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In this In The Thick of It Toolbox episode, Yobany Mayen, Senior Vice President at Encore Bank, talks about the importance of entrepreneurs and businesses having a solid banking relationship.
Scott and Yobany discuss the impact of interest rates, the role of personal guarantees, cash management, fraud prevention, and lending processes for small to medium-sized businesses.
Yobany provides practical tips for approaching banking relationships and shares insights on what business owners should look for when developing a financial plan with their bank. This discussion equips aspiring entrepreneurs with valuable information to navigate the banking world more effectively.
***
About Yobany:
Yobany Mayen has over 20 years of experience in Commercial Banking spanning three financial institutions and two areas of expertise: Commercial Relationship Management and Treasury Management Services. After graduating from Texas A&M with a finance degree, he entered the Commercial Banking Analyst Training Program at JPMorgan Chase Bank, spending time in New York, Austin, and San Antonio, TX, where he currently resides. Later, he moved to Amegy Bank, a division Zions Bancorporation, and now is at Encore Bank as an SVP, Treasury Management Regional Sales Leader and shareholder. He earned his Certified Treasury Professional (“CTP”) designation in 2003, serves as the President of the San Antonio Association for Financial Professionals (“SAAFP”), and is a volunteer committee member for one of the largest regional annual trade conferences in his industry (TEXPO), which will be hosted in San Antonio in 2025.
The recurring themes of his career through a large, medium, and small bank are: winning as a team, finding financial solutions to help clients achieve their goals, and enjoying building relationships with interesting and successful people. Two of the most interesting people he knows are his parents, who immigrated to the United States at young ages, worked hard to be successful in their own careers, and supported him as a first-generation college graduate.
He is married to Angie Lewis and has a blended family of 7 kids, 5 grandkids, and one Cavapoo named Bentley. He and his family attend Northeast Bible Church in Garden Ridge, TX and volunteer in the children’s ministry.
About Encore Bank:
Encore Bank was established in 2019 after its founders moved to the Capital Bank, rebranded it as Encore Bank and began its remarkable growth journey. Starting with just $159 million in total assets, seven employees and a single office, Encore has since expanded its presence into 19 markets across seven states. As of May 15, 2024, Encore Bank had $4 billion in total assets. Headquartered in Little Rock, Arkansas, Encore Bank is a privately held, commercially focused bank that couples highly experienced and talented bankers with innovative technology to offer unprecedented levels of service to its clients through a hospitality-inspired concierge approach. Encore Bank provides a full suite of financial products and services with purpose, passion and precision.
To learn more, visit bankencore.com
***
If you or a founder you know would like to be a guest on In The Thick of It, email us at intro@founderstory.us
Creators & Guests
What is In The Thick of It?
Join Scott Hollrah, founder of Venn Technology, as he takes you "In the Thick of It" with the real stories of founders who are actively navigating the challenges and triumphs of running their businesses. This podcast goes beyond the typical entrepreneurial success stories and delves into the messy, gritty, and sometimes chaotic world of building and growing a company. Get inspired, learn from the experiences of others, and gain insights into what it truly means to be in the thick of the entrepreneurial journey.
When you're dealing with a bank and a request, and if you have a formal package,
you should get a pretty good indication yay or nay within a week or so.
And then you can nail really down the details, right?
Is it a million and a half that you'll let me borrow?
Is it a 1,750,000?
Or what's the rate?
What flexibility.
And feel free to negotiate respectfully.
The other part I don't think a lot of business owners think about is it's okay to ask the bank,
hey, tell me how you make money on this deal.
Tell me what would make this deal good for you.
Because I'm telling you what makes it good for me.
I need that money now.
I need it for this purpose.
I need ten years to repay instead of eight.
And it should be a collaborative process where you can both win.
Welcome to In The Thick of It Toolbox, the special series where inspiration meets implementation.
Here we don't just share success stories, we equip you with proven tools and strategies
from seasoned founders, turning entrepreneurial dreams into actionable plans.
Prepare to be enabled and empowered on your journey.
You're not just listening to a podcast,
you're gaining access to an essential toolbox for your business success.
Let's dive in.
It's no surprise the biggest challenges startups often face have to do with money.
It's important for business owners to find a trustworthy banking partner
who can educate them and keep their business on the right track.
In this episode, I'm joined by Yobany Mayen, senior vice president at Encore Bank.
He and I dive into the impact of interest rates, the role of personal guarantees,
and cash management for small to medium sized businesses.
We also touch on the role of technology and finance trends,
and changing customer payment preferences, such as crypto.
If you're an aspiring entrepreneur, you'll gain practical tips for approaching banking relationships
and learn which questions to ask when developing a financial plan for your business.
Welcome to an In The Thick of It Toolbox episode.
I'm thrilled today to have a long, long time friend, Yobany Mayen.
We go, man.
Well over 20 years back, back into our young adulthood and in our college days.
So, Yobany, thanks so much for joining me.
It's great to be here.
All right, so our topic today is about banking and just the importance
of a solid banking relationship for any entrepreneur, any business.
And before we get too deep into the topic, maybe just walk us through what got you into banking.
What was your early career like and where are you at now?
What kind of banking are you doing?
I love the story because it comes down to the relationships we have.
And when I was a junior at Texas A and M in the business school, there was an
organization called Fellows, which I know you're familiar with, that provided
an opportunity to get up close and personal with some great firms that were
recruiting business students, primarily the accounting firms and the banking
firms.
So I had the opportunity to meet folks from JPMorgan Chase, which I would later go to work for,
in a very relaxed, laid back social environment.
And they were smart, and they were fun.
They were well dressed.
They worked the room.
And I said, man, I like these people.
I'd like to be around them more.
And it turns out they had an intention,
they had a purpose in being there beyond just having a good time.
And they told us about the internship.
And so I ended up applying for an internship with JPMorgan Chase, had an opportunity
to do that in Houston, and that was my intro into the world of commercial banking.
Had an opportunity to get hired on.
And so for me, it was an opportunity to interact with folks,
find some people I liked, and said, I want to spend more time with you.
And it ended up becoming a career.
That's awesome.
And you were there for quite a while.
And what kinds of things were you working on at JP Morgan Chase?
I did almost nine years there, and it was a great place to start.
As a young graduate, they had a very formal credit training program,
had the great opportunity to go up to New York City.
And as a texan who was born to immigrant parents, I had never been to New York City.
And the pitch was, we're going to put you up in a corporate apartment,
which, by the way, costs more than what we're going to pay you,
and we're going to expect you to work really hard with a group of cohorts.
So we had young folks from the west coast and the Northeast, mostly liberal arts colleges,
and then a group of Texans from Baylor, a and M ut, Rice, SMU.
And they basically did a crash course business finance degree in a matter of four months.
And we had full days.
We had case study work and group work.
