EP13 - You wanted to be a banker - financing your ESOP transaction.

Good day everyone. This is the ESOP guy and we are on a journey to an ESOP. Just wanted to say thank you so much for joining today. Hope you're having a great 2021. We are now in season two of this podcast and just enjoying the process of providing, I think just a resource to help people think about whether or not they would utilize an employee stock ownership plan in the succession and exit plan of their companies and other things too, as we as we've explored so many different topics. There might be benefits that you haven't even thought of. And one of the things that we get into is, you know, talking a lot about how it affects, you know, with the current employment market being starting to get tightened again, how it really does benefit in terms of providing employment and employee motivation, employee retention. So for whatever your reason to think about an ASAP, this podcast is really about providing information to help you better understand the process to get your company through. And become an ESOP. And so, with that, if you have interest in our other episodes, please go to our website at journey to an ESOP.com. And as we start this episode, I wanted to kick off with this. Mr. Cra You heard the testimony so far. Would you please tell the court in your own words what happened on the afternoon of September 10th? What do you mean in my own words? Whose words are they going to be? You know what I mean. I was very upset that day. And why was that? Would you let me say let me talk. Alright, alright, go ahead, go ahead. Alright, OK. I was very upset that day because I could never become a banker, and this failure to become a banker was eating at you, eating, eating, eating at you inside. Uh yeah. It was your family that pushed you into banking. It was their dream for you, Mr. Newman. Your Honor, I'm only trying to establish Mr. Kramer's fragile emotional state. My entire case depends on it. So if you've never seen that episode, um, super funny, and basically, Newman, who is one of the characters of that, is trying to get Kramer to testify because he wants to get out of a speeding ticket. And the whole thing's about Um, creating this whole thing about becoming a banker or not becoming a banker. And so what it made me think about was this idea of, of what it's like for a company to go and approach the bank for an ESOP loan. And so I want to go into the banking side of things today, a little bit deeper. And so one thing I just kind of like want to make sure everybody knows, you know, from my own history, a long, long time ago, I once was a banker, and I'm really dedicating in some ways this episode out there to all the bankers out there, they do work very hard and it's banking has changed so much over the years before when I was When I first started my career in banking and moved out, um, about 20 years ago, it certainly has changed a lot, but they do work work really hard. So I think it's a, it's a good thing to stop and say, you know, thank a banker today for what they do. So the big question really for those that are new to ESOPs, And as a title this podcast, how do I get my money? So if I'm going to sell my company to an ESOP, how am I going to get my money? It's very important. So cash really does come to the selling shareholder really only in two ways. They're going to either get that through the prepayment of the debt. Or um bank financing, or the, so the payment of their own seller notes. So keep in mind that you will likely be taking a seller note as well. So the combination of the seller note and the bank financing is really how you collect cash on what the ESOP, what you're going to be owed in the ESOP transaction. And so, the question is, is how then do you go about if you're going to have bank financing, how do you go about seeking financing for your ESOP deal? And so we're going to get into that specifically. I want to also announce to everybody, um, our next episode, our next ESOP Guy live web webinar series is underway, and it's entitled, What is your business Worth as an ESOP. So what we're going to do there is talk a lot about the valuation side. And go into uh a presentation just explores the, so there's certain aspects or the methodology behind business evaluation as it relates to ESOPs. So that's coming at the end of April, April 28th at 2 o'clock Eastern time. So you can sign up for that through our website at journey to an ESOP.com as well. So as always, if you like what you hear on the podcast, please subscribe to the podcast, share it with a friend if you think it might be helpful, rate and review the podcast so that other people can see if this is a resource that they would like to tap into as well. So, let's launch into this episode and really start thinking about when you start thinking about your banking relationship as it is today, and what we're trying to do is, is visualize something coming down the road, which is, I'm going to work through an ease up transaction. And as a selling shareholder, what I would really like is to get some money at closing for the transaction, which would be great, you know, in a sense, I want to have a liquidity event. When I do my ESOP sale. So, so this kind of episode is really about, um, there are ESOPs out there that have a 100% 100% seller financing. So all they do is just take the 100% back as a note. There's nothing wrong with that. The selling shareholder gets the interest on that and they become the bank