Bank Debt for Business Growth

A Workshop in Partnership with Keystone Bank

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📍 Welcome to bank debt for business growth. My name is Chris Sica I am the Chief Revenue Officer for The Ronin Society we are, you know, we’re basically partners in growth for business owners. 📍

We bring institutional level financial planning and analysis and scalable management structures to businesses to help them grow through the four stages of small market business growth which we think of as a. You know, starting in the founder stage when it’s really just a couple of operators and then eventually they start to hire some additional help.

And that takes them into the operator stage where they’ve got people, helping them with their process, with customers, with their services, whatever they do. Eventually though they want to make that jump to the asset stage, which is where the business goes from being something that would just die. If the founding team was involved, were to leave, to becoming a true asset on their balance sheet, where it actually creates value regardless of, of the owner’s involvement.

And then occasionally people that create asset stage businesses that they want to expand as well. And so they’ll look at, you know, outside funding to help them scale faster than their flows can allow. And so that’s what we’re here to talk about today, because generally, if, if you decide you want to grow faster than your cash from operations will allow you to do, you’ve got to look at financing options and that usually comes down to debt or equity.

So equity is a very common thing. People talk about it all the time. People know about all the different options there. There’s crowdfunding there’s notes, there’s convertibles, there’s straight equity. , there’s just an infinite number of resources at this point in Austin and, and across the country.

But debt is often a really, really incredible tool that really doesn’t get nearly as much attention or get as much resources devoted to explaining how that can be used for a business to grow. So that’s what we’re going to talk about today, and that’s why we decided to bring Keystone bank here into this conversation to help us talk about.

What that can look like, what debt can be used for, how do you even start that process and deciding between debt and equity and what are the pros and cons and, and who is it? Who is it really a good fit for? So I wanted to introduce the the members of Keystone bank that joined us today. So I’ll go ahead and start with Tyler.

Do you wanna introduce yourself? Sure. Hi guys. I’m Tyler Marshall. I’m Senior Vice President Deposit Operations and Strategy for Keystone Bank. So although a lot of today’s discussion centers around lending if we segue at any point in time, I’ll be happy to answer any deposit related stuff, but I’ve been in banking 20 years.

My background is in deposits, all things deposits and the project management, product development. Everything that surrounds that. So that’s my side of the bank. Thank you, Tyler. And we actually met. Keystone through Tyler primarily because we’d heard about the great work he had done around PPP loans and just getting those out to people and making sure a lot of smaller businesses that weren’t getting the attention from bigger banks, you know, got some help.

And Tyler was instrumental in helping a number of people that we know do that. So thanks for all the hard work on that. Tyler Kristen, you introduce yourself. Yes. My name is Kristen Fisher, I’m the Vice President of Treasury Management here at Keystone bank. My primary role is to help bring in businesses help transition their counsel or from additional or other institutions and set them up with different solutions to help create efficiency with their processing of the financials.

With the banks. I’ve been in banking for about 10 years now, two years here at Keystone. So really excited to get to work with everybody here. Great. Thank you for coming. This is awesome to have yet. How about you, Dennis? Do you want to introduce yourself? Absolutely. So thanks for the opportunity guys.

I mean, this is, this is a nice forum and a great opportunity for all of us. So I’ve been in banking a little over 30 years. I’ve been with the big guys, JP Morgan Chase started my career at Texas Commerce bank back in the day. But I love the community banking model. And so I reached out to Jeff Wilkinson who founded Keystone bank late 2020 and said, Hey, I want to be a part of your team.

I want to help a small business grow. Just so you guys know that’s, that’s exactly what we are. We’re just like, we’re a small business. We’re in Austin, Texas. We’re based in Austin, Texas, and we want to help all of the small businesses here in Austin. And as you grow, if you get into others States, markets, whatever, then we want to grow with you.

That’s why we’re here. So I’m the Market President for the headquarters here in Bee Cave, and in my task truly is just to help with any process from deposits to loans. My background is commercial lending but I do small business loans. I do car loans. We have a residential arm to do mortgages.

So don’t be surprised when you reach out to community banks nowadays. Let’s just say that, that you know, we can compete with the big guys to be away the Wells and all that. With our treasury management platform that Kristen we’ll get into a little bit later, all our deposit services, we have mobile apps, all those things.

So we’re, we’re very small business friendly. And we just want to be another resource for you guys. And even if we don’t get your business or earn your business day one you’ll still have cell phone numbers. You’ll still have contacts here at the bank. We want to talk to you. We want to answer your question.

Do we just want to be a good financial partner down the road? So I’m tickled to be part of this today and You don’t have the opportunity to answer any of you guys’ questions and hopefully we’ll develop relationships out of this. Cool. Thank you, Dennis. This is great. Eduardo, do you want to share a little bit about what you do?

Well, I’m the newest member of the team. Yeah, I’m about. I think three weeks into this thing. But I’ve got 50 year background in banking with 25 of that devoted just to SBA, exclusively to SBA. So I am the senior vice president and director of the SBA department here at Keystone .We’re developing the processes to do SBA loans for just about anything you need, particularly the three, four aspects that you mentioned, Chris.