And it was challenging and fantastic.
In fact, I always tell folks it was one of the most diverse groups of people
from an ethnicity, a cultural, a religious, even age.
We had some people.
We had a young man who was a survivor of the 911 terror attack in New York
and decided he wanted to go into a completely new career, who's in insurance.
And he showed up as like a 30 year old with a bunch of fresh college grads and he did this program,
so just an inspiring group of young, talented, hardworking folks.
And it was a hard program, but I ended up completing that placing in Austin, Texas.
And that's where I started my formal banking job as an analyst,
was promoted to an associate, and then JP Morgan Chase merged with bank one.
It was a mega merger.
At the time, Bill Harrison was a CEO and Jamie Dimon,
a very popular name now probably the best big bank CEO of our lifetime.
I was a young banker and had the opportunity to step into a relationship manager,
or what people would just call a commercial banker role, with a portfolio
of clients and an opportunity to grow a little bit earlier than I would have otherwise.
And so I think my satisfaction with JPMorgan Chase was I was in the right place at the right time.
I had done the work expected of me,
so that when an opportunity came, I was ready to take the challenge.
Had a great group of senior bankers and managers above me and really enjoyed that platform.
Had the opportunity to relocate from Austin to San Antonio, which is where I grew up, with JPMorgan
Chase in a bigger role, a larger group of clients, some more sophisticated financing arrangements.
And so that's what I did at Chase.
And then right at the tail end, my boss asked me,
hey, you know, we've lost a product partner, what we call a treasury salesperson.
So the RM, the banker primarily focuses on lending.
Now they own the whole relationship.
They're the quarterback.
That's a metaphor people get, but they bring in product partners.
Maybe we have a client that does a lot of foreign business and they need
to deal in foreign currencies, so we bring in a foreign exchange expert.
Maybe they deal with a lot of heavy equipment, so we have an equipment finance expert,
or maybe they're concerned about interest rate movements, which we've all seen recently.
So there's interest rate hedging, so there's all these specialists that can work.
But the most important one, the one most often used is a treasury specialist.
And it's not somebody that does us treasury bonds,
but in fact, it's the treasury function of a business.
The collecting of revenue, the disbursement of payments, tracking the information.
Just as simple as how do I see how much money I have and where is it and is it safe?
I was asked to step into that role as a partner
to relationship managers because we had lost a good TM sales officer.
We had a new one that didn't last very long, and we just had a tough time finding a good one.
So I was asked to do something.
I wasn't expecting some might have viewed it as a slight step sideways,
if not back in order of importance.
The relationship manager runs the relationship.
The TM guy is the partner.
But I said, interesting.
Let me learn more about it.
Long story short, I said, I'll give it a try.
If I don't like it, I'll just go back to being a banker or commercial.
RM well, here I am 13 years later after that move,
and I've really enjoyed being a treasury management specialist, more of a product partner.
But that's how I ended my time at Chase was on their treasury management side.
Had a stint, well, longer than a stint,
eight years at Amogy Bank, a regional bank here known in Texas.
They have sister banks in California, Colorado and others.
Part of Zions Bank Corporation, about a hundred billion dollar asset bank.
For the listeners out there, when we measure bank size, the most common measure is asset size.
So you start at the top.
JPMorgan Chase today is a $4 trillion asset business.
Humongous.
$4 trillion with the t.
And there, I can't wrap my head around that.
It's astounding.
And again, Jamie Dimon, fantastic job.
You go to bank of America.
City and Wells is the next three.
None of them are above four.
And so that's how the, it starts at the biggest zions where,
you know, amogy was part of that, is part of that.
And where I worked next is only 100 billion.
So definitely a regional bank.
And for the entire eight years there, I was the treasury guy,
and I got to work here in central Texas, Austin, San Antonio, one of the most vibrant economies
as part of the Texas triangle and had a lot of fun being a little more free.
JP Morgan Chase, fantastic bank, very structured.
When you have 4 trillion in assets and I think over 250,000 employees worldwide, you have
to have systems in place and you silo things and you wall them off and you have industry verticals.
And so the trade off of a big bank is had all the coolest tools, had all the best solutions.
I had the smartest people available that I got to learn from.
The trade off is a narrow customer base.
Maybe it was deep, but it was narrow.
And so the opportunity to move to amogi here in central Texas was, the pitch was, do what
you're good at treasury solutions, but you get to call on any size customer, little to huge.
Anyone you can go after, go for it.
And that really scratched a niche that I had said, all right, let's try this out.
Had a great run there for seven years, about eight years.
And then where I'm at currently encore bank.
The move here was, okay, let's take it to the next level.
I bumped into an aggie that we both know a little a few years older than me, Lane Allen.
And he said, I've been tapped on the shoulder and provided an opportunity
to bring an Arkansas based bank to San Antonio.
But I've been asked to be an investor and to bring in employees and investors in this market.
So it's not just going to be an out of State bank planting a flag here.
We're really going to run it like a San Antonio bank.
And we have one in Austin and Dallas and Fort Worth.
And if you're willing to start from zero customers, zero loans, zero treasury business,
and be a part of a team to grow something, this is for you.
And I said, sign me up.
So those are the three banks I've worked for.
The mega money center bank, the regional bank, and now an upstart boutique commercial bank.
Man, you're very adaptable and you're always up for adventure, and that's something I appreciate.
The Texan moving to New York for a little bit.
And then as these different opportunities have presented themselves and you've been asked
to take on different roles, you've said, yeah, man, sign me up, let's do it.
And man, I just love that about you.
Thank you.
So, man, talk to me about being in banking for the past 20 plus years.
How much has it changed from day one?
And obviously, like you said, you talked through some examples about the difference
between working for the biggest bank in the world and working your way down.
But maybe at a more macro level, how has banking changed in that time or has it changed?
It definitely has.
In certain regards, there is a tendency for the big to get bigger.
I mean, the term that weve heard, even people that dont read
the Wall Street Journal or Financial Times, is too big to fail.
And so being at a JPMorgan chase 0708 and seeing
TARP troubled asset relief program and what the government tried to do to help.
Right.
We don't get into politics here, but the government tried
to do something that they thought was needed.
Banks needed to be a part of that, because we are a core backbone to
the business community in the US, the role that the Federal Reserve plays.
So from my undergraduate studies, bank financial management,
to being able to see how that really played out coming into the career post tech burst,
I came out in zero three going through the zero seven, eight downturn.
Covid I mean, man, there are all kinds of crazy stuff that happens.
What tends to happen that I've seen is even though we've had some big failures.
So looking at how bank last spring break was a big painful situation.
Silvergate we've had some failures, quote unquote.
But if you look at the asset size of banks as referenced earlier,
it's just consolidating to the bigger banks.
That trend is continuing.