in a sense, um, because they're being, they're the ones that are lending the money to the company for the in exchange for the shares that they're giving. So, in this case, they're going to want some money at closing and they'll still take a seller note because that's typically, you know, the, the breakdown, the breakdown, they're going to have some bank financing in this, in this example. So the first question is, is it possible that your bank, the bank that you deal with right now on conventional commercial loans, that say finances your line of credit, that finances may be a term debt, is also capable of doing your financing on your ESOP transactions. So that's that's a question that I think is a very first and foremost because As I think about this, and I, what I really want to express in this, this podcast episode is that what we want post ESOP. For many, many different aspects of the ESOP. We want a banking relationship that's more than just a transaction. And I say that because what we really, we want to make sure that transaction is done really well, right? We want to make sure that we've, we've gotten the best possible banking um package that we could get. So you're, you as a, a client of the bank are going to want to make sure that you, you get treated well and, but I think you have to think beyond that in addition to the transaction because you want to have a relationship with the bank that can manage the company's needs as they go forward. And so it, so I love to start with the, with the question, can my own bank do this? And I think that's a question that should be asked really early on in the process when you're seriously considering an ESAP transaction. And the answer to that question is going to really depend, you know, based on the bank. And so if we, if we think about banks being there's larger, really super big banks like, like JPMorgan Chase and Bank of America. And there's really small banks, community banks, or, or, or banks that primarily or, you know, even credit unions that that function at as banks, and then they have the the middle banks, the middle sized banks. So, so when you talk, when you're thinking about the ESOP transaction, Some of that's going to matter in in terms of where they fall. Um, one of, one of the major questions that you need to really ask and ascertain and, you know, even maybe have your advisors help you in this is, does your bank have knowledge of ESOPs? And do you feel comfortable, um, that they really do know what they're, what they're doing. I had recently had a meeting with a client and a bank and looking at a potential transaction. And I think that the bank itself has probably an ESOP expert. Unfortunately, they were not on the call. And so a lot of the conversation was Centered around educating the banker on what an ESOP, how an ESOP works, how the structure of the the company is going to work, going into it, what's, you know, what's going to happen with the shares. And so I could tell pretty quickly that the bank that we're talking to really didn't have a strong knowledge of ESOPs. Now that's going to be difficult to try um to work a deal because we're going to be spending a lot of time. Um, getting them up to speed and then when they say they can do a term sheet or they can have that they can come, come through with some financing, we, in terms of structuring the transaction are gonna want to make sure that we, we have a deal that actually will work. And so, one of the, one of the things that we have to do in the process of the journey to an ESOP if we're gonna have bank financing is secure the financing and make sure that it is gonna happen and we can't We can't like that's such a significant point if the client is expecting to close and have a liquidity event. So one of the things that I've done, and I'll share this too with you as I start thinking about this episode, I've done my own research, because in the last 12 months, I've spent, you know, and, and let me go backwards a little bit, because I was a banker and because I was a commercial lender, I kind of, you know, know a lot of bankers already. And I wanted to reach out to a lot of people that I knew already, which I did. And then I reached out to a lot of other bankers. So I think I reached out over the last 12 months to over 100 bankers all over the country. And I will tell you my own, in my own research, what I found is that most bankers are really unfortunately coming up very short. In terms of lacking the skills necessary to provide their clients with what I'm going to say is, is advisory services related to succession planning options, including ESOPs, but primarily as I focused on ESOPs, that's, that's my primary button, but I think for the most part, and that's not, that's really not a slight against the bankers at all. It's, it's more of just the observation. And I think it's very important, you know, and and I and I really go back to my early days of banking, I think it's very important. That the client surrounds themselves with knowledgeable advisors, including their CPA, including their ESOP advisors and attorneys, and, and I, and I include the insurance people on this, and I include the bonding people on this if they have bonding, and I'm going to include, um, of course, bankers in this because I believe When you are helping a client as a banker, you're, you're not just doing one transaction, right? You're not just doing financing for one thing, you have to see the big picture, you have to see the needs of the