Our expertise can pay off for youAt First American Bank, we pride ourselves on securing desired outcomes for our clients in various industries. Here's a sampling of clients who benefited from partnering with us.
Provided financing to an experienced developer for the ground up construction of a 190,000 s.f. retail center in Kissimmee, Florida. Loan included the acquisition of the land, infrastructure improvements, vertical construction of the shell, and interior build-out for each of the units as they were leased.
Seasoned hospitality investor obtained a ground lease at a key location in West Palm Beach, Florida. First American Bank provided a construction loan for the construction of a 150 key Canopy by Hilton Hotel. The financing facility included an interest only period during the construction and stabilization of the property and included a mini-perm, post stabilization.
First American financed the acquisition of an existing 629 unit self-storage facility in Riverview, Florida. The financing facility included an interest-only period to allow the borrower to reach stabilized occupancy and then provided for a principal and interest period, post stabilization.
First American provided financing for the construction of a single-family home in Chicago. The advance was 80% of costs based on the experience of the builder, the location of the property and the projected selling price of the home.
First American provides extremely competitive rates on multi-family properties. This transaction provided a 15-year fixed rate (with a 15-year amortization) on a 10-unit building in Chicago to allow the borrower to lock in an attractive rate and to allow him to rapidly repay the loan.
An industrial developer acquired an attractive site in Aurora, Illinois, and needed flexible financing while they went through the entitlement process and marketed the site to an end user.
First American structured a facility to allow the investor to acquire a vacant, class A office building in Lake Forest, Illinois. The financing structure allowed the borrower sufficient time to seek out the appropriate end users without having the requirement of having to make principal and interest payments.
The financing support for this company was somewhat unique given the compensation structure put in place for its employees following the transaction. The strength of this company’s business is the distinctive talents of its employees, so after we helped to finance the 100% purchase of the company through an ESOP, management put together a combination of warrants and phantom equity to reach a level of compensation to attract and retain talented individuals. The company’s success forced the stock price, and the corresponding liability associated with its phantom equity, to increase substantially over the first few years of the plan. We were able to work with the company during the recession to structure an additional $10,000,000 in cash flow financing to buy-out a portion of the phantom equity and cut off the growth of the liability, saving the company millions of dollars in future cash outlays.
This firm’s employee base is primarily made up of highly educated individuals who develop a substantial amount of intellectual property during the ordinary course of their consulting work. In addition to trying to finance a second stage transaction to bring the ESOP from a 24% shareholder to a 69% shareholder, the company was also looking to preserve cash flow flexibility to continue to invest in multiple potential new lines of business centered on that intellectual property. The initial ESOP transaction was completed without bank financing; however, the company had grown rapidly since then, causing a sharp uptick in the total valuation of the business as well as the subsequent financing needed for the buyout. First American Bank was able to provide a financing package that allowed the company cash flow flexibility to continue to invest in new business lines, while providing the founder with a substantial cash payment on day one.
This 100% ESOP transaction structure included financing from three different parties: First American Bank, the selling shareholder and a third party mezzanine lender. It was important to the selling shareholder to receive a certain level of cash at closing that was in excess of typical senior bank financing standards, so being able to work seamlessly with the third party mezzanine lender was key. While introducing an additional lender into the fold typically adds substantial time and cost, we were able to navigate the closing process on a timely basis with, not only the selling shareholder, but also a third party mezzanine lender. This helped to ensure the former owner was able to receive the initial cash payment necessary to complete the transaction and the company had a debt structure in place that would allow it the ability to continue to succeed moving forward.
First American Bank’s long term relationship with this customer began with the financing of the 82% purchase of the company through an ESOP. We structured the request through a combination of a term note and line of credit sweep facility to take advantage of the company’s strong cash balances and cash flows to aggressively retire the ESOP debt. This was completed without requiring personal guarantees of the selling shareholders or assignment of the qualified replacement property. This structure and rapid debt repayment allowed the company the flexibility to finance five acquisitions during the course of our relationship, totaling more than $8,000,000, allowing management to continue to grow the business.
First American Bank’s relationship with this practice began several years ago with issuing a Stand-by Letter of Credit facility as credit support for a taxable bond where the proceeds were used for the purchase of two medical office/surgical center properties and related equipment. The facility has grown as the practice expanded and renovated these properties. The amortization/payment structure has been modified over the years to maximize cash flow to the doctors. In addition, we provided a working capital line of credit and have extended several equipment term loans as well as personal mortgages for the individual doctors and associates. The practice debt is currently structured without requiring personal guarantees of the professionals due to the strength of the borrower, cash flow and overall relationship.