I think I've heard the number of banks in the US,
you know, it's down from 5030 years ago to less than 3000 today.
And if you were to put it all in a table again, starting with the biggest,
it's disproportionately aggregated at the top.
And that has some pluses.
If you're a startup company that is just skyrocketing in growth and needs access to the global
markets and all kinds of crazy stuff, you can get it at a one stop shop like a big, big bank.
But there are very important roles that a community bank and the regional banks play,
because most young founders need a little more handholding.
Most small business and medium business owners that are
concentrated to a small group of owners want that personal relationship.
And you don't always get that with a group inbox or a 1800 number.
And so there are some trade offs.
But I would say, going back to the question,
what's changed is with the shocks of the financial system, it tends to support the biggest banks
can absorb those shocks, which is why they have capital to absorb those shocks.
Continued merger and acquisition activity that consolidates
and reduces the total number of financial institutions.
Interestingly, credit unions are a big deal here in Texas,
we have some of the biggest in the country here in San Antonio,
specifically with our military city, USA, you know, well known reputation.
We have security service, federal credit union, Randolph Brooks, Federal Credit Union.
And these are in the billions of asset size.
So that's one big trend.
And two, you've heard fintech, man, everybody loves.
Now, it's of course, AI, artificial intelligence, but fintechs are out there saying
banks are boring, banks are old, we're cool, we have an app, crypto, whatnot.
And so they're a bigger player.
But in many cases, they partner with banks and they want and need banks to deliver their solution.
So it really enhances a consumer bank's experience, you and I,
with our mobile apps to our personal banks and even business clients who want a little more access,
like Zelle, for business and other types of things.
So number one, consolidation to the biggest players.
Number two, the advancement of technology has affected our industry.
Originally perceived as a threat, I would say more friendly competition and really collaboration.
And the regulations no doubt are going to continue to get tighter because as troubles happen,
the regulations are there in place to try to prevent those from reoccurring.
But as we know, we're very smart and dumb people, there will be a new crisis.
It might be a little different flavor, but we'll just keep this cycle going of trying to make
up for the sins of the past and keep our system strong and being able to absorb those shocks.
Preston, I don't want to go too, too deep on this, but you mentioned crypto and man,
not necessarily speaking on behalf of the bank, but where do you see crypto going?
Do you see it playing a big role in our finance system and our banking system in small,
medium sized business world?
I think it's sexy and new that always gets attention.
It's good for headlines, it's good for people to dabble in.
I personally don't own any, but it kind of would have been fun to have,
you know, some early bitcoin or all these other types.
Obviously, Elon Musk, a market mover, talking about his dogecoin and whatnot.
I think, and I don't know a ton of it, but I think on an underlying technology basis, this public
blockchain aspect, which does have implications into banking and other business transactions like
title services, to have an independent place, a third party, if you will, that's subject to public
scrutiny, to ensure that this information is accurate, isn't manipulated, available to other
folks.
That's interesting.
I think that is interesting.
I think it may be a little over exaggerated at this point.
The aspect that concerns me, having grown up in commercial banking, I have my slant
where in every role I've had at big, medium and small banks know your customer
as a result of the USA Patriot act, which came to be after the 911 terrorist attacks.
To understand, banks need to know their customers, they need to know what business they're involved
in, where the money comes from, why it's there to help the government find people doing bad things,
from drug trafficking to terrorism to other really unsavory things.
And so I get it.
And it's always been a part of my job, even as the treasury guy in the second part of my career,
to ask why, why do you have these large checks coming into your account?
Why do you need to come and get out $10,000 of cash?
Why do you need access to international wires when your business is a local restaurant?
So those are questions we're ingrained and taught in commercial banking.
And that's the part that gives me pauses to have a currency
that in some cases allows for a lot of anonymity from beginning to end.
That just puts up a little red flag in my mind, saying people can use that for nefarious purposes.
So I don't think it's going to go away.
I think some of the underlying technology might be adopted by banks and certain transactions
and other business services, but the crypto aspect, you know, I'm suspicious of.
And the Federal Reserve has talked about, they're researching a central bank digital currency.
You know, get out your tinfoil hats.
You can really cause a stir depending on where you bring up these kinds of topics.
Family members that I know included.
But I say, interesting.
I don't put a lot of stock into it quite yet, but I enjoy reading about it on occasion.
I'll admit that I did buy a little bit of doge I didn't like, go put all my life savings.
And I'm just, I'm waiting for that tweet from Elon that takes it from where it's at right now.
Like sixteen cents to, you know, man, if that just went up to a dollar,
man, life would be really good.
So small bet if it hits, great if it doesn't go well.
But did you get a t shirt with that at least?
Did you get any swag?
You know, I did.
I should ask.
Um.
All right, so I'll back up.
One of the very first things that I did when I started my firm was went and opened my business
checking and savings account and think I got a credit card at the same time.
And over time, that's evolved into lines of credit and loans.
But, man, you touched on some things that I think go below the surface
of what people think about when they think about banking.
Right?
I think it's pretty natural to think about deposits and loans, but you talked about all these
other different kinds of treasury services and the ability to send wires internationally.
And you even mentioned Zelle, which has actually come in really handy a time or two for us,
even recent history, man, maybe just expand on what is the world of
banking products that may not immediately come to mind for people?
Great question.
Classically in business school, we learn about the cash conversion cycle,
how a business takes cash to buy the raw materials to produce the products or services they need,
and then the process of billing for that and actually getting paid for it.
And that whole CCC, the cash conversion cycle, we mirror that in banking and in treasury,
specifically treasury services, to say, how can we facilitate that more efficiently?
So on the paying for goods or the paying for raw materials or folks to do the work, obviously
in your business, takes smart people doing some programming and working with other systems.
So those are billable hours.
And so things like paying old school, right?
All the way from the most basic and cumbersome to the newest.
So cash, obviously is still there.
And then you have your check writing,
which unfortunately is still the number one form of payment in the US for businesses.
As long as ever since undergrad, I've been hearing checks will die.
Checks will no longer be in existence for all the good reasons.
They're prone to risk.
They're expensive, they can get lost in the mail.
Your account and routing number is right there.
Yet they are still persistent, and businesses still have old processes in place to use them.
And you step up to ach or e check, efT.
We have a very efficient ach network in the US to settle electronically
payments that you would otherwise send via check and cash.
But beyond that, and then you have wires for large value,
urgent payments that need to get there today that cannot be reversed once they're settled.
So we can, you know, most of your audience,
think about when you bought your first house or your last house.
You settled via wire, because that couldn't be reversed
and the title company knew it was good and collected funds.
Then you have things that supplement that we mentioned, Zelle, Zelle, consumer Zelle for business.
We mentioned, or we've talked, many people would know about cash app, Venmo, those types of things.
And interestingly, most of those on the back end,
the underlying settlement, payment rail, so to speak, it's Ach.