client has from a, from a cash flow standpoint, and really understand the business model and how you as a bank, Um, and I'm speaking to the banks in this case, but you as the bank, are able to say, yes, we can support that and help the management team make business decisions based on that type of relationship. Without that, and there's a lot of guessing because one of the things that we have to understand is that we're not just financing an ESOP transaction, you're also Making sure that company has enough um working capital line of credit to support the growth they might have. You, you also have to make sure that they have needs to finance equipment. Um, you have to make sure that the bank has the ability to continue to grow with that business, because we all know that things, everything changes over time and we can't just plan one event here. We got to plan the whole relationship and know that we're going to have to have some room for maybe some financing down the road. So, So that's kind of my, my one observation that I'll make and. I think some of the reasons that I've seen that this is true is that The old, in the old days, the bankers, um, the commercial banks really did spend a lot of time training their bankers on credit and other financial skill sets. And I think what what's happened is the banking models have moved to hiring salespeople in the the roles of what we're going to say the commercial lender roles or the what we call line lenders. And so because salespeople are good at talking and and communication, obviously a skill set that you have to have. Um, there, but without the skill set of the credit side, what they're doing is they're basically assigning a credit person to each banker and hopefully rounding out the need between the two sides so that we can have, the bank can have more sales people. So I think that's, that's part of it. And when I'm when I'm addressing here is maybe the reason behind a lack of advisory. Um, I think the banking model also, for whatever reason, and I, and I saw this in my career early on, has really unfortunately encouraged turnover in key positions so that bankers do move, you know, in their career multiple times, maybe even 456 banks in their career, maybe more than that. So because of the turnover, it's very difficult for the client to get to know a banker for a long period of time and have, have that, that depth, in-depth relationship where you certainly can have that more with say your CPA firm that you've had for 2030 years, um, your attorney firm, and all that. So I think that definitely contributes to it. And I don't think in all these things don't necessarily excuse this. I do think there's still a strong need for bankers to be advisors. So that's my, that's really kind of what I'm pushing here. Um, I think the specialized skills, unfortunately, this is really the 3rd reason for, for things that are like ESOP transactions, are, are, um, sequestered in a small group of people in the bank. And even though they can reach out to all the banks throughout the country, I think that the the bankers, the banks that do have it, like, say, an ESOP specialist. That is in a different market, um, can certainly call in or fly in and, and support a transaction, but there's only a few of those to go for the entire bank. So if it's a large national bank, they're going to have a hard time spreading those people out throughout the whole country. So I think those are all very valid reasons. And, um, and I think because of that, I don't think the banks have been um as As, you know, and I would say that in advisory leadership, you know, and thought leadership, leading the charge on succession and exit planning when it comes to ESOPs. And I really do think that there's a need for that. And I think what we need to do is, um, you know, in terms of this podcast is really create An awareness and a need for that in the relationships. And I think really one of the things I would say is, is be asking your banking relationship, your banking partner about these, if you do have any interest and see what they do and how they respond. And I think that's really helpful um early on in the process, you know, in terms of, of better understanding what they can do. Um, I, my, some of the research I've done too, I think some banks just simply don't have an appetite for um ESOP deals. And the reason they don't, and there's nothing, like I said, there's really nothing against them in saying that because simply an ESOP deal has what we're going to call an an uncollateralized portion of the debt. And that, that basically is termed an air ball. And so one of the banks says, look, I'm not that comfortable with an air ball. All they're saying is we don't really, we're not really comfortable from a credit standpoint with this type of debt. And you, you just got to know that early on, if that, if that's how they're looking at it because you, you want to make sure that you really do find the right banking relationship. Um, because of this gap, I mentioned, um, is contributed to what I'd say is typically done on an ESOP transaction. So this is the current status. Um, it's really managed a lot by an investment banking firm. So the investment banking firms become, you know, as they become the ESOP advisor. They put together a big slide deck and they start going to banks that they think could finance it. And they're going to the banks to really have the bank sharpen their pencil and source the financing. And so what, what happens is the