This financing request originally came from a consortium of doctor practices who were interested in construction and end loan financing for a multi-practice medical office condominium building. First American customized the structure for each end loan to best fit the cash flow needs of each practice. For the various medical practices, we have supplied working capital lines of credit, equipment and leasehold term loans, 100% financing of practice buy-ins by new associates as well as wealth management and residential mortgage financing for the individual doctors and associates.
This relationship encompasses both the personal and professional side of the firm. In addition to supplying the firm with a working capital line of credit, the bank also has personal lines of credit to each of the partners and residential mortgages and personal accounts to the partners and associates. The bank also manages the retirement accounts of the partners, structuring the investment portfolios to their individual needs.
The financing of the acquisition of this divestiture was accomplished by supplying the buyers with a term loan for that purpose along with a working capital facility. In future years, the bank also provided CapEx financing to help the business expand. The purchase was led by an independent sponsor, along with a third party mezzanine provider who also co-invested equity.
Financing for this stock purchase for a majority ownership was accomplished by providing a term loan piece and a mortgage loan solution in addition to a working capital facility. The transaction was led by an independent sponsor along with two mezzanine lenders who also co-invested equity.
Financing for this recapitalization was done through a term loan and working capital facility. In later years, the bank provided funds to help with a dividend recapitalization. This is a good story of the bank’s flexibility and patient debt capital which has been used to help support the business through tough economic downturn. The company was supported by a sponsor which provided equity and subordinated debt.
Financing was accomplished through a term loan and mortgage loan solutions, while also providing working capital facilities for the business. The monies were used to purchase the assets of the business along with refinancing existing subordinated debt. The transaction was led by a sponsor who provided mezzanine debt along with equity. There were also seller notes as part of this transaction.
This private, liberal arts university used a tax-exempt bond to finance six separate master plan projects on campus including renovations to three buildings, a new athletic field, construction of a new performing arts center, and various energy savings projects. Portions of the debt funding the athletic field, arts center and energy savings projects are being repaid over 10 years from the proceeds of a capital campaign, while the balance is being repaid over 20 years from operating cash flow. Bond proceeds were drawn down over three years, and the amortization was then based on the final amount drawn for each project. Overall, the 26% lower interest rate allowed the university to realize present value savings of over $750,000 compared to conventional financing and reduce its debt service costs by $70,000 annually.
The bank worked with a private day school to refinance its existing debt and fund renovation costs of a classroom building. The refinancing tranche of the bond began amortization over ten years upon closing, while the renovation costs were drawn down over a three-year period and begin amortizing once the first tranche is paid off. This structure allowed the school to incorporate future capital expenditures in the bond. The debt was structured with a fixed rate that resets periodically based on a formula. Altogether, the school saved over $600,000 by using the bank’s direct purchase bond structure and enhanced its savings by including future expenditures instead of waiting to issue a second bond.
This 75-year-old community services provider had recently completed construction of a brand new 60,000 sq. ft. facility using conventional debt. First American Bank proposed using direct-purchase bonds to refinance the $5.3 million construction loan and finance the addition of a new $2.9 million 30,000 sq. ft. aquatic center. The bank worked with our not-for-profit customer to structure the bonds, including finding a governmental issuer, selecting bond counsel, and coordinating the whole process. The 20-year bond issue was a floating rate, and the borrower executed a 10-year interest rate swap to minimize interest rate risk and provide certainty to their cash flows. The savings generated through use of tax-exempt bonds reduced their borrowing costs by over $125,000 annually.
This K-12 school district was interested in taking advantage of the decline in interest rates by refunding its existing General Obligation bond issue. However, the current bonds were not callable for six months, and the new tax bill had eliminated advance refundings. First American was able to provide a forward rate commitment to purchase the bonds in a private placement that allowed the district to take advantage of lower rates without having to wait six months and risk rates increasing. As a result, the district lowered its effective interest rate by 1.73% and realized a net present value savings of over $840,000.
A local park district was looking to refund its existing Alternate Revenue Source bonds in order to level out their debt service and take advantage of current lower interest rates. The new bonds would have a 12-year final maturity with three potential structures: callable in six years, callable in eight years, and non-callable. They were also looking for a three-month forward rate lock. By purchasing the bonds directly, the bank was able to provide structuring flexibility while saving the district over $125,000.
One of the bank’s municipal customers was looking to incentivize a developer to construct a new housing development through funding water, sewer and other infrastructure improvements. Working with counsel, they created a special tax assessment district that allocated the costs to each home site’s property tax bill over 10 years. The bank then purchased Alternate Revenue Bonds, payable from the special tax assessment, but also backed by a general obligation tax levy. This innovative structure allowed the developer to commit to the project, with plans for 32 single family homes, 66 duplex lots, and 16 condominiums.