There are new, the most innovative payment, the newest payment system,
or rails that's out there is real time payments or fed.
Now, those are slightly competitive electronic settlements that are immediate.
So whereas an ACH settlement is usually batched or scheduled in advance,
the Fed now and the clearinghouse's RTP, real time payments, is immediate.
And it has some other functionality around information.
But for the folks listening to this, the small business owners, the entrepreneurs, it has expanded.
The ways in which to pay has expanded.
And it's very convenient to fire up your app, as you mentioned,
and send us all payment to a cell phone number or an email.
When you don't have the account number now, there's some risks and trade offs,
and when you scale, that can be harder to do, but that would be the payment spectrum.
Similarly, on collecting, so you do your, you sell your goods, you provide your services,
you send an invoice, you want to get paid for that, that corporate, that person can pay you
through all those same methods, check, cash, ach wire, and these modern electronic methods.
And some banks have provided online websites for your clients to register
so that you never get access to their actual account or routing.
It gives them a little more comfort to pay you electronically.
And so those are some of the advancements I think entrepreneurs can take advantage of.
And depending on what industry you're in, maybe you're very technology friendly
and you're online solution provider or you're heavily dependent on an app experience,
then you can just plug things in and folks don't know the underlying features.
They just go, okay, I can authorize my account through stripe
and I give you my debit card and it all works great.
So it has gotten a little more complicated.
And I would say if you're working with the credit union, a small, medium or large bank,
having somebody, you can sit down and say, here's my whole business flow.
This is what I do.
These are my objectives.
I'm very sensitive about risk, or I really need this money quickly because
I borrow a lot and I want to pay that down and avoid interest expense.
Those professionals can help you balance priorities and say, all right,
for this payment flow, this is the most efficient tool.
This gets you the objectives you want because it really is speed, cost, security.
And as you scale, you need a lot of information.
You don't just want to get a check or an ach into your account for $10,000 and not know
who it came from, what work it was supposed to pay for, what lot of product you sold.
The scaling aspect really involves more information
so you can post those payments accurately and timely to manage your receivables process.
That ends up being a lot more important than I think business owners first think of.
They just think, get me the money, Robert, every once in a while,
well have some deposit, hit our account.
And every once in a while I have to dig through and im like, I have no idea what this is for.
I totally, totally feel, you see its a great problem to have people throwing you money,
but you want to make sure its from the right place.
It gets applied to the right account.
Youre responsible for it.
Your doc, your numbers, your financial statements need to be accurate.
Yeah, man, I'd mentioned how Zelle had kind of come to the rescue recently.
We had a situation where we had onboarded a new intern
late last year and we had a hiccup getting them set up in the payroll system.
And man, from where I sit, there are few if any things that are more important
in the employee employer relationship than timely, accurate pay.
Bingo.
And for someone for their first pay period,
to not wake up that morning and see that direct deposit, like, I'm just not okay with that.
That's just huge, huge breach of that relationship.
And so, man, we had to go clean things up on the back end.
But being able to hop into Zelle and send this person money,
and it was there instantly and it was as if the payroll had run correctly, that was a lifesaver.
And so theres been a handful of things like that.
And some of these modern innovations are just, man, they had a lot of convenience, for sure.
Yeah.
And thats the play.
Whats stereotypically understood as that innovators benefit is were going to go a little fast
and crazy because theres a need that we need to fill now and well fill in the gaps later.
Well do the compliance later, well tighten it up later, and there's a place for that.
Your traditional banks can be a little slower.
And interestingly, Zelle, for the listeners that don't know,
it's owned by a company called Early Warning Systems, which is owned by a group of banks.
So PayPal, Cash app, Venmo, et cetera, the bank said,
we want a piece of that action, we're going to do it our way.
And so, yeah, Zelle is brought to you by your neighborhood's largest banks.
Interesting.
And to your point earlier about the employee experience, it puts trust right in the middle.
Hey, can I trust my employer to compensate me the right way and timely for the work I do?
That same principle applies to banking relationships.
So for the entrepreneurs out there,
yes, functionality is a very important discussion to have with your bank.
I need these services and solutions and monies in and out
and access to information to make my business work fine.
I don't want to have to worry about banking every day.
That's what my clients tell me and that's what I encourage them.
If things work well and I do what I'm supposed to do, you don't really think about me.
You just fire up your app, your AP and AR folks work just fine.
But trust is a big part of that.
And having a person you can talk to, I would encourage those listeners out
there, whether again, it's a credit union, a small, medium or large bank, to
have someone you can at least talk to and check in to do relationship reviews
on a regular basis, because your business is growing and your needs may
change.
And you want your financial partner, your bank, to be right there with you, not lagging behind.
Robert.
So, man, you said something there about responsiveness and even get a hold of somebody.
And im just going to speak from personal experience, my own anecdotes,
full disclosure, weve got accounts at big, big banks.
Weve got accounts at a medium sized bank and full disclosure,
weve got accounts at encore where Yobonis at.
But man, that responsiveness thing is just such a, such an important thing.
Like when you need something, like you need it, you can't wait.
And part of what got me to shift away initially we had accounts just with one very large bank.
I'd rather not say who, but I would get a call.
It was very clear that we're just a number.
And you know what, don't get me wrong, like the big banks, there's definitely a role
for them and we still maintain some small balances there and do a little bit there.
But it is very, very clear that we are just a number.
And if we were to take our accounts elsewhere, they could care less.
And I would get a call once or twice a year from someone who was quote unquote my banker
and im pretty sure that the only reason they called was because somebody told them,
hey, heres a list, call these people, offer them this product,
get them to bring over x amount of deposits, blah, blah, blah.
But when I needed something and I would call this person who was quote unquote my banker,
I could call, I could email and I would never hear from them, like never.
And so that leaves me dialing into this offshore call center where it's cold
and there's nothing personal and I'm trying to ask questions to this person that
literally is just reading off a script and I can't get anywhere with them.
And so for me, it's been really important to have relationships kind of
throughout the spectrum of size of banking where when I need to talk to a
person, I've got the cell phone numbers for my bankers at encore and I can
send a text to, I won't say names but I can send a text to people, I don't
get a response.
And that's just such an important thing.
It's a pretty awful feeling when your money's kind of locked
up and tied in with people that won't return your calls and emails.
Right.
And to your point, I will call out the positives of every bank out there.
I search for it because the economy in the US is so big and our communities are so
diverse and dynamic, there's enough pie out there for all the banks.
So it's not, no one bank has to throw down another to feel good about themselves.
And so a big, big bank, again, we talked about earlier, scale, speed, sophistication.
And if you're good with a general inbox and a 1800 number, and twice a year call when the CRM pops
up a notification to that quote unquote assigned banker, then that's a great trade off.
And that works for you.