Whether it’d be startup, whether it be expansion, whether it be refinancing our restructure all of that is available through SBA. So we’re, we’d be more than happy to answer any and all questions on SBA related points. Great. Yeah. SBA is a very underrepresented tool that I see in the, in the small business market, the rates are great.

The financingis totally doable. And I’ve seen a number of people acquire and scale businesses using SBA debt, and it’s a pretty effective tool. So I’m glad we have you here today. Great. So we’re going to kick this thing off. I figure everyone’s probably got a lot of individual questions and that’s really what we want to focus on today is answering your questions rather than just presenting a preset.

You know, deck or just slide or presentation, but to get this thing started, we did prepare a couple of questions so we could see the discussion and get us off to a strong start. So I’m going to start with some really basic, easy meatball questions right across the plate. Let’s start with a really basic thing.

What are all the different types of debt, bank debt that are available out there? Is there a really easy heuristicyou can lay out of all the different ways that you can get money from a bank. I guess I’ll take the lead on that, Chris. Thanks for the softball. Yeah. Maybe it’s a softball for you, but for us it’s every deal is different, right?

And so you can think of a conventional is, is just, you know, a balloon, if you will. So we’ll structure something, somebody is going to buy an asset and we put it on a five-year note with a 20 year amortization. But, but it depends on each deal. So there’s TI (tenant improvement) loans for, for the small business, they’re gonna have to deal with the landlord and then we’ll come in and help them finance the interior, finish out.

That is, that is one of the riskier loans that we will do. Let’s just say that, I guess, because that’s all what we call TI or soft collateral, and it runs the gamut all the way to real estate. So real estate is probably the best and least risky in our portfolio where somebody is actually buying a building or expanding their business.

And we take a lien on the actual real estate. The advance rates a little higher, we will advance on borrowing base type transactions where if somebody is truly just a cash flow type type company where they’re converting inventory, AR those things into cash then we’ll put advance rates on those particular assets.

And land, you know, 80% on AR for example, or 50% on an inventory, if it’s all finished goods and it’s just an inventory driven company, like we’re getting a lot of requests today because Austin’s really growing with a lot of e-commerce. And so you’re seeing some of these big companies that are just selling finished goods to the e-commerce sector.

And we may go a little bit higher on the advance rates in there, but. Every deal is different. We’ll look at them all. And we’re in a structure that that’s the best thing about the community bank. I guess I would say is that we’re going to structure a structured is going to make sense for everybody.

Because what makes me sleep at night is not leveraging a company upright. I mean, I want to go to bed at night knowing that we didn’t overlap. We’re a company. So we’re going to, we’re going to be approved in our underwriting. We’re going to make sure that they have cashflow. They can service a debt, all those kind of good thing.

So. Maybe I want to catch her, but it’s a really wide group A to Z what we can land on. Okay. So one of the things that comes up a lot with business owners is this idea of a line of credit. You know, they either, they need to make a date purchase for inventory, or they decide that they want to hire either seasonal or new full-time help and maybe the cash just isn’t there.

So could one of, y’all talk a little bit about a line of credit. And when that’s best to be used and, and what that generally looks like for a business owner. All right. I’m going to answer that. I’m going to make it work to answer this as well, because there is a, there is a need for and we’ve done this for, oh my gosh.

A lot of companies here in Austin and around the state, but so lines of credits people think that they can just draw them up. And what, there’s a word in front of the line of credit. This is revolving. And, and the key to align our credit is that it needs to go up and down. So you’re going to draw it up for a purpose, right.

To buy something or whatever. And then hopefully the cash generated from the operations will pay the loan back down. We want to see that thing revolved and we’ll, we’ll look at it every 12 months just to make sure that the company is, you know, growing it’s, everything’s working like it’s supposed to do down the road, if it, if it needs to grow and we need to increase the line because of this is truly is growing.

And we can look at doing that. But we keep lines of credit on very short maturity, typically 12 months or less as the company grows. And if everything’s performing, then we we can look at a 24 months, but we typically keep lines of credit really, really short nature. And you’ll find that where sort of another thing that people may think about banks or commercial banks would say.

We’re not commercial mortgage guys. So we’re not going to have the 30 year average type product. A lot of people call in and say, well, I want a 30 year mortgage, like a residential. So they’re very used to the residential world, but they’ll, they try to convert it into our world. And commercial banks are typically short term lenders.

So we will keep our maturities five to 10 years. We do out products that will go to 15 years. But the amortization is really key on making those things work right. And keep the cash flow. Come in so that it can service to that. We’re in warrant on, and I’m on him to answer this because they, SBA is really good at, and we’ve utilized this quite a bit when it comes to employees and those things that, that you’re not funding and assets, it’s going to turn to cash, but it’s, it’s what we call permanent working capital.

That’s the perfect use for the SBA program because they do fund permanent working capital and it can be done in a line setting. So. You want to enter that? And there is a, a combination under the SBA program, put it under a specific thing that they call the cap line program that provides a line of credit financing as well.

