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Relationship Banking- Bank loans and Line of Credit

Relationship Banking- Bank loans and Line of Credit. Mike Rizzo Senior Vice President Five Star Bank 3100 Zinfandel Dr., Suite 100 Rancho Cordova, CA 95760 (916) 851-5443 mrizzo@fivestarbank.com. Five Star Bank. Who are we? Established in 1999 in Rocklin

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Relationship Banking- Bank loans and Line of Credit

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  1. Relationship Banking-Bank loans and Line of Credit Mike RizzoSenior Vice PresidentFive Star Bank3100 Zinfandel Dr., Suite 100Rancho Cordova, CA 95760(916) 851-5443mrizzo@fivestarbank.com Progressive Professional Personal

  2. Five Star Bank • Who are we? • Established in 1999 in Rocklin • Serve the regional CRE and business markets • Sub-S bank • 465M in assets • Offices in Rocklin, Natomas, Rancho Cordova, Elk Grove, Redding and Chico (LPO) Progressive Professional Personal

  3. Banking During the Great Recession • Residential Mortgage meltdown with national banks and investment banks • Downward spiral of national, global, state and local economy • Consumers stop spending • Businesses downsize and/or go out of business • Unemployment increases which perpetuates decreased consumer spending • Commercial real estate falters because tenants become scarce as businesses go BK • Regional and community banks take losses as businesses and CRE developers and business owners can’t pay back their loans. Progressive Professional Personal

  4. Lessons Learned • Too much leverage is a bad thing (just ask a real estate developer) • Must be able to Scale Up (AND SCALE DOWN!) • Large fixed cost could be detrimental • Liquidity, aka cash, is king especially when your fixed assets are underwater Progressive Professional Personal

  5. Banking and Business Today • Businesses are healthier • Quality loan activity is up • Banks are optimally cautious • Yet, two out of every five California Bank’s under regulatory order Progressive Professional Personal

  6. What’s the Right Bank for You? • Strength (liquidity, capital levels, earnings power, loan loss reserves, portfolio quality) • FFIEC - https://cdr.ffiec.gov/public/ManageFacsimiles.aspx • Is your banker a “trusted resource” or an “order taker”? • Relationship Banking • Where are the lending decisions made? • Do you personally like your banker? • Do they personally like you? • Shop Local- Bank Local Progressive Professional Personal

  7. What kind of lending do they do/can they do/want to do? • Industry types • Loan Types – CRE, C&I, Consumer • Loan size • Company revenue Progressive Professional Personal

  8. Approaching the bank • Referral to the bank from an advisor, industry expert, CPA, attorney, etc. • When is the best time to come to the bank and what should I expect? Progressive Professional Personal

  9. Deposit Services • Are you just looking for money? • What kind of Deposit Services do you need? • Remote Deposit Capture • Courier • Night Drop • ATM • Cash Management • Online Banking • ACH • Wire Transfer • Positive Pay Progressive Professional Personal

  10. Loan Types • LOC- 30 day resting • A/R formula LOC – monthly formula • Perm working capital (SBA) • USDA • Equipment Loans 2-5 year term installment debt • Tenant Improvement – unsecured • Letter’s of Credit (LC) • Real Estate – Conventional and SBA Progressive Professional Personal

  11. Balance Sheet vs. P&L • Are you solely focused on the P&L? • Learn to read your Balance Sheet • Your bank looks at the balance sheet first Progressive Professional Personal

  12. Sample Industry and Loan Type • Smart Grid – SBA and LOC • Bio Engineering –Venture Debt – term and A/R LOC • Energy Efficiency (Manufacturing/Distribution) – Term, LOC, tenant improvement • Electrical Contractor - LOC • Network engineering/network security - LOC • Solar – Project Finance • Geothermal – LOC/Equipment • Software – SBA and conventional • Telecom – LOC • Window Coverings – Manufacturing/retailing • Attorney Firms – LOC • CPA - LOC • Non-Profits – LOC/ CRE • Hardware component – Venture debt • Restaurants – Tenant Improvements/equipment • General Contractors – LOC Progressive Professional Personal

  13. Live Example –Manufacturer of Smart Grid products • Long time company that finds itself in at the doorstep to the “smart grid” • Needed money to seriously go after this market, although it was related to the technology they had developed over the last 10 years. • Solution: SBA loan to purchase goods necessary to fulfill new orders and to payoff existing debt Progressive Professional Personal

  14. Live Example – Hardware Component Manufacturer • Incredible technology to increase manufacturing efficiency • Funded with Venture Equity • Bank augmented venture funding with LOC to help cash flow needs • Company exit!!! Progressive Professional Personal

  15. Live Example-Energy Efficiency • Manufacturing and Distribution Growth Company • Needed to leverage A/R and Inventory to maintain growth (fulfill their P/O’s) • TI needs for growing office environment • Term Lending for significant CapX • Company exit! Progressive Professional Personal

  16. Live Example- Commercial Solar PV, PV and Energy Retrofit • Project based • Based on project cash flow • Knowledge of manufacturer and/or installation contractor Progressive Professional Personal

  17. Live Example- Software Company • Mature industry insider with a penchant for software design • Early stage- development • Did not want to bring in significant outside investors • Conventional bank financing using real estate collateral Progressive Professional Personal

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