Great.
If you're looking for more personal accountability and knowing that, again, yeah.
If Scott were to call me and say, I have a problem, to know that I will take it to
the highest levels of my organization, which again, is 350 people, but to be able
to get to the CEO, the COO, our head of it, and say, this is important, and I'm
not going to get off of your case until we can deliver a satisfactory resolution.
That's what we get to provide as a community bank.
And the middle sized bank is a little bit of both.
Just an honest conversation.
And there are clients I've had at all three of the institutions I've worked at where I have
to honestly look at their needs, look at myself in the mirror and say, you know what?
I'm not the best fit for you anymore.
I was.
I'm no longer the best fit.
And you know what?
I have good relationships with other bankers at different banks.
I'm going to introduce you.
Man, talk about a breath of fresh air to that business owner.
And I can sleep peacefully at night knowing I don't have
to bend over backwards and try to do something I know I can't do.
Well, why not just hand them off to somebody that can?
And that's the kind of respect in old school banking I learned
that I think we could all benefit from.
Just like a business owner.
Hey, I was great for you at this stage, or once you get to this size, I'm the right spot for you.
Until then, talk to my friend sue.
Talk to my friend Bob.
That's what we should do as entrepreneurs and as service providers.
Man, I couldn't agree more and kind of going off on a little tangent here.
When I meet other people that are in our space that just want to,
like, hold it all close and they don't want to talk about anything.
They don't want to talk about what they're seeing in the space,
and we're competitors, and, man, the pie is big enough.
There's plenty to go around.
We can cooperate.
And, man, you know, there's this phrase, a rising tide floats all boats.
Man, let's help make one another better, and let's improve this industry.
That we work in for the betterment of everybody.
And I really wish more businesses would take that mentality,
whether youre a massive company or youre somebody small.
And so honestly, and for those who are listening, thats been a huge part
of our success in my business has been were going to collaborate with people.
Were not going to treat everybody like theyre a competitor.
And it has served us very well because theres been times where
weve gotten calls from people that said, hey, were too busy, we cant take this on.
I really want to see these people get what they need
and theyve sent stuff to us and weve done the same.
Theres times where, to your point, were not the right fit for everybody.
And being able to throw something over to somebody that you know and trust and respect,
even if theyre your quote unquote competitor, it will come back to benefit you in the end.
I totally agree.
In your audience in particular, reputation is huge.
Their name is their business for so much of the entrepreneur and the startup guy or galaxy, and that
may grow and you bring in new partners and you have a company name, but it's still personal.
And in banking, I think people, clients can think you don't care.
It's just a bank.
And I consider a commercial banker in the role that I
play as a treasury specialist to partner with them.
Our reputation still does matter.
Again, I've moved twice, may not be the last move.
And so those peers I know in the community, as you mentioned,
there's still a personal level of reputational value, whether they're carrying a Wells Fargo flag
or business card or a chase business card or community bank a, community bank b.
And I think personally, I value that.
And I want to have great relationships with as many clients as I can,
even when those clients don't fulfill their side of the deal.
Right.
We're in banking.
We've talked all about the fun, exciting new things.
Well, some of the most basic things, like lending money, we don't always get paid back.
Customers get into a pinch.
The business plan doesn't work out as planned.
Someone takes advantage internally and commits fraud.
Oh, my gosh.
We get to deal with some pretty nasty situations.
We see the personal financial statements of the guarantors.
We see the business financial statements.
We see the rent rolls, commercial real estate loans.
And so integrity is important on our end,
and we rely on that business owner who signed a note, a guarantee, to do their best.
And so, ma'am, I think the business community, especially in banking, has a long history,
a long memory, actually.
And so if you don't hold up your end of the bargain
and you don't act on the up and up that follows you.
And similarly, as a service provider, and I've listened to some of the other episodes,
the outsourced accounting and HR, our reputation, what we do individually with every client on
the phone, day in and day out, is just as important as the big company we may or may not work for.
And so I'm encouraged that you and I align on that.
We can help each other out and we can benefit in the long term being a good player in the space,
whether we're on the client or provider side.
Without a doubt, man, you mentioned fraud or people
dealing with an employee, embezzling or something like that.
Man.
What are some safeguards that an owner can put in place to
prevent themselves from waking up one day in that situation?
That is a great question, and it gives me an opportunity to tell the hard truth.
Small business entrepreneurs don't like to hear, and I don't have the exact stat,
but I believe it's the number one most often committed fraud is internal.
Whether it goes back to when I was working at Blue Baker in College station during school,
and the owner, Dave Fox, would say, I'm not as concerned with people breaking into this building.
I'm concerned with the people I trust inside.
Wow, man.
That's the case.
I could tell you countless deals where the CFO, the accounts payable clerk,
manipulates the lack of internal controls to take advantage of it and steal money themselves.
These are considered, quote, white collar crimes.
The dollars are big and people go to jail and people have, you know, significant consequences.
So to the business owners out there, I would encourage you, number one, segregation of duties.
Map out these processes internally and with advisors
to show that someone can't take advantage of a lack of oversight or a lack of accountability,
that the person who writes the check and authorizes it doesn't also mail it.
Right.
You need segregation of duties to ensure there's accountability.
Second, there are services that banks provide.
A common one.
I was talking about it with the prospect today.
Positive pay for checks.
As boring as, hey, I write ten checks a week.
Okay, well, after you do that check run and you print those checks in house,
send a simple excel file with the pay name, account number, amount, date,
and we will make sure to review every check that clears your account.
Business owner and if it's modified, if it's duplicated, or if it's not even on your list,
we're going to let you know, provide you an image, and you get to say yes or no.
Oh my gosh.
So simple, nothing fancy.
If the business owner is willing to take that one extra step, send us the info.
We'll make sure nothing erroneous, duplicated or not even on the list goes through.
Similarly on AChs nowadays, we talked about the benefit of electronic.
Well, I go online, I authorize Verizon to debit my corporate cell phone package.
I authorize the it provider on my copier and printer and website.
You're getting debited.
You're getting hit with electronic withdrawals from your account
as a matter of convenience, personally or Netflix type stuff.
Well, for the business, they should screen that as well.
And so positive pay for ACh, it's called other things by banks.
ACH debit block filters creates the ability for you to create a good list
with a unique identifier for everybody.
Debiting your account to control when and how much.
So those are two simple services that most all banks provide
to monitor your accounts and give you a last look per se.
And then those internal controls just on the human aspect, unfortunately.
Think about how someone could take advantage of the setup, access to checkstock, access to online
wire initiation, ach payment, even Zelle, and have those honest discussions, because
it's the basics, the blocking and tackling of that, and then the bank can help supplement it.
The other thing I mentioned earlier was relationship reviews.
You should be sitting down with your banker and team once a year at a minimum to go over.