We’re doing it with a relatively new company right now where we want to instill the revolver function that, that Dennis was talking about. We want to educate them on setting up the power in base doing the aging of the account receivables, you know, doing the regular filing for that. And the, the SBA is the perfect tool to do that for to help them do that.

And then graduate them out later on in a year or two into a conventional structure, rather than keeping them in the SBA. It’s very important not to make to apples and oranges. The revolver is really more for that account receivable financing that, that inventory financing it is definitely not for tenant improvements or TIS play.

Dennis was referring to earlier. It is definitely not quick equipment purchases, not for that type of stuff. It is really short term driven because it is supposed to revolve. One, when you need something else, then you come to the SBA because unlike the bank like the regular bank, the conventional bank we can offer long-term financing.

If you’re buying a piece of real estate, we can offer up to 25 years. And it’s what we call fully amortizing. That is. There is no balloon. As long as the payments made on time, you can have all 25 years to pay that loan. And so it’s a very good, useful tool. And the same thing goes for equipment. We can go off to the useful life of that equipment.

In some instances, 15 years. Well, the bank may not be able to do that conventionally because of far old cash cash flow. We we can under the SBA. So the SBA gives us a great deal of flexibility in to be able to offer longer term financing, which obviously improves the cashflow of the business.

Cool. Great. So I guess the last question I’d like to ask before I open it up to the group is what are, what are some things that, that happen at say a business owners, you know, timeline, what are, what are some events that occur that caused them to say, oh, I should probably talk to a bank and start looking at debt.

What are, what are some of those triggers that people can be aware of or on the lookout for that say, oh, this might be a good situation for. Using debt as opposed to equity or just trying to ride it out, you know, beingcash poor for a long time.

We’ve seen that. I’ll answer one more time. And then Eduardo can answer from the SBA side as well, but we see that with landscapers. We see that with some of these e-commerce guys that are calling in as well. They’re landing a bigger contract, right? So they, they have. Neiman Marcus calling or the landscaper guy has the University of Texas called me and they have no cash to, to fund that particular request.

And so we will look at that and we will help them. We got to know the contractors legit, right? It can’t just be a word of mouth or LOI or different things like that. But what work with them on what we can say, PO finance or job finance, or any ways to kind of help them leverage to win that additional business.

That’s the calls that we get. Let’s just say that when, when you know, they’re tapped out, but they have a great opportunity in front of them call I can’t hurt. I mean, call you don’t have to call us. You can call any or call your CPA, but just reach out to folks and figure out what do I have available to me?

So I don’t lose this opportunity, right? Because it’s all about seizing that opportunity and helping that business grow. Great. So we kind of kicked this thing off with a couple of questions that are a little bit more broad and scope. I’d like to open it up to the group and let some other folks chime in and ask questions about their specific situation or something.

They just have some curiosity about. So I’m going to open it up. Let’s see. Tony, do you want to go first? Sure. So my two-part question. Number one is when you say community bank, does that mean you’re limited to businesses that are in Austin, near Austin, close to Austin in Texas. And then second part of that or not second part, but a different question would be, can you talk a little bit about purchase order loans?

I give a small company comes in and says, look, I got this purchase order. Walmart is going to buy 100 million zings that’s from me, but I got to go get money to make a hundred million things apps. So those would be my first two questions. Well, I’ll jump in and answer Tony that that’s a perfect opportunity for SBA on the second part because the SBA has an accommodation for purchase order financing specific.

You have that opportunity to, for those hundred million dingbat. And we can we can help with the support of the cost to produce those products and then wait to get paid by by Walmart. So it’s a it’s a very good little product that is very underutilized, and we’d like to use it more.

So give us the opportunity you want to handle the market. Well, and then I’ll add to that too. So purchase order for the answers is probably one of the toughest things to get out of, out of bank. So we, yeah. Let me just say that we added in word on the SBA team recently and, and I’m so tickled because you don’t ever going to SBA.

You gotta hire the folks that are seasoned and understand that. And Edward has been, been around for. A few days and very knowledgeable he sits on the national board. And so we are tickled to have him on board so that he can help us grow and, and have these other options for you guys as small business folks.

But that, that that’s the toughest one businesses need to be in place a little while they need to have some existing cashflow. So we’re not going to just help out a startup in that kind of a scenario, but But we’re going to talk to everybody and we’re going to see what, what works and see if there’s a structure that fits on the first question.

The first part of your question. So geographically, yes, we want to have we’re we’re here in Austin. We are headquarters in Austin. We want to help Austin grow all small businesses here in Austin. We do deals in Dallas and Houston and El Paso. And yes, we’ll do deals all across the state of Texas. Especially now that we have Eduardo he can do that.

In his portfolio and, and we will love to look at any of those opportunities. We have franchises that come into Texas. And so wefinance a lot of preschool, like Kids R Kids and those kind of guys. So we’ll, we’ll look at those across the state. The reason why I will go out of state, it would be existing relationships.

