Brent Porlier called Billboard Insider after reading Lending Markets Tighten. Brent and his daughter Melissa run Porlier Outdoor Advertising company, which will soon approach 400 faces/flips in Missouri and Kansas. Brent says that lending markets have been good for Porlier and we talked about how to have a good banking relationship.

Brent isn’t seeing a tight credit market.

We use a a large community bank south of Saint Louis. Melissa and I recently decided to make sure we have two banks that know our business well and understand our numbers. We reached out and had plenty of interest from banks wanting to be a second lender. We have a good track record and are able to clearly articulate our careful, targeted growth strategy.

How do you get your bank to think about collateral value as a multiple of cashflow as opposed to the value of your steel?

Good question. That’s always an issue with a new bank relationship. Initially, they’re focused on worst case collateral value. We have good records that show the evenness of our cash flows from each sign. Once a year we turn in basically a billboard cash flow summary sheet for every billboard in our company (gross revenues less direct expenses less a 7% sales commission). Banks are able to see that our cash flows are consistent so it doesn’t take more than about 12-24 months for the bank to say “oh you’re really a cash flow business”. Then we will sometimes send them an article from Billboard Insider which is helpful.

Good communication with your lender is key

I think one thing we do well – Melissa’s really good at this – is we communicate regularly and we have an open dialogue with our banks. We share the bad as well as the good. For example, last year, as a company, we fell short of our sales targets and it was starting to reflect in our numbers and so we would have lunch with our bank and say we’re kind of flat compared to a year before but it’s not so much the economy or the market. It’s operator error, our underperformance and so here’s how we’re addressing that. Essentially, we always need to put meaning to P&L numbers, not just recite them.

Personal Guarantees

Yes. Each bank is fully guaranteed by me personally.

Specific assets go to each bank

We give each bank a first security interest in certain assets and we have a pool of unencumbered assets.

What’s your target leverage debt to cash flow?

I think we’re running about 4 and 1/2. If we get towards 5, we can feel some pressure on our cash flow flow. Our maximum permitted debt to cash flow is 7 to 1.

You borrow cheaply

We borrow at prime minus one percent.

Banks want to see a succession plan

The last thing I think I’ll say is that both our lenders gain a lot of comfort from a company like ours having a good succession plan, knowing that Melissa is involved and now president. My bank told me they see a lot of small privately owned companies where the founder does everything and if the founder dies unexpectedly, without a documented succession plan, things go south quickly.

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