All right, here are the accounts I have.
Here are the activity.
Here are the people that have access.
These are the signers on the accounts.
These are who have logged in.
Banks can easily show you in.
Many websites that we provide.
Our bank websites will give you an audit function to do research into.
Give me all the login ids when they log in and what they do.
So that would be a third thing that the bank can help do is a bit
of a checkup on a regular basis to make sure those accesses are accurate.
For the longest time, I was the only one that had any visibility to the banks.
And thankfully we've grown to the point that we've had to expose some of that to other people.
But I'm the only one that can actually transact, whether that's transferring
money between accounts or going into online bill pay and actually cutting an
electronic check and being able to go in with those controls to say, hey, it's
view only and it's just these accounts and not these other accounts that's
valuable.
And being somebody that works in the tech space.
It doesn't matter if it's your banking system or your CRM system or your HR system or what.
Periodically, it's really, really critical that you do
look at those controls and who has access to what in these systems.
Yeah.
Oh, and you mentioned, I failed to mention another basic one, which is dual control.
So if you are a bigger company or you're taking advantage of online payment
methods, Ach wire, remotely printed checks, Zelle have it where one user initiates
it, but a second user logging in on a different device with their own login id and
do multifactor authentication, a code, a fob, something, they're the one that
releases it.
So you have two people involved in every payment workflow.
And again, our bank, like others, you can lock down who has access to what and maybe the approver,
busy CEO, he's out doing socializing.
He can still approve that payment on the mobile app, but he's requiring somebody at the office
to initiate it, that they have the right information.
So dual control is a big plus on any payment workflow.
And then pretty much all the banks now have the multi factor authentication.
Either a text to your phone, an app, Google, the authy type app,
or old school, the big corporates, they carry those secure fobs.
They got like a keychain full of plastic token.
Yeah, man.
So as you know, I took a five week sabbatical last summer and I completely disconnected.
I literally, I deleted my email and slack off of my phone.
My, my out of office message said, you know, contact these people,
and if you really need me, send me an email after this date, because when I return,
I'm literally just going to flush every email that came in and I, and I did that.
The one thing, though, old habits die hard.
The one thing I could not, not do in my time off was
look at the bank accounts pretty much every day.
Yeah.
So I think another thing is just monitoring it on a regular basis and looking
at each individual transaction and, and really asking, okay, hey, does that look right?
Do we really pay that company that much?
And does that actually jive?
Yeah.
And most of your bank sites and apps will give you a robust
alert option if you want to know when a big transaction comes in,
when a large transaction goes out, when your account drops below a certain dollar amount.
And there's some tools also to automate internal money movement.
When you get significant inbound funds,
maybe you want to move some to a savings account to earn interest.
Your banker can talk to you about those solutions to optimize it.
But yeah, as the owner and the money is yours.
I can understand what you want to keep an eye on.
It may be neurotic, but I couldn't give that up.
All right, so lets maybe talk a little bit more about lending for a minute.
Okay, so if Im a business owner and Im at the point that Im looking for
some kind of credit, whether its a line of credit or a loan, something else,
what is it that I need to be prepared to demonstrate to the bank?
What kind of documentation, what strengths of the business do I need to be able to show?
Like, what is a bank going to ask of me and what are they looking for before theyll actually
lend money?
Preston yeah, its a great question because when people think banks,
its the first thing they usually think of.
When I need money, ill go to a bank.
So what we would like to see is a well organized folder of information.
Number one, your entity docs.
You're legally organized and you have executed documents,
all of them, to your historical financial statements.
Again, whether they're in house, company prepared, whether they're reviewed by a
CPA or whatever it is, have some three years worth of historical financial
statements, your balance sheet, income statement and cash flows, and then have
some projections, what do you see for the next one to few years in regards to
revenue costs?
And so what a bank will do is run that through their underwriting process to generate a cash
flow statement to help figure out how much debt we would comfortably put on your business.
So that's the numbers side.
Two would be the purpose.
Like you said, maybe I just want a working capital line of credit because there are times I'm going
to need to outlay a lot more cash before I'm going to get paid for that revenue.
And I'd like to borrow that on the line rather than dip into my cash reserves.
Makes great sense.
Or two, I have a big piece of equipment I need or a stack of technology tell me,
do what I need to do, and I'd rather not pay for that 100% upfront.
Great bank can finance that very easily.
And another very common one is I'm ready to buy my own building.
Tired of leasing, and I want to buy a building.
Banks love that.
It's called owner occupied real estate versus investor real estate,
where you're relying on a third party paying, you lease payments in order to satisfy the debt.
So those are most typical.
Your line of credit, your equipment, financing and your real estate.
For an owner occupied building.
Think of it as a consultative process with the bank.
Tell them what your objectives are.
They'll look at the numbers, and it'll be a little bit of a back and forth discussion.
But ideally, ultimately you'll get a number.
You'll get payment terms, amortization and term of the facility,
interest rate fixed versus floating, and they'll walk you through everything at the culmination.
You'll have a term sheet to sign, and then a set of loan documents to sign.
And you'll get funded and be in a happy group of customers who pay a bank interest in principal.
So, you know, that's where banks are really structured well.
And so I would tell you when you're dealing with the bank and a request,
and if you have a formal package, you should get a pretty good indication,
yay or nay within a week or so, and then you can nail really down the details, right?
Is it a million and a half that you'll let me borrow?
Is it a million 750?
Or what's the rate?
What flexibility.
And feel free to negotiate respectfully.
The other part I don't think a lot of business owners think about is it's okay to ask the bank,
hey, tell me how you make money on this deal.
Tell me what would make this deal good for you, because I'm telling you what makes it good for me.
I need that money now.
I need it for this purpose.
I need ten years to repay instead of eight.
And it should be a collaborative process where you can both win.
Preston, do you see differences in how the bigger banks
handle that kind of process versus the smaller banks?
Or is that collaborative, iterative process pretty universal?
Steven?
Unfortunately, I do think there is quite a bit of difference.
I think the term in the box, the bigger banks, because of the volume
they have to move things through a fairly standardized process.
Standardized process.
And you don't get a lot of say.
Don't be surprised if you get a yes or no.
And this is the amount.
Terms are not subject to negotiation.
But if you're ready to sign, we'll get you the money in three days.
Okay, well, if that works for you, fine.
But if you'd like to know how the bank came to that decision, and what, if any,
elements of that financing are negotiable, that's where your regional and community banks are going
to have an advantage, and I think you can get to a smarter solution.
So, for the startup, the founder at the early stage, the young company,
I think there is a lot of value to learning the process.
Even if you had the same amount of money financed or lent to you, I think
there's a lot of value in understanding how that process works because
someday you're going to be asking for a lot more money, or you're going to
sell your business, be tremendously wealthy, and want to start investing
yourself.