So somebody that’s here and they’re expanding, or they’re buying an asset in Colorado or I’m second home, or I’m doing one up in Wyoming right now, Whitefish, Montana. I mean, Montana, not, not Wyoming, but so we’ll do that, but that’s going to be with our existing customers who have a history with us who have a good relationship with us introduced, starting to look outside of our geographic areas that we still want to help those guys too.

Great. Thank you. Awesome. So we’ve got a couple more questions coming through on the chat. The first question is, does Keystone offer factoring? The short answer is no. Okay. There’s back grips here in town and if that’s needed, we can, you know, and I’m sure Chris, you guys have options for them too, but there’s a couple of good ones in town.

And let me just keep saying this though. So don’t, that’s a good question, but maybe you’re eligible for Brian based finance, which is very similar, right. And it costs a little less than factory. So. Don’t get discouraged and just ask, just ask questions. That’s all it takes. Talk about the difference between the two and why one is cheaper than the other.

Well, so, so it’s typically seasoned businesses that are going to come to us and our advance rates are going to be a little higher possibly. But it’s, and, and we’re going to we’ll draw the line up, right. And, and use the borrowing base to. Help them finance those receivables. And then when it’s collected, then we want to pay the line down.

So maybe their receivables are taking 60 to 90 days out where the case was factory, and they’re going to get funding day one, and it may be limited it’s it’s a range on, on the product type and the company’s needs, I guess, at the end of the day on the pricing of that. But they typically limit their advantage a little tighter, but the what’d you get your funds day one.

And then on you keep mentioning borrowing base. I think I have an idea of what that is, but can you explain what that is? And is there a shorthand version for a business owner to figure that out short version, is there like the way for a business owner to kind of like quickly come up with an estimate of what that might be for them?

Well, sure does. Look at your balance sheet, take your current balance sheet and just look at your AR. And it’s, and it’s all based on age AR right? So at the end of the day, if you, what banks will typically do, we’ll look at AR that’s 90 days or less, and give you an advance rate on that. And so AR some, some banks will do 85% some don’t,

we’ll do 90. Some will do 70. It just depends. What I would, I would increase my event rate on AR only if. That AR was insured and those are typically bigger companies, but there’s AR insurance out there for, for the the companies to use and utilize. And again, that makes them, it’s just mitigating risks, like any injuries does.

Right. And so we would give them credit for that and give them a little higher advance rate if that’s needed on the inventory side. Again, that’s, that’s a little tougher, it’s a more riskier. So we limit that to 50%. So you can look at your balance sheet. Run those numbers and that gives you an idea of what we would advance against that.

So 80% of AR is 50% of inventory top of the borrowing base, which means that’s the most that you can come to the bank and borrow at any time. Great. And you said there was another option besides factoring? I didn’t quite catch what that was called. Hmm, not sure. Okay. I thought you’d maybe mentioned one, but we’ll move on.

We’ll move on to the next question. So the next question is. CPG companies. So consumer packaged good companies, they don’t self manufacturer. So the question is, is there a strategy that can allow them to get alone for sales and marketing expenses? Because it seems like a lot of times it’s difficult for businesses to get debt for a sales and marketing expense to help grow top line.

Is that true? Is that, is there a reason for that? What do we do about that? You should be the reason that we find that is because they’re all we lump that into working capital. So, what you’re saying is that I need working capital to expand, to pay for those marketing expenses to pay for any employee to travel.

That’s all working capital and a whole lot of a lot of times what happens if there’s nothing to support that working capital? No, no. The repayment that I had worked in capital, no historical financial cashflow, none of that stuff. That’s the perfect use of the SBA program. You’ll say it’s to do a pure working capital loan that’s available under the SBA.

And so it is it’s something to look at when you’re talking about that working capital component for the to use the SBA Program. R&D (research and development)fits under that as well. Just, you know, I mean, that’s an expense that that’s, that needs to be funded somehow some way. Right. And but it doesn’t necessarily lead to cash at the end of the day.

Okay. So if there’s not something to kind of borrow against, it’s difficult to justify that from a debt, for sure. Got outside independent net worth it’s, you know, it’s an unsecured loan. So wha what, what do we do as a repayment source? Yeah. Makes sense. Looks like we had a question from Alexander Lee.

Hey guys, Alex here first off shout out to the running folks who are putting this together, really enjoyed the conversation so far. And thank you for the, to the Keystone folks for you guys joining as well con was listed actually beyond on behalf of my wife. She has her own marketing communications firm based out of Austin.

A woman owned business. 2 million plus in revenue was calling. Cause I think that there and you started, you all started talking, touching on some of the terms that I wanted to bring up in terms of. Recourse personal guarantees but inherent to the nature of their business. So their consulting firm short-term contracts.

They’re not going to have a ton of AR they’re not going to have fixed assets. You started touching on the working capital loans. They would really like to explore the debt markets to continue to expand the business and the team. But without those Traditional hard assets against which to lend and not really secured long-term contracts.

What kind of options do they have? I’m not really familiar with any of the SBA AA loans, or do you guys have any other products that you would recommend for them with a track record of revenue, but not necessarily anything against which the security

Hmm.