investment banker, because of the way the transaction is structured for an ESOP, is going to get paid um for the sourcing, the financing, they're not looking specifically in this case for a banking relationship, even though that's really what we're we're calling it on the, on the front side. What they're really trying to find is a transaction. And with a transaction that doesn't have a relationship, then it's kind of like you're leaving the client in a place where, you know, yeah, you've gotten financing, but what is that gonna look like long term. So, The bank doing the financing is going to have to become the primary bank for the company. It's becoming, you know, it's going through the ESOP. The, this, this is really the way they have to do it because they have to take all of the credit that or the debt the bank that the company has. And the only way they can collateralize that is doing a what we call blanket lien on the assets of the company. So in addition to that, they're going to have their own depository and treasury relationships, so the banks. Um, some banks are stronger there, some banks are weaker there, and so that has to be evaluated as well, in addition to just what we call the credit side, which is the loan relationship. So, so here and as we navigate through this, what, what we have because we have say a lack of banking advisory, we have the investment banking groups stepping in to get paid to source the banking relationships, you're going to have much more of a transaction oriented type of banking relationship going forward in in the midst of a somewhat complex. Um, ESOP relationship. So now the company converts to an ESOP. Now that company as an ESOP needs a strong banking partner, um, especially as you groom new, new key managers and we have companies growing and and different things like that. So they're going to need a very strong banking relationship. So we're going, as we go through and explore this podcast, I want to make sure that we help you position your company for the right banking relationship, because that is what's best for the company long term, not just for the event of closing. So let me go through the underwriting one on one side and I'll Um, I'll, I'll kind of touch on some things, um, as underwriting goes to help you put in your mind and understand the way the bank's looking at these things. So the primary source of repayment when a bank is starting to underwrite a credit, is generally the cash flow that's generated from the business. Um, the secondary repayment source is going to be the conversion of collateral to cash. So that's typically the structure of a conventional, what we call commercial and industrial deal. Typically speaking, you're gonna underwrite a deal around the potential age of the collateral. So if I underwrite a line of credit that's secured by receivables, the term of this loan as it revolves, should be paying down around the conversion of the receivables to cash. So that's a short-term type of cycle. So a line of credit usually matures in a year or is either is um going to be, be able to call, be called, which is called on-demand. Um, so in that case, what we're expecting is we're expecting the the line of credit to have a very short, uh, that loan vehicle to have a short-term life and be always being paid down and liquidating and paid back up and that kind of thing. So it has this revolving nature, we call a revolver. Similarly, if I'm financing a long term asset with a longer life, then I can pay that over off over a period of life of the asset itself. So if I'm financing real estate, for instance, Um, real estate has a long term life. I can say I can go with 1520 years on an amortization. From financing equipment. Again, I'm stretching it out of the life of the equipment, maybe that lasts for 5 years. So it's a 5-year term. So, now, here's we, as we go into what we have with ESOP financing, we have what we call an acquisition debt that is not collateralized. And as I, as I mentioned, it's an, it's called an air ball. So this is everything that the bank could get in collateral in it and above that is what the air ball is where there's no collateral. There's no secondary repayment source. So, hey, this is scary for banks because as they walk out on the ice, metaphorically speaking, they're not sure how thin thin it is, right? So if it's going to crack, and they're going to fall in left holding the bag with no secondary source of repayment, guess what, they lose. And one thing that needs to be pointed out, is the type of, of, you know, financial partner they are, right? Their, their reward, when we look at it is the, the maximum amount of interest they can collect during the life of the loan. So from a business assessment of risk, what's happening is they're investing money for this small interest rate return, which used to be based on LIBART, they're changing the the spread premium. So it used to be um LIBOR that they would base their cost of funds on or cost of debt, and then they would use that to try to create a profit spread on, on the loan. So either way, however, they use their spread premiums, um, there's still a small return on, on the risk that they're taking. So, like just to appreciate the bank for a second and say, you know, thank you for even considering doing this air ball loan at such a small rate, I think that's something that you have to get in your mind and understand your banking partner isn't an equity partner. Who's going to make a big return if the company