Read the case study.

Covent Technologies
FREEING UP CASH FLOW WITH CORTRUST BANK
As co-owner of three small
companies, Bruce Hanson is no stranger
to acquisitions. But when his bank of
10 years was bought out for the third
time, he no longer recognized the person
with whom he was doing business. The
new bank rarely checked in or offered
advice. It seemed to push products over
partnerships, and focused more on
capital than customers.
So in 2012, Hanson began searching
for a smaller, community bank with a
different approach. "Aside from more
favorable rates and terms, we wanted
to work with a bank that really cared
about and understood our industry:'
Hanson said. "We knew that would be
an important backdrop to any financial
conversations or decisions with them:'
The Minnesota Precision
Manufacturing Association (MPMA)
was one of the first sources he
considered. As past president and a
current board member of the MPMA,
Hanson knew of at least one banker who
was actively involved in the industry.
original owner and decided to focus
exclusively on close-tolerance parts. That
was in 1992, and since then the company
has more than tripled in size.
Significant Growth
Seven years later, the pair purchased
Superior Tool and Machining, which
focuses on quick-turn prototypes. Again,
they made changes that resulted in
significant growth. Though both companies
serve many of the same customers, they
have sharply different services.
Recently, Hanson and Mattis
launched Covent Technologies, a holding
company for both shops. However, sales
have been relatively flat in recent years,
due to slower-than-expected growth in a
few niche markets, squeezing cash flow
and stifling investments.
After careful analysis of the
company's past, present and future
capabilities, Swanson and his colleagues
at CorTrust put together a financial
package that offered considerable
savings as well as improved cash flow
and credit capacity.
that addressed the company's short- and
long-term needs.
First, CorTrust proposed a more
flexible working capital line of credit to
give the company additional freedom to
grow. Because this loan was backed by the
SBA,Covent Technologies received very
favorable rates-about half a percentage
point lower than its previous bank-in
addition to extended payment terms.
Second, CorTrust suggested the
company consider a combined capital
equipment loan. After consolidating
several smaller loans, this capital
equipment loan, also backed by the
SBA, extended payment terms from 5 to
7 years. It also offered a lower interest
rate-again about a half a percent lower
than the company was paying before.
Third, CorTrust recommended
the company refinance its real estate
mortgage, which already was backed
by the SBA, but under less favorable
terms. With mortgage rates near all-time
lows, he suggested Covent Technologies
switch from an adjustable-rate loan to
An Interest in Manufacturing
In early 2013, Hanson approached
Tim Swanson with CorTrust Bank, who
also happened to serve on the MPMA
Board, about possibly making a switch.
Over the next few months they met several
times and had substantive conversations
about the company's history, operations,
challenges, and opportunities.
"The biggest difference I noticed
between CorTrust and other banks was
its interest in manufacturing:' Hanson
said. "They wanted to know more about
our business than just the financials.
They were interested in our plans for
the future and how they could help us
achieve our financial goals:'
Hanson has spent the better part
of his career managing and growing
manufacturing companies. Two years
after joining Andrew Tool as shop
manager, he and a fellow employee,
Randy Mattis, purchased it from the
18 I PRECISION MANUFACTURING
The biggest difference I noticed between
CarT rust and other banks was its interest in
manufacturing
...
- Bruce Hanson, owner, Covent Technologies
Considerable Savings
One of the first suggestions they
made was to take advantage of the Small
Business Administration's (SBA) loan
guarantee programs, which backs or
guarantees loans taken out by small
businesses to help alleviate some of
the risk to lending partners. Swanson
worked with a colleague outside of
CorTrust to put together an SBA
application for Covent Technologies
November I December 2013
a term-year loan and lock into a much
lower rate. The SBA approved the new
terms and allowed Covent Technologies
to transfer its mortgage.
The financing package proved to
be a win-win for Covent Technologies,
which realized immediate and longterm savings, and CorTrust Bank,
which mitigated its risk by working
with the SBA.
"Our cash flow has improved by
almost $100,000 per year with the
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CorTrust Bank
The financing package proved to be a win-win for Covent
Technologies, which realized immediate and long-term savings,
and CorTrust Bank, which mitigated its risk by working with the SBA.
financing package CorTrust put together
for us:' said Jack Thompson, CFO of
Covent Technologies. "The lower interest
rates and extended payment terms have
freed up cash flow and made it easier to
invest back into our company:'
About CorTrust
A family-owned bank since 1931,
CorTrust focuses primarily on small- to
medium-size businesses and has a number
of manufacturing clients in Minnesota and
South Dakota. It is also a major supporter
and sponsor of the MPMA.
Swanson has been a commercial
banker for over 30 years and joined
CorTrust in 2010. Prior to being a banker,
he worked at a steel fabrication company.
"I feel like we understand the
financial side of manufacturing very
well:' he said. "In fact, one of the
reasons I serve on the MPMA Board
and on the Government Relations
committee is to stay current on the
many issues manufacturers are dealing
with, whether workforce, regulatory,
or trade related. That way, we can be
proactive in finding financial solutions
to help address those challenges:'
CorTrust Bank has locations in
their offices. CorTrust has approximately
$726 million in assets and the ability
to lend in excess of $10 million to any
single entity.
Covent Technologies appreciates
the improved customer service and
cash flow and says its relationship
with CorTrust has helped position the
company for additional growth.
"We couldn't be happier with
CorTrust;' Thompson said. "They
have the support functions we'd
expect from a bigger bank, but the
personal service of a neighborhood
bank. They're business people, not just
bankers. They really do understand the
manufacturing process:'
!I!
Woodbury and Blaine, Minn., and 22
locations throughout South Dakota.
However, its services aren't restricted
by client location. Technology allows
customers to manage deposits and other
daily operations without having to leave
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Left to right: Jack Thompson and Bruce Hanson of CoventTechnologies, and Tim Swanson of CorTrust Bank.
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November
I December 2013
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