Yeah. I don’t know how to, how to put this, but there is a there’s definitely,

there’s it’s more where to start if you had a lot of questions and they’re all all in one. Yeah. And I don’t mean to hog other people’s time, but if it’s better to no, that’s right. A couple of points on your comments. One when you come down to small business financing, The owners are always going to have to be personally liable on the debt.

I that’s, without question. Cause you’re talking about you know, the, usually the business being dependent on the success of one or two key people. And, and so we want those one or two key people to guarantee the debt. To remain the interest and, and and hopefully pay us back. But yes, there is we, everything that you’re talking about is either contract financing or working capital financing, and it is not unusual for us to face a situation or find an opportunity to learn for working capital.

It goes all businesses start out, struggling. And they usually come to a point where they need a base level of working capital to always maintain. And if you financially, we short-term working short term financing, like the line of credit. You’re always going to wind up being in that need for working capital.

While if you restructure a, you do use a program like the SBA to, to establish that baseline of working capital. Would you then pay back over a longer term rather than very short-term basis. Then you maintain a lot, you can retain a lot more of your, of your own capital to put back into the business and have it grow that way.

And when I what yeah, the the differences here, the working capital that the bank and finance it for you, there’s typically going to get paid in the business cycle. That is a year typically they’re using the SBA. We can do three, four, five, even as long as seven years, depending on what the particular need of the customer is.

So there’s a tremendous opportunity there to build that working capital base, to then be able to self fund a lot of that growth as well.

Did I answer your question or did I dance around it? No, no, you answered it. You’d be probably created more questions in a good sense. Just tell the answer, but I’ll, I’ll grab your contact information. We can connect offline for them. Yeah, please. Yeah. I’ll add one last thing to that too, but you know guys, it’s just about the question at the end of the day.

So these are great questions. So this, the deal is, the answer is always going to be no, if you don’t ask, right? So. Ask your banker ask your CPA. I can’t reiterate that enough, but because there’s ways, I mean, that’s soft collateral. Those are very risky loans to the bank because we’re taking the risk.

And then when you, when you say, well, I don’t want to guarantee the debt either. Well, that that’s just another red flag for us, because I mean, who’s believing in the product. You or us. And so we want you to be on the hook. We want you to be excited about what you’re doing. And then we’re going to figure out a way to help you get there.

So we’ll look at other assets. If we have to, I mean, it doesn’t have to necessarily be tied to the business. Some guys sell companies, they have a, a ranch or whatever. I mean, everything’s open to discussion, but you just gotta ask the question first.

Awesome. Thank you so much. Just as long as it’s secured against my wife’s 50% and not my 50%. I’m good with it. You can take don’t take ex-wives or

she heard me say that you’re in the state of Texas, that in the state of Texas it’s community property. Yup. So, so follow-up question. We did have a question which is, are there any creative ways to avoid personal guarantees as leverage? I’ll just I’ll end it at that. I mean, you know, that’s just the question,

not on a small business concern, I guess again, they go back to my, prior to the comment I made a minute ago. That’s you know, the success of the business is typically a small business is typically centered around one or two individuals, and we want those one or two individuals to stay interested and how they stay interested is in that by signing on the bottom line.

And I mean, we have big companies, right? We have, we have $40 million revenue, top line companies that the owners will guarantee you, the debt they’ll kiss the paper all day long. No questions asked. And so then when we get the little a hundred thousand dollar guy and he doesn’t want to be part of it again, you just ask yourself questions, like why I can tell you in my 30 plus years, I’ve never called on a personal guarantee.

In, in there’s a lawyer on the line, I believe as well. So I don’t even want to go into a courtroom and I even try to fight that because I don’t even want to get there. I mean, we try to clarify the loan and then whatever else after that, if there’s any efficiencies, we’ll, we’ll seek that. But we don’t want your properties back contrary to popular you know, popular belief banks

aren’t interested in taking collateral back. We want you guys to succeed. We want you to grow and we just want to help you do that. And like I said, I sleep better at night when we underwrite prudently to make sure that that app great chime in on that really quick in nine years of practice. And I’ve been in the legal field since I was 19 and various, even in personal injury matters.

I can’t recall one instance where we went after somebody’s personal assets, even with a guarantee. Yup. Thank you. Yeah. Wow. That’s really interesting. Thank you. Thank you, Matthew. So question for you guys just as a general. I decide that I’m interested in debt. I don’t really know how to reach out to the bank.

There’s a phone number and a website, you know, how do I decide who the person is? What’s the role? Who do you ask? And then obviously specifically for Keystone but who is that person that you reach out to? If you want to develop a relationship with the bankers business owner? Well, I’m going to be the first one to tell you that he is, you should always develop your relationship with your banker before you need the financing.

So pick up the phone. Yeah, like here, if you call Dennis, Dennis is going to be able to shepherd you through what your need is. You know, he’ll look at the full quiver of services that we have and pick a select the services that would be best to try and address your particular need. And I do the same thing.