succeeds? They're only going to get paid what the interest expense or the interest rate is going to be on that loan. And so, what, why would they do that? Because this is a, this is part of the way the banks, you know, build a whole relationship. So they would do that to build a whole relationship with the company and within all the services. So the loan services, the credit er or the uh the deposit services, the treasury services, anything like that. That can be part of the whole profitability model for them. They're also in it for the long term. They're not in it for, they want a long term relationship with the company, which means that they want, they really do want to be a banking partner with the company, because over time, that's, um, that's going to be a better fit for them from a business perspective. They're not in it to make one big investment and hopefully make a big return. They don't, they don't, they're not looking at it on the short term. So this is all relevant to know and because I think as we start talking about the idea of approaching the bank or pursuing another bank to consider them lending you the money for your ESOP transaction, I think it's important to really understand how they're thinking. So I borrowed this from an article that was written recently and posted in the NCEO and it's entitled Approaching Banks for ESOP Loans written by David Salomono with Levenfield, Perlstein and Regina Karls with JPMorgan Chase. Now, they suggest, as you think about your ESOP deal. To make sure you put together an overview of the total deal, which means understand what percentage of the company is being sold to the ESOP and understand what the desired level of financing is and what we, what the seller is expecting to get from the cash proceeds. How much debt can the company really handle in the transaction and, and some of these questions are going to have to be answered for from modeling out those questions. And so this is really important because as you start the process of thinking about doing an ESOP. The very beginning steps are really to create, first off, some type of evaluation model to determine um what you are going to transact for, and then from that valuation model to determine what the actual cash flow is available to service debt. And, and as the models get created, um, they're going to be very, very important to help to help facilitate those conversations with the banks. Now, one of the things that I, I want to stop and just say, I think that that conversation again in the industry of doing ESOP transactions. Needs to happen much earlier on in the process than many deals, and many deals that happen that are done and managed by investment banking firms, um, are putting that trend, that, that conversation in that process towards the end. It's not like they're not having conversations with banks, but they're putting them all in a room in a sense, giving them the, the, the presentation and, and saying, hey, submit your proposals by X date, we'll consider them and, you know, and by doing that, they're going to get potentially the best transaction deal. And so, all I'm saying is, is have the this thing done earlier on in the process and consider your first bank, your primary banking relationship first. And then if they can't do it, and they don't have the knowledge base, then certainly move from there. Um, if you need information on banks that do ESOP lending, certainly reach out to your advisor, and you can always reach out to us as well at, at um journey to an EOP.com actually as a how can we help? So we would be more than happy to provide you some, some banks that do ESOP lending if that's something you're thinking about. Um, I do think that this is not as sophisticated as it's, it's thought to be. And, you know, when we're approaching the banks, it doesn't need to be, you know, as complicated as you might think it does. So, only because, and I say that because I think there, there's this veil of mystery behind, hey, it's an ESOP transaction or it's an acquisition debt. It still works the same way as most, you know, requests for financing. Now, as you approach the bank, um, there are all sorts of ramifications, you know, as you start to point out the points. Now it's very important because the ESOP deal has tax advantages that aren't available. So if the lender doesn't really understand ESOPs, they're not going to understand how the cash flow is going to be affected um under the ESOP transaction. And so it's important that that be um put together and, you know, and, and communicated in the way that basically the bank really gets it. And so hopefully, if you're dealing then with a bank that has knowledge of ESOPs, that's gonna totally make sense to them. Um, one of the, one of the major areas of what I would say it's been a lot of time on is the financial forecast, because the financial forecast is really the, uh, the linchpin for the whole transaction because it establishes the financial cash flows and the, and the potential story of what is actually going to happen in the, the transaction and, and how much source, how much cash is going to be required in the transaction. It's going to allow for to, to, it's gonna allow for the client to communicate to the bank. What the actual net cash flows are available to service debt. So then the calculations can come with the way that they look at the credit and, you know, as I get through that, it's basically how they are going to evaluate the risk that they're looking at um