And there's some aspects you can carry over in our credit and underwriting process.
So don't be afraid to be consultative with your bank.
Don't be afraid to ask them to be clear about what's the most important parts
of this financing for them, just like you tell them what they are for you.
And once you book that loan, maybe it's monthly principal and interest payments or interest only.
You may have some financial covenants that you have to report,
and that's very important for you to know, for you to tell your bookkeeper, your accountant.
That's very common, especially in term debt notes that have, you know, longer repayment.
They may ask for your financials within year end 9180 days.
They run a calculation on a, call it a debt service coverage.
That's a common one.
So when you borrow money from a bank, obviously you have to repay it.
But oftentimes there's a little more to it.
There are financial covenants, there are limitations.
For example, a common one is you would need prior approval
from the bank before selling a part of your business and bringing in a new owner.
Because they may have you on the hook as a guarantor,
and they want to know, who's this other person?
It may change the way that business is run.
It may change your strategy.
And so there are things when you read in the term sheet
and you read in the loan agreement that may sound scary.
Don't be afraid to ask your banker.
Hey, guy or gal, please explain to me why this is important
to you and why I would need your permission before I do a, B, or c.
And if they're uncomfortable explaining it to you or get defensive,
you might be working with the wrong banker.
Because everything has a reasonable explanation
and for the right reason, it might even be negotiable.
It's really interesting.
Talk to me about.
So, from bank to bank and industry to industry and loan type to loan type, there may not be
a universal answer to this, but are there like, are there mechanical things that you can expect?
Like, you know, we want to see these kind of debt ratios, or we want to see
x amount of profitability, or we can tolerate some losses up to this.
Are there some numbers that if somebody's looking to get financing,
that they can really try to strive for before they go ask for it?
Steven, great question.
I really appreciate that.
Yes.
Let's start with the basics, make money be profitable.
Now, that doesn't always mean net income is positive.
Net Inc.
Can be negative.
And for those that have a strong accounting background or have good
bookkeepers to tell them this, there are non cash expenses, depreciation,
amortization, and there may be even some legit cash expenses that are one
time and non recurring and have a great explanation that may be, quote
unquote, add backs.
Tell that to your banker and you'll see their eyebrows lift a little.
But tell them there's a good reason why there are real add backs that can show true cash flow
from operations.
You've heard the term EBITDA.
EBITDA.
There's multiple ways to quantify cash flows for the bank to get comfortable with.
There's enough cash that this business is generating to repay us.
That's all they want to know.
And so number one, be cash flow positive.
And that may look slightly different depending if you're a manufacturer, if you're a service
industry, how your company is set up, and your accountants can help you with that.
Number two, do that for a couple years at a minimum, two, ideally three.
And if it's on, the two have a forecast that shows you're going to stay
in a cash flow positive state.
Separate to that quick tangent, let's say you want to venture into a new segment.
You're in your business, you're really good at it, and there's an adjacent segment,
and it's going to take some significant cash upfront
to get into that, and you're not going to return a profit for a year or two.
There may be a place that the bank can play on that if your
underlying main business is solid and can help support that.
Or you may need to do that out of pocket.
But don't just be scared away.
Go ahead and ask your bank.
So number one, cash flow positive, two to three years with a forecast to stay that way.
Number two, cash flow leverage and balance sheet leverage are two ways to describe your debt load.
Cash flow leverage would be how much debt do you have
as a multiple of the cash flow you're producing?
Let's say you're producing a million dollars of cash flow and you borrowed $3 million of debt.
That's a three to one ratio.
Three times your cash flow leverage is three x.
Generally speaking, most commercial banks will top out at that, and there's some wiggle room.
But generally, I wouldn't encourage your listeners to go to your bank, to their bank asking
for more than three times their stabilized cash flow as it relates to the amount of debt.
But second is balance sheet leverage, your assets, your liabilities and your equity.
So hopefully you've built equity in your business.
Let's say again, you have a million dollars of equity.
If your cash flow is low, but your equity was high,
you might be able to borrow a little bit more or less.
And so you don't want to over leverage your balance sheet and be in the negative.
And so balance sheet leverage, cash flow leverage are two indicators.
And then, as we mentioned earlier, they look at collateral value.
So you want to have as a banker, not only the cash flow from the business,
but something of value that in the worst case scenario doesn't work out.
Maybe you finance a piece of equipment and you know that you can sell that for 50%
in a year or two, and that can be part of the repayment.
So a clear sense of what you have, that's a value,
and then the rest would definitely be industry specific.
There are unique things in manufacturing and service and other things that there are metrics that
banks will look at against your peers on what's best, and they also look at their historical loss.
So that's the great thing about banks is we have all this history.
We have an internal risk team and a loan review team that puts together
our individual loss ratios, and then we have the general industry.
And so that can give us guidance on how much debt
can this type of industry generally sustain over the cycle.
And then we determine, well, how much will this particular company get at what point?
Well, maybe more broadly, should a business owner expect to have a personal guarantee
on pretty much any type of credit they're going to get from a bank?
Oh man, that's a fun topic.
As a startup, as a sole, I think you use the term sole preneur.
That's cool.
My honest answer is from a commercial bank.
Yes.
And again, even though, let's say the worst case scenario, the cash flow from the business drops off
for an unexplainable reason or unforeseen reason, the collateral value is not there to recuperate.
Most bankers will say if it gets to that third source of repayment,
which is the guarantee from the owner, we're pretty much writing off that loan.
But it's in principle the idea that the owner is on board 100%, that if we run into a bumper
in the road and there's a covenant break, let's say you have a debt service coverage where you need
to generate $1.25 for every dollar of debt that you borrowed from the bank.
So you have a 25 cent cushion.
Let's say you break that.
That's technically a default.
It's not as bad as missing your loan payment, but technically it's a default.
You come back to the table with your bank and you discuss it.
They want to know that you're going to come back
in full faith and do everything you can to set things right.
And so I've still seen as the default go to a personal guarantee.
Now, if you grow your business, you bring in new owners, and nobody is over 20%.
And I think you got some more negotiating room.
Even in the first scenario, you can negotiate a maximum a stated total dollar value
of the guarantee, versus an unlimited personal guarantee, which is always the bank's preference.
And then you can even negotiate what are called burn offs.
All right, I'll be on the hook 100% or x million of dollars day one.
But if I perform, I pay you back, I meet my financial covenants and I start paying this debt back.
At what point will you reduce that guarantee?
And so to have a burn off over years, one, two, and then you're completely free.
Year three, I've seen that.
Interesting.
Don't be afraid to ask.
Under what situation would you be comfortable reducing my guarantee?
Very interesting.
Man, I picked up a lot of nuggets here and I feel like I'm someone who's
relatively educated on this, man, it's been been awesome.
Let's talk about a super fun topic.