You know, I’m, I’m a lead, I’m the lead on the SBA side, but if I see something that will be better suited in on the conventional side, I’m going to sit down with Dennis, with Greg, with any one of our other lenders and come up with a solution. That best fits the customer need because, you know So we, we can’t put a square peg into a round hole.

We’ve gotta be able to match the services that are, will be best for the success of the small vessels. Because if that’s all business person and not successful, we’re not successful because the only way we make money is by that interest on our loans. And, and if we can’t put it on the street or we don’t get it back we we have some problems, so you’re gonna, you’re gonna see us always chime in on that, trying to be, get the better get the better solution to address the particular need for the customer.

Let me do one other thing. Cause there’s, there’s a question that comes up some, a lot of times, I guess, but when you’re coming to a bank and developing those relationships It’s not about us, just so you know, it’s about you guys. So we should be good listeners. Your bankers should be a good listener. I don’t get paid to put a deal on the books for you guys.

And so I have no interest in whether the deal gets done or not some banks and sent people differently to do that. But in the community banking world, we don’t, our mission is to serve the small business client and listen, and try to find, you know, the right solution to make it work at the end of the day.

So contacts, somebody you’re going to have a lot of contacts at the bank. Jeff is very good. Our chairman and CEO, he’s very good at meeting all the clients he’s heavily involved. He’s probably more so involved than I’d like him to be in our business. But, but I, but it’s really cool. I always tell him, I said, well, I’m going to be a billion dollar bank.

I said, are you still going to answer my phone calls? And he’s, I was told not by him, but by his prior employees that, yes, he’ll still call you Saturday night if you want him to. So that’s the kind of bank you’re going to get with Keystone bank. I’ve been around the block a while and, and that’s not normal.

So I’m going to toot our horn a little bit, but you call us if I don’t have the capacity to help you, I have a lot of lenders that can but at the end of the day, we’re all going to listen. We’re all going to try to find a solution for you. And, and again, we just want to develop that relationship and have that opportunity to develop the relationship.

Well, and part of the that’s the community banking model. I want to kind of just chime in and say, it doesn’t even have to be somebody in the lending area, Kristen and I, you know, on a regular basis, make those connections. We know who does what and who has the capacity for what? And we, you know, we get those meetings set up all the time and, and have meetings like this, you know, with, with clients and prospects.

But you know, if you’re banking with a community bank before I called, called. A lending department at a bank. If you know, somebody that works in the deposit area of the bank particularly at a higher level you reach out to them as well cause they can, they can get you to the right place and, and to drive that point home all our business cards, you have not only our office number.

You have our cell phone numbers, you have our email addresses. So one way or the other, you can get it. You can reach out to us and reach us and ask the question. We’d love to answer them. Cool. So let’s go to Phillip Oop, next he has his hand raised. And then we’ve got a question from Chad. We’ll hit next.

I I’m guilty of using big banks and I carry a lot of shame around with that. So that’s, I use big banks. That’s appropriate. That’s appropriate. But, so that leads to my question and hopefully it’s not too off topic, but I’ve tried to use community banks in the past. And one of the downsides is they end up having to use this bank for that, and that bank for this and the app is outdated.

And so like, I tried to use guarantee a while back because they funded my PPP loan and they’re there. App was troublesome. I tried to open a credit card and then their credit card was through some other portal. So I had to log into two different portals to even see the balances and then to communicate the two banks was, was troublesome.

So how, how has Keystone kind of modified some of that and for a small business owner that does everything himself, I can’t have everything all over the place. So is that, how can y’all answer that kind of question on how you’re making that happen? Yeah, I’ll jump in on that one. Keystone has invested in technology, you know, we have invested in the best and are staying up to date and up front with all the newest available technologies out there, because we want to make sure that’s the only way we can compete with those big banks.

You know, we’ve got the full treasury management system. We’ve got a basic good, basic bar, personal online banking where you can do mobile deposits. We’re connected with Zelle, for personal use with treasury, you know, we’ve got your ACH platform that you can originate payments and debits. You can originate wires from there, international and domestic.

We can get you set up with a check scanner in your office. If we have any checks, we’ve got a great bill pay site as well. And then we also offer merchant processing. So Keystone has truly invested in the technology that we offer our clients. So we can be at the top cutting edge. Our industry with them in this area, you have the, the platforms that we use an icon.

My background is in community banking. Actually Dennis and Eduardo, and I worked together at a different community bank for a decade before Keystone. But the we’re all in on the digital banking suite. And so, and it’s all connected where we work with the same core processor. And so we don’t have things that are taped together and stuck together with Popsicle sticks kind of thing, where it’s all integrated and all worked together.

And one of the things that we’re working on right now is to work with FinTech, aggregators, so that we can integrate seamlessly with a lot of these FinTech solutions, these apps that are for accounting or for a point of sale and, and, you know, specific to different types of businesses. There’s always a a vendor at each, you know, Kind of industry that kills it on a, a software product.

And we want to be able to connect seamlessly with those and keep all that moving for you as well. So that’s kind of our current, one of our current projects. Yeah. And with that project, you know, the need came up with a couple of clients needed that they had the software, they wanted to connect with direct connect with that software and the community banks.

