through so if there's any additional questions please go ahead and type those in the questions box box at this time but Jerry what's the one question is what's the size range that you work with and what's the timeframe that you deal with that you normally see for the closing sure well and that that varies SBA as as a product we top out on a seven a loan of you know start throwing some of these acronyms out here 7a loans are the ones that are used to do most acquisitions because we're talking about non durable equipment sometimes working capital and most importantly all those intangibles that will top out at five million dollars that's on the our side of it now to that you have whatever equity injection by the buyer is available to be injected and any type of seller note that is negotiated over and above that so you can have a much larger deal than five million dollars that's the the area that we work in most and and the vast majority of the time that is adequate to handle things now if you if there's real estate involved or we use USDA we can take that up to 20 million dollars you know if certain things apply so there's no real set answer for that but by and large five million dollars is the neighborhood that we work in most of the time do go higher as far as time frame goes like I said on the top we we get very very involved with we have a relationship with exit planners all over the country a number of our lenders around the country are involved as well with the exit planners and we like to get involved and depending on when we get involved we could be involved for three to five years in building that company up on the backside as far as the time frame for the exit you know that typically is around 90 days and I think that's generous it can be 60 to 90 days on the outside it really depends on how organized the the cellar is and with good exit planning that I know exit planners I work with they are extremely well organized and ready for this and that helps things to speed things up a great deal on the closing side you know you always know but you know it's typically we have an answer with we do ello is inside of a few days commitments within a few weeks and then we're typically closed up in two to two to three months like say 60 to 75 days is generally the answer there true perfect thanks Jerry appreciate that if there's any additional questions obviously you see Jerry's you know office number and and email address but you're more welcome to send any questions additional it to me offline I'd be more than happy to send that over and and get those answered for you but with that we can go ahead and and conclude today's webinar but before I let everyone go again if you are not signed up for this as a planning summit and you are interested or want further information please visit www.canadianoutback.com or go ahead and call our API global office and and be more than happy to share information for you and and kind of let you know when Jerry might be around and and when our times are for the exhibit halls to be open so with that we'll go ahead and conclude Jerry thank you very very much for spending some time with us is quickly going through stuff if there's any additional questions please go ahead and send those to Jerry and we'll we'll get those answered for you but with that we'll get everyone back into their busy busy day today in busy week Jerry appreciate you spending some time with us and we'll talk soon our pleasure