Let's talk about interest rates.
Oh boy.
So both on the deposits side, but also on the lending side.
Where do you think we are headed from here?
And I guess for context for the listeners, we're recording in early June of 2024,
man, this is the one area in my entire banking career,
from 2003, that the banks have never been right on 100% of the time.
I mean, it's like the weatherman.
It's going to be hot and sunny and it's cold and rainy,
and people still trust the weatherman the next day, right?
It can be wrong so much and still be trusted.
You know, there are quantitative measurements that determine the consensus of what rates should do.
And banks follow those.
Banks price their loans and deposits according to those.
But generally speaking, we dont know.
And the market were in now is crazy weird.
As you mentioned, in June 2024, I would have anticipated coming into this year.
I would have anticipated already three or four cuts
to the Fed funds target rate, which havent happened.
We hear the term higher for longer for bankers, depending on how the bank is structured,
whether they have more loans or more deposits and whether those loans are fixed rate loans.
So it doesn't matter what the interest rate does in the market.
They get the same rate on the loan or floating.
If rates go up, they make more interest income and you, as the borrower, pay more.
Some banks love it that rates are high.
Some banks hate it that rates are high.
It really is bank dependent.
So I would say ask your banker what they anticipate.
With your advisors and your finance team.
Figure out what can your business actually handle?
Don't try to play the interest rate like a video game or a betting scenario.
Even going back to my JPMorgan Chase days, we would tell customers, all right,
you want to borrow this term debt for ten years, can you really handle if rates go up two or 3%?
Sure, you'd love it if it went down two or 3%.
But is that something you really need to worry about?
If not, fix it?
So really, it's a risk avoidance.
It's a risk mitigation.
Don't view it as you're trying to get lucky so you can brag to your other friends a year from now.
Man, I paid so little on my debt.
That's not the core of what you do.
You're there to run a business, and banks can provide you a method
to eliminate that interest rate risk as simply as you have a fixed rate loan.
That's the plain vanilla easy part.
But understand that the bank is hedging their risk on the back end.
And so if you're a little larger, a little more sophisticated, maybe borrowing a little more,
there are options that the bank can provide you to fix that rate via hedging.
Some interest rate hedging.
So your listeners may not be interested in that, but you can always ask, get educated.
So I would tell you, I don't worry a ton about interest rates on the lending side.
What I do day to day on the depository side, man, that is important because we're seeing
what are we going to pay on a rate to our consumers on a cd three, 6912, on and on.
What's our money market rate going to be?
What's our deposit account rate going to be?
There's a rate we pay on operating balances that help offset these fees,
ach wire account maintenance, et cetera, called earnings credit rate ECR.
The money you keep in your operating account should work for you,
and it can work for you by earning credit to offset your bank fees.
And then you may have some money in a savings account or
a cd earning pure interest of which obviously is taxable.
So these are the discussions your banker and treasury management team can have.
Just know your sensitivity, know what you're willing to take as far as interest rate risk.
And if it's not much, just lock it down and don't worry about I
really thought they were going to go down, but they stayed up or vice versa.
There are large corporates I dealt with at the beginning of my career that said,
I never got it right and we had smart people from all the big banks tell us and we lost a lot
of money trying to play the interest rate game, guessing what it will do.
But yeah, I couldn't do that myself.
Just like in investing, people talk about don't try to time the market,
make a smart bet and just stick with it.
And it sounds like you're saying the same thing for interest rates.
I mean, we may know grandma was always talking about laddering
cds when rates were in the high single digits, low double digits.
That's actually a strategy that's working for folks today to get three,
four, five plus percent on a three, six or nine month cd.
That's pretty sweet.
So sure, take advantage of the rates as you're a net depositor,
play them as high as you can get them.
But if you're a net borrower, man, the risk on it being more costly rather than less is so much.
I would just encourage you to lock that up.
And most of your bigger and medium banks will have an economist or an interest
rate forecast that they include in an email or a podcast or LinkedIn post.
Sign up for those.
I encourage you to read many of them.
I do s and P and Bloomberg.
I read some of these, but man, they can be so confusing at times.
Read enough to just be in the know when the Fed meets, what their answer was.
And if you really want to get nerdy, read the notes and they decipher whether they said and or,
and it really gets detailed.
Im going to call you for that kind of advice.
Im not going to.
Im not going to read.
I give you the cliff notes versions.
Yeah, well, this has been enlightening as we kind of wind down
any other advice or guidance or trends to look out for?
I encourage your listeners to view their banker as a real partner.
Obviously your interests are not exactly aligned.
The bank lends you money, number one, they want to get repaid.
They're not as concerned with the success of your business directly, whereas it's slightly opposite.
But just view it as a partnership, not an adversarial relationship as you mentioned.
View it as a resource to become educated and to put
into place access to credit before you may need it.
I had somebody tell me a bad joke about bankers.
A banker is someone that will give you an umbrella when it's not raining,
and then when it rains, we'll ask for it back.
I think that's a little unfair, a little excessive, but I just encourage your readers to,
and not only know one baker, maybe you want to try the small community banker,
the regional banker, and get to know the one that wears the $3,000 suit at the big bank.
Get to know them, talk to them, see who you like.
There's a lot of chemistry that's involved, but they should be educating you.
They should be advising you, because one day you may want to borrow money from them.
And today, that's the other thing that's unique about this market.
If in your business, you're generating a lot of cash and you have that cash
sitting in and running through the bank, maybe you don't borrow any money.
You are a very valuable customer to banks through this crazy interest rate environment.
There are billions of dollars that have left traditional bank accounts, both from consumers
and businesses, and gone straight to buying treasury securities because of the amazing yield.
That's put a pinch on banks in general because they were relying on those
fairly cheap deposits as a source of funding for their loans.
So in June of 2024, if you're a business owner out there that has more cash in the bank than
they're borrowing, you should be treated like a king and a queen by your bank right now.
And if you're not, maybe it's a good time to talk to someone else.
And then, you know, if you're a net borrower, you should have easy access to your banker,
understand what agreements you've come to in regards to loan covenants and the repayment terms.
And when rates do drop, whenever that is, get in front of your banker, say, hey, man,
this interest rate you gave me last year was good for then, but, man, it's really hurting me now.
Can we discuss refinancing?
Banks should always be open to discussing that with you, and there may be some fees related to it.
But just as you've had some great folks on this podcast and I've loved listening to, we're partners.
We're here to educate, to learn.
We love the relationship.
The same applies to a banker, and hopefully you have that relationship.
If not, go looking for a new one.
Awesome.
Yobany, thank you so much.
Scott, great to visit with you.
That was Yobany Mayen, senior vice president at Encore Bank.
To learn more, visit bankencore.com.
if you or a founder you know would like to be a guest on
In The Thick of It, email us at intro@founderstory.us.