The manufacturer utilized our cost-effective, direct purchase IRB program to purchase a large machining center to replace four older models. Additionally, the new machining center provided additional capabilities and efficiencies needed to support new business. The down payment and installment payments to the supplier of the machining center were planned over a six-month window. The financing covered all costs involved, including purchase price, design costs, engineering, installation and issuance costs. First American’s ability to structure the IRB utilizing a draw down feature (advancing principal as needed) with an interest only period made this investment extremely economic. Our ability to close the bond within 45 days preserved the borrower’s timeline to have the machining center up and operating. Conventional financing was available from the bank and the supplier. However, the cost of financing with the IRB provided a 25% discount over the other options and more than $100,000 in interest savings over the seven-year term of the bond. The payback for the upfront costs of the IRB structure were recouped within nine months of fully funding the IRB. Lastly, we used a forward interest rate swap to lock in the borrower’s interest rate prior to funding.
Proceeds of this direct-purchase bond were used to finance the acquisition of vacant land and construct a 100,000 square foot building. The facility is owned by a real-estate LLC and leased to two affiliated operating companies. The project enabled the operating companies to expand their capacity and capabilities to satisfy customer demand, and the over $800,000 in interest savings attained through the bond allowed them to remain competitive, fund additional capital equipment needs, and create additional jobs. The IRB was structured as a draw-down bond. Proceeds were not funded until required for the project, thereby reducing interest expense. The bonds were interest only during the one-year construction period, then amortized over 20 years. Although the bonds were floating rate, the borrower executed an interest rate swap on a portion of the debt to protect against interest rate risk.
This commercial bakery had recently won contracts to provide products to two new retail chains and needed additional capacity to meet the demand. They planned to purchase an existing 56,000 sq. ft. commercial building for $3,000,000 and then spend an additional $1,500,000 on renovation. The bank proposed using a draw-down 20-year IRB, with interest only payments for 10 years, followed by a 10-year amortization. At the same time, they would accelerate the amortization on the mortgage on their existing facility to pay it off in 10 years. This would allow the company to retire its higher rate conventional debt first and maximize the benefit of the lower tax-exempt rate. This unique structure gave the company over $400,000 in net present value savings while reducing its annual debt service costs by over $35,000.
For many years, this medical device manufacturer’s business focused on contracted production for long-term contracts. In recent years, the company’s business model shifted away from contracted production to quickly fulfill orders without the ability to allocate time to a specific production run.
When the company operated through contracted production runs, it utilized a transactional Export Working Capital Program that allowed for the flexibility to fund working the capital to complete their orders individually. That method allowed the company to offer varying terms to the buyers based on the contract. As the company’s model shifted toward immediate fulfillment, the need to maintain standing inventory was apparent.
In order to support this change, the Export Working Capital Program line of credit migrated to a combination of an asset based line of credit for day to day business and a transactional line of credit to support long-run projects. The support afforded by the Small Business Administration (SBA) and EWCP allowed for aggressive advance rates on both foreign accounts receivable and inventory.
The combination of financing methods allowed the company to grow and meet the needs of their customers. The transactional EWCP line of credit provided support for large scale production that would not ordinarily be supported under an ABL model. The ABL line allowed the company to leverage their inventory to provide the working capital necessary to produce and sustain a greater amount of standing inventory.
This distributor was a young company with considerable experience prior to venturing out on their own. The problem is that they had modest starting capital in an industry with some of the lowest margins of any industry. To get started, they needed a loan that would allow them to make payments directly to their vendors so they could amass some business and qualify for larger facilities.
To bridge this gap, First American Bank issued a Transactional EWCP line of credit designed to fund against Purchase Orders. This allowed the Bank to fund the company’s vendors directly, allowing for the goods to be shipped and the customer invoiced. This process also allowed the Exporter to begin building a credit profile with their vendors which would eventually lead to the company securing terms from their suppliers.
As the company grew, First American migrated the Transactional EWCP line to an Asset Based EWCP line of credit that allowed the company to further scale with its growth. The migration to an Asset Based EWCP line also allowed for further efficiencies within the company as the reporting requirements were not as stringent as they are under transactional structures.
The support provided by the Export Working Capital Program allowed for the exporter to obtain a flexible Purchase Order structure at the outset that is not as readily available in the market. As they continued to grow and further capitalize the business, the EWCP allowed for them to transition to an ABL structure at an earlier point than is available conventionally. Combined, these two methods allowed these entrepreneurs to leverage their industry experience and begin their own business in an industry that is very much governed by your access to capital.
