Establishing Link to Lender Can Pay Off

Jack Lantz, president and chief executive of a Monrovia maker of sophisticated resistance and laser welding equipment, will fly to Germany next week to visit his latest acquisition. The trip is a routine matter except for two things of interest to anyone who runs a growing business:

* He borrowed almost all of the $3.5 million he spent in acquiring the target German company, Peco Welding Systems.

* He secured the loan in part with foreign assets--which is to say, assets not within easy reach of his lender, Union Bank of California.

If you have any experience in borrowing from commercial banks--or for that matter, in borrowing from the many non-bank lenders competing to lend to small and mid-size businesses these days--you know that not many years ago it was difficult to borrow capital for an acquisition campaign and next to impossible to borrow against foreign assets for any reason.

Lantz did both, and his story shows that, as outlined in this space in recent weeks, lenders now compete more eagerly than ever before to lend to healthy companies, and a handsome payoff awaits the business borrower who takes the time to establish and maintain good relations with a lender.

Lantz’s relationship with his banker, Ron Bossi, regional vice president of Union Bank’s commercial banking division, goes back a dozen years. In that time:

* Lantz borrowed about $15 million from Union Bank to finance three acquisitions plus a complex leveraged buyout and corporate reorganization in the early 1990s.

* Revenue of his company, Unitek Miyachi Corp., grew from $10 million to $65 million.

If you infer from all this that Lantz understands the basics of borrowing from a bank, you’re right.

To be sure, he runs a tight ship, and Unitek Miyachi’s financials show a strong asset base, a healthy cash flow and solid profit.

But it wasn’t just good numbers that put the privately held company in position to use debt--not equity--to finance its growth. The real key was Lantz’s understanding of the way bankers do business and his willingness to keep his own banker comfortable.

“Ron Bossi is a banker and very conservative,” Lantz said. “And the best thing to do is to make him less nervous. I tell him what I need and why I need it, and if we’re going to have a bad quarter or a bad year, I tell him ahead of time so he can be prepared to answer questions from his bosses and maybe loosen the covenants to my loans when I need them loosened. He doesn’t like surprises.”

Lantz goes even further. He sends Bossi his financial statements on a regular basis. He and Bossi meet for a working breakfast once a quarter, and once a year Lantz gives Bossi a tour of his plant and a formal presentation of his plans, detailing his need for expansion and working capital and the challenges he expects to face, along with the strategies by which he expects to overcome them.

In short, Bossi said, Lantz doesn’t hide the essential facts of his operations, positive or negative. Instead, he treats Bossi as a valued partner in his own success.

“Jack Lantz tells us where he wants to go, and because he challenges us, we ask the right kinds of questions,” Bossi said. “And he listens.

“The main thing is communication. When the business owner helps the banker to understand the industry and the business niche, the banker is going to know what kinds of products and services to provide and when. But the best relationship starts with understanding the business owner’s goals.”

Lantz focuses on the payoff.

“The first acquisition I did was in Holland--a risky thing for a banker to take on because it wasn’t just down the street,” Lantz said.

To complicate matters, the target company--Lantz’s main distributor in Europe--wasn’t profitable, so Lantz had to convince Union Bank that he could pull off a long-distance turnaround. It took some doing, Lantz said, but the bank agreed to underwrite the deal.

“The fact that I had a good relationship with Ron helped me get the capital I needed when I needed it,” he said. “I want a source of capital that doesn’t dilute my equity or that of my managers. Bank financing is the cheapest financing you can get. I learned that it’s really important to have a good relationship with my banker.”

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Juan Hovey can be reached at (805) 492-7909 or at jhovey@gte.net.