in terms of of providing the financing. This also establishes a potential valuation, as I said, um, in terms of what, what the business is really worth, which supports the whole loan request as well. So when we, when we think about this credit people at banks approved loans based on historical cash flow, which, which is um going to happen with an ESOP deal too, right? So they lend on the ESOPs or the companies um multi multiple of that cash flow. So knowing your historical cash flow is going to be essential. Um, one of the aspects of knowing your cash flow is to make sure that you've nailed down what real adbacks are. And so there's other podcast episodes, I think one is, I did one on norm normalization entries, that's really important to know what your adbacks are because it's going to affect the total cash flow. So, real quick, if I have a client who's selling a controlling interest in the company, And they no longer gonna have discretionary expenses, say, going out and, and spending money on, you know, their hunting lodge or going out and they had an airplane, you know, that didn't need to be done, you know, in the business. So there's all these different costs that expenses that were hitting the income statement that are now no longer going to do that. So if we can itemize those, we can, we can then present a real normal cash flow so that the bank can underwrite that and use that to figure out whether how much they can actually lend in the transaction. As we go forward with the bank, we're gonna want to combine the tax benefits in ESOPs so as we test out the potential covenants and looking at um whether we're going to include a debt service coverage ratio or a fixed charge coverage. We're going to want to calculate those um either alongside or prior to submitting our package for the bank so that we really understand how strong the potential credit could be. And so that might take a little more of an advisor to help you with those things, but it will be important to try to like understand what those ratios are. And so the obvious point in this is that the higher the coverage ratios are, the stronger your credit is and the better you can negotiate the terms of your ESOP deal. And so vice versa, right? The lower that coverage ratio is in relationship to that. Now, understand that. When you've calculated that, there's other things that go into the credit. It's not just this one, financial loan cover on the fixed charge coverage, but it is important for you to kind of have some estimate of what you think those ratios are gonna be, so that you can be thinking about what your potential deal structure would be and how many, how, how much time and effort do you need to put here. Um, one of the points of the article I thought that was really helpful, um, is, is how, and this is what I think where banks either get ESOPs or don't. But one of the things they pointed out in referencing the uh NCEO's research was related to over 1700 ESOP loans with a default rate of only 2 per 1000, which is incredibly low. So why are ESOP loans, um, have, why do ESOP loans have such a low default rate? And so as the bankers start to realize this, These are really good opportunities to loan money, even though there's air balls and there's scary stuff because the secondary payment source isn't really exactly where they need it to be. These are really good loans. So there's a great opportunity and these companies, you know, there's other research on ESOP companies outperforming non-ESOP companies and there's a lot of data around um how employees are empowered and and you become a better company. And so there's, there's a lot of reasons I think that company is so much better as an ESOP company than they are as a non-ESOP. So with all of that, we're going to get this place where, what, what are we going to get to the bank and the bank's going to need in order to evaluate this now. Of course, a a full management presentation is going to give them the whole scope of the deal and all that. So, but if you, if you just skinny that back, essentially, they're going to need to review the financial statements. They're going to have to look at some historical financial statements, and really as they underwrite the history behind the company. They're going to want to understand the forecast and what the forecast is incorporating in it for potential cash flow to pay the note back, which is going to be, of course, the ad backs for taxes and all. So the cash flow model that you create to for feasibility is going to be helpful to have some dialogue and communication. And possibly present that as we go through what the potential forecast is that there's a lot of work that goes into before that because we have to project the, the revenue, we have to look at operating expenses, we have to have a reasonable forecast that makes sense, that's going to tie well to again, the valuation and the purchase price. So all those pieces need to fit together. Those pieces really um provide the basis and the foundation of the what we're going to call the overview of the ESOP deal so that they can really evaluate what percentage of the company is being sold, what type of entity that we're going to be, is it an S corp, Corp. So what are the selling shareholders going to estimate to take back in terms of a note. And so we'll be saying, you know, we're comfortable with this level of financing and, and then we're going to kind of guide the ship there. Um, we're gonna also probably submit at that point, a