So we can say, okay, we can take a look at it. The decision-makers are right here. And we can get with the team and you know, plan out what it would take to get involved and connected with those fintechs. So that’s another benefit of community banks. We might not be connected right now, but talk to us and we are willing to keep your business and additional business because that’s the area that’s growing to make that connection and make everything work.

I want to that mostly answers my question. You mentioned the check scanner. I’ve never even seen one of those. Do you all do the mobile deposits? Yep. We do it all. Okay. Yeah, that’d be better than that. Those are for the high volume, you know, I deposit checks a day kind of customer where you just kind of stick a chunk in there and it was a zoom through.

And

that sounds like a fun tool, Tyler. Was that a good visual, you know, I love that.

I particularly like that illustration chunk it in. So let’s jump to a more broad, a topic that I would, I would love to get a banker’s perspective on. So how do you think about. Let’s say, let’s say you are a business owner, and you’re trying to decide between taking on debt to grow versus staying constrained by, you know, your, like your current cash flows.

So you’re, you’re a business owner and you’re thinking, do I use debt to grow or do I just stick with the cash that I’m generating and just try to make it work? Now, obviously there might be some bias here in your responses, but that being said how, how would you approach that? What would the mindset be of thinking through?

Okay. I, I do think this is a good time for debt versus I think this is a better time to continue to stick with just cash that I have. How do you, how do you approach that problem?

I think it’s very simple.

No, so again, it’s all simple to me. That’s actually kind of simple in the sense that again, we don’t want to overlap or anybody, so it’s, we’re going to take a deep dive into the financials, let them sit down with them. We got to know where the growing and go and going and growing. So we can help them make a good business decision.

I, because I truly, I truly believe, I mean, like we’ve over our careers. There’s probably been one instance where it was a retail type shop who came across that kind of crossroad and said, well, I need to take on debt to expand. And they found a way actually they utilize the cash and they, and their inserts.

They took on a family member and investor. To help get the second store going, which is one of the riskier expansions is that second one, the third and fourth tend to get a little easier and then debts, that starts making a bit more sense because then you can truly see the cash coming in. You can truly see the, the future of the business go, you know, growing.

And so I don’t know. Don’t be surprised if you ask a banker and they’re like, well no, now it may be time to be bringing in additional equity and nobody, no business owner wants to give up equity in their company. But, but sometimes you may have to do that versus taking on bank debt. Interesting that you said the second location is, is extremely risky.

I’ve definitely intuited that, but I’ve never heard it laid out quiteso starkly. I asked you a restaurant tours, ask you if any other retail type platforms. They, I think they all agree. I mean, we’re talking to a distiller and wanting to expand, and it’s, that’s, that’s a big leap of faith going from what you’re comfortable with because you can spread your management, then it’s, it’s all of those things that you’re, you’re thinking of.

Right? I mean, it’s, that’s just enough to get you in trouble. How do I deliver the same quality, the same product, the same everything and multiple and multiple cases. Right? And so those are hard, long discussions to have. What are some other really difficult? I guess it’s kind of like a Fermi paradox where you have to get through like a really difficult situation to get to the other side.

So what are some other like besides second location? What are some other really risky events that you see business owners go through? It’s really interesting to get the banker’s perspective on this, just cause you all look at it a little differently. Growing too fast does, I mean, not having sales can kill you growing too fast can kill you.

So it is, it’s really developing a balance between what you can do and, and preparing for that next step. And then that includes grooming the management for that that next site, like we were talking about you know, maybe taking on a different different line of product. It’s you’ve got to also have the expertise in that area.

So there’s, you know, there’s you know, I have a great deal of admiration for a small piece of small business people, because I mean, we were I think the doctor was mentioning, you know, everything that they have to do in order to get done, you know, it’s you, you were at least 10 different hats at one time.

And that’s whether you do it during the day or during the night, You’ve got to do it all. And, and it’s you, especially when you start growing. There are so many different segments that, that could come back to bite you. I do want to go back to, to a mindset of taking on equity or taking on staying in the current cash flow or taking on debt take into consideration the.

Later time that you’re going to have before it starts generating whatever step you’re taking and starts generating enough cash. Cause you know, the us cold-hearted bankers, we have this little thing that we like to get repaid. You know, it’s a, it’s a strange phenomenon that way, but we learned, we like to get repaid your equity is something else altogether is that’s.

There can be very patient and wait on the sideline while you’re building up and, and, and yeah. And then take that. Take the the benefit of that growth. So it just depends on what you’re looking at, what your horizon plans are as to whether or not you need to jump in and take that dead on for our stay within the confines of your own cashflow or take on equity.

And the, you know, also get creative when you take all that equity. You guys are at the Rohner group. You will know that there’s different ways to get repaid. You don’t have to just take ownership. You can take a royalty on a product if you’re doing that. Or you can do some board some other subordination type product.

So it’s, there’s different ways of doing things. It’s just explore the, your options. Yeah. I really appreciate you saying that. I think that’s. Really, what it comes down to is, is taking a look at all the options before he made a decision. And I think to touch on this a little bit, because we do, we do answer these sorts of questions all the time at Ronin for our clients.