A heavy equipment distributor that sells machinery to mines throughout the world required a loan that allowed them to finance transactions with terms that extend well beyond the normal terms eligible under ABL credit lines.
Understanding the unique needs of this company, First American Bank proposed a Transaction EWCP line of credit to provide a working capital structure to the business that would both accommodate purchase order financing as well as accommodate the extended buyer terms required by the industry.
Working with their trade credit insurer, the distributor was able to negotiate an insurance policy that would offer terms of up to 360 days. Coupled with the flexibility of the EWCP structure, we were able to provide financing based on the cost of the vendor purchase order while simultaneously recognizing the benefit the trade credit insurance policy brought in supporting the extended terms.
The Transactional model is where the flexibility of the EWCP structure shines. The ability to provide purchase order financing, is considerably beneficial as the structure is inherently more risky due to the fact that the capital is extended before an asset (a receivable in this case) is created. As such, the support provided by the SBA allows for this flexible financing to be deployed. At the same time, the structure allows for the Bank to administer credit based on the individual needs of each order rather than under blanket ABL eligibility.
A custom machine manufacturer received a purchase order for a large specialty packaging machine that would take approximately six months to construct. The manufacturer required a down payment of 30%. With this contract, the buyer required that the down payment be secured with an Advanced Payment Guaranty. That guaranty would come in the form of a letter of credit issued by the manufacturer to the benefit of the buyer with the goal of insuring that the down payment is repaid in the event of a breach of contract.
It is completely reasonable for the buyer to request this guaranty of the vendor; the challenge comes in the way of the burden placed on the manufacturer in this case. The down payment allows the manufacturer to begin production of the machine and progress the project to the point where they can submit for another payment or, combined with existing capital, complete the machine and submit for a draw prior to shipment.
When a manufacturer has to provide an Advanced Payment Guaranty, the letter of credit that has to be issued must be secured in order to be issued. Most commonly the letter of credit is secured with the initial deposit or with availability on an asset based line of credit. Under both scenarios, the manufacturer will see a reduction in their working capital position for the duration of the letter of credit.
In order to leverage the down payment and allow the manufacturer to put it to work toward the production of the packaging machine, the SBA EWCP and CAPLine program allow for the letter of credit to be issued with less collateral than required under conventional structures. Under either of these SBA programs and depending on the terms of the contract, the letter of credit can be issued with 25% to 50% cash collateral instead of the conventional requirement of 100% collateralization.
The ability to partner with the SBA for the issuance is one of the most unique aspects of the EWCP and CAPLine programs. The issuance costs of the letter of credit and costs associated with the SBA loan are often much less than the borrowing cost under a line of credit. As such, there is an inherent savings granted by utilizing the down payment in place of borrowed funds.
A seasonal goods distributor has contracts with several big-box retailers throughout the United States. Under the terms, the retailers have 90 day payment terms from the receipt of the goods which accounts for the time necessary to place the product on shelves and sell through the seasonal goods.
Approximately 90 days before the products are needed on the retail shelves, the distributor must issue purchase orders to the factories in China along with a 50% down payment. In total, the business cycle for these products can run nearly 180 days. When dealing with purchase orders, they are not accounts receivable until they ship and thus do not provide the collateral to a lender that you typically see with an Asset Based line of credit.
Understanding the business cycle of seasonal businesses, First American Bank recommend a Seasonal CAPLine, one of the specialty uses of the SBA’s CAPLine Program. Under the seasonal structure, we were able to finance the payments to the manufacturer on a per-purchase order basis until the retailer made payments nearly six months later.
This distributor was in the process of expanding their supply chain to beyond their primary domestic vendors. As a largely export company, this meant that a portion of the orders will be drop-shipped from foreign vendors to foreign buyers. As is the case when beginning to work with a new vendor, payment terms will take some time to get established. As such, the distributor had to find a way to finance their existing orders to provide the liquidity necessary to pay their new vendors prior to shipment.
To address this challenge, First American Bank recommended an Asset Based CAPLine. Similar to the SBA’s EWCP, the CAPLine Program could be structured on an asset base that would allow the distributor to pool all of their eligible receivables as collateral for the line. Unlike the EWCP, the CAPLine program does not require the goods to be exported directly from the United States. This allowed the lenders to implement a structure to support future orders, even those that drop-shipped.
Dropped-shipped orders are a challenge for most export specific programs, such as the SBA EWCP or Express Programs or the EXIM Bank, as they do not qualify as a “domestic export” since they did not ship directly from the United States. In these situations, we look to the CAPLine Program as a solution for companies engaged in drop-shipping. All other financing requirements remain intact, including the need for trade credit insurance.