good overview of the management team and a good overview of what we think are really the strengths of the business and how we think that, that this, not just this transition is going to make sense, but the transition of the business moving forward with new leadership and That plays a, you know, a part in, you know, the acquisition of, of clients and new customers for that company, and the supplier relationships and just really thinking through if, if you were the bank, they're going to want to evaluate any major risk areas. So if there are any that you would have, say, maybe, um maybe there's a concentration issue within the the company, maybe there's been um a couple of years ago, there was a downturn. that needed to be explained and they had one bad contract or something. So, so thinking about those, you're just gonna want to address those early on because they're gonna pick them up in the financial history. So considering all that, that's all been provided to the bank. Now they can do their underwriting. And the question that we're going to have to the bank at that point is, hey, how long do you think underwriting is going to take? What's your time frame? Also ask the question, who are you dealing with? Are you dealing with the credit people, the people that are making the decision? Is there a structure to approve the loan? Does it go through a signature approval authority, which means That in order for the relationship banker, who's maybe the banker you're dealing with the most, in order for him or her to get the, the, the client, the credit through the process, They have to have a credit signature and maybe somebody in the state has to sign off. Who are these people? And are they in the meeting? Are they part of it? Are you able to explain all of these things to the right people? So then that's a very important aspect. If they're, if their people are behind the curtain and you never get to talk to them, how do you really get to explain, you know, your position? So again, that's part of building. A banking relationship. So if you're bringing in a new bank that you haven't dealt with, that's advice for you, um, in your existing banking relationship, assuming they can do an ESOP deal, really, hopefully, they're, they're going to have much shorter turnaround time because they really understand your business model and a lot of the questions they're going to ask you, they probably have already asked you. So then then they're really just trying to get comfortable with the transaction. Once you do and you do get them to provide a term sheet, now you're in a position to really evaluate those in comparison and then build those into the feasibility to support the, the, the whole deal and really understand how that's all gonna fit. So that's really the, you know, as you pull it all together, um, this, um, really can be then used as we go through the planning process and understand what, what comes next. So as I finished this episode, I wanted to finish with this. So partly I just love that theme song to Seinfeld. So, but really the funny part of all this is, as we think about it, you as a selling shareholder, you become Kramer, well, not Kramer, but you become the Kramer, Kramer's dream was, hey, I want to become a banker, which is hilarious. Um. What's so what's not funny about that though is the reality that you do become like the bank, right? You're in a position now that you have to do your own underwriting, right? If I'm the selling shareholder, I'm thinking about my own loan getting paid back. I am now thinking about my, the risk of my loan, the interest rate that I'm getting, and I'm evaluating the cash flow. One of the things I love about ESOP deals is when I get to compare an ESOP to a management buyout. So that would be where The key managers are buying out the uh the shares and or and maybe that's one option or the company decides they're going to do an ESOP. So you compare the two. Now, an MBO is going to be after tax, so the cash flows that are generated that after the taxes are paid. So I'm always going to have MBO is always going to have a lower cash flow than a an ESOP, right? So it's fun to compare those, but as a banker, Your job is to determine whether or not you want that credit risk. So, I think as we close it out. You know, every banker has to do their underwriting and get comfortable with it. So I think that there's a lot of good reasons for you to take the note back and feel comfortable with it, especially because it's your own company, you're probably a lot more comfortable with the cash flow. You can get a really good return on that compared to what's available in the marketplace. If you are investing in obviously savings, then, of course, you're going to get a better interest rate. So a lot of, a lot of things to think about and contemplate when you're thinking about approaching the bank. So with all that, I wanted to say thank you so much for joining us today. Please check out our website at journey to an ESOP.com, and if you have an interest in the upcoming ESOP Guy live webinar, that's on April 28th at 2 p.m. and again, that will be about what is your business worth as an ESOP. So we're going to go into a presentation related to valuation methodology. If you like the podcast, if you don't like it, don't listen anymore. But if you like the podcast, then subscribe, share it with a friend, um, and if you want to rate the podcast, that would be awesome, but, but we look forward to now our next step on this journey.