And what we found is that there’s really two parts to. The numbers, there’s accounting and then there’s finance. Right? And the accounting is what happened. And a lot of businesses have that some more clearly visible than others, depending on their accounting sophistication. But once you know what happened, There’s a whole nother process of what you think is going to happen in the future and that’s finance, right?

So you know, whether you want to take on debt or you want to take on equity or both, whether you want to match a long-term play with cashflow, with long-term debt versus short-term with short-term the whole asset liability matching principle. Those all depend on having very clear books, really clear numbers and any relationship, whether it’s with a bank or with investors, or really anyone, if you don’t have really clear numbers and a clear idea of what drives those numbers it’s difficult to have these conversations or ask these questions at all.

You’re hitting on that. You’re hitting on that last little thing too. So I look at it as projection, so you can call it hands projection or whatever you want, but be honest with yourself first and foremost. And when you approach banks or your CPA be realistic man, we see some deals, two year old companies that are coming in and they’re going to grow by 200% next year.

And I’m like really? Wow. When but be honest and then some of them, Hey, it might be, and maybe you can’t do that. Well, let’s just be realistic. And, and do your homework, know how you’re going to do that and give us good factual information because that that’s just critical on any kind of projected type financing that we’re going to look at, or the company is going to look at.

And, and again, that comes to that overleveraging thing. So if you give us weird projections and you’re so forward on it, that that’s going to happen and we over lever, you, you can’t hit your targets, then we’re about to trouble. Nope. So, yeah, no. So it’s a, that’s the stuff we love to talk about. So we’ve got five minutes left.

📍 I want to be respectful of time. Are there any other burning desires, any other questions people have that they want to get answered before we wrap for today?

Going once? I don’t, I don’t have any questions. But I just want to say, I appreciate you guys putting this together and for everyone from Keystone being on the call to answer questions and inform them. Thank you. Thank you. We appreciate it. Yeah. Thank you everybody for coming today. Oh, we got one from Jonathan.

What’d you guys say, I’m sorry. I did the hand raising thing. It’s I, I want to say thanks also for the webinar. Thanks to Ronan. We’ve been working with Ronin. I represent I’m here similar to Alex attending on behalf of my wife. Who owns a design company, female run business just crossed a million in revenue.

She’s growing maybe too fast. Got a little bit nervous about that, but one of the things that we’re looking at is we just bought a plot of land where hopefully it’s the future site of her. Team’s office and wondering if Keystone does construction lending for businesses. And then also I was curious if Keystone also does personal banking.

We are, we, we are guilty also of running with large banks and we saw the fallout of that when the pandemic hit. So we’re looking to make a shift. So this is kind of timely, but just, just curious where you all are at on construction for business. The answer is you go first and then I’ll answer both or yes, but y’all go first now.

Yeah, I’m gonna say one thing real fast before they say yes. Why? I said three times this isn’t about bashing the big banks today. Guys. I came from the big bank world. I, like I said, I was at JP Morgan chase where there’s good banks. There’s bad banks. There’s everybody delivers stuff differently.

There’s a, there’s a good reason to use the big bang. Right. And that’s not what this is about, but if you want a good relationship, when a good banker, there’s probably some there as well, but. Community banks are notorious for that. And we, that’s what we’re here for. We’re here to help all you guys cause we’re one of you.

So go ahead and take it away on the other. But I was going to say about that as five one, two five seven seven three three six.

Yes, we do construction to permanent all on one all day long. And we are definitely personable. As you can tell, we don’t have any fun at Keystone. Well, you know, in terms of the personal bank, yes, we One of my goals joined the bank a year ago and since is to kind of round out our offering to make sure that we can bank on the deposit side of the bank, personal commercial, you know, and from every aspect including, you know, HSA, IRA, you know, anything you got.

So and then, you know, the PPP lending process, one of, one of my big pushes this year is to connect. We, we will, that was an unprecedented opportunity for us to make connections with. You know, business owners on both their commercial and their personal stuff. And so my big push this year is to turn those, you know, borrowers into customers of the bank.

And that’s that’s been just kind of a huge opportunity for us, but yeah, any personal commercial, all of it we can do. I’d be happy to talk about the deposit stuff if you wanna reach out to me as well. Yeah. Thank you. I will. I wrote your email address down, so thank you. You Jonathan. Thanks for coming.

All right, well, let’s wrap for today. I want to be respectful of time. Thanks again, Keystone bank one for all the work y’all did for PPP stuff and really helping some folks get across the finish line there. And two for just always being willing to answer questions, help Be a great resource.

You guys really are community minded. It’s really awesome to be connected with you all. So thank you so much for doing that. Thank you to everyone for coming today and asking great questions. And we’ll get contact information out to anybody that wants it. We put Tyler’s email in the chat.

We will probably send out the recording. Once we get it edited a little bit to everybody that attended. And uh, yeah, looking forward to seeing everybody again at the next one. Everybody have a wonderful, wonderful rest of the day. Thanks.