Low Rate, Bad Deal? How Loan Covenants Can Restrict Your Business Capital

Jeremiah Bush (00:00)
Most consumers walk in saying, Hey man, we want the lowest rate possible. Well, it doesn’t matter if I give you the lowest rate and I give you horrible terms and conditions, right? Or if I give you a great rate, decent terms and conditions, and horrible covenants that you’re never going to be able to abide by. So the great thing about what we do is we’re able to walk our customers through that entire process. And honestly, most—most business consumers have no idea

what the covenant language is and their term and and and their loan agreements and everything’s good when you’re making your payments on time.

Joseph Crooms (02:04)
And welcome to Investor Fuel Real Estate Pros Podcast. And I am joined today by Jeremiah Bush, as well as his

protégé and right hand. I guess Jeremiah would be Batman, and he got Trenton Bush as his Robin. So welcome them both. Hey, Jeremiah, say hello to everybody, and Trenton, say hi as well.

Jeremiah Bush (02:32)
Hey, how’s it going, everybody?

Joseph Crooms (02:34)
Good, good. You got both of them there. So Trenton be sitting back, relaxing. Jeremiah will be the seasoned man, and I think our listeners are really going to take away something away from this podcast, especially how you’ve been approaching business. But before we dive in, tell me exactly what your business is, you know, loaning or or or partnering, or kind of how would you explain?

Jeremiah Bush (03:04)
Yeah, first off, thank you so much for for having me on today. It’s a pleasure to be sitting here with you. So our company, VaultAtlas.com, we’re pretty much—we—we play a role as the middleman between consumers who are looking for business capital and the banks on the other end who are trying to deploy that capital. Our our our role in that is to basically make sure the rules or the lay of the land is spelled out clearly.

For those who want to access capital. So when our consumers come in—come into our site or partner with us, our job is to then to then articulate their requests to the banks and then on the bank side we’re working with them continuously to make sure they’re only getting options in front of them that fit into their credit box. So that way the acceptance rate for the client is higher.

And then for the bank they spend more time working on credits that they actually want.

Joseph Crooms (04:04)
Okay, so before—so let’s dive into this this way. For people who may not be familiar with your world, give us the short version. What’s your main focus these days? What markets are you operating in?

Jeremiah Bush (04:15)
So right now we’re primarily focused in the Texas market. We do a lot of work in the in the commercial and industrial space, owner-occupied real estate. We do do some investor-type real estate, but but our target client is somewhere between that startup client and let’s say fifty million in annual revenues. So that’s our target.

Joseph Crooms (04:41)
Let me ask you a question. So you’re the middleman and so you have to build strong relationships with banks. We’ll get to them later, but how does—how do you advertise to your clients, especially the new and those that are a little more seasoned?

Jeremiah Bush (05:46)
Yeah, that’s a good question. We—we’ve been building a pretty significant reputation here locally. We’re based out of Austin, Texas, so we’ve been building a pretty good reputation here locally. So a lot of it’s been word of mouth. We obviously do the other marketing, you know, the the high traffic marketing-type deals, like, you know, Instagram and Facebook and we do those things.

But typically our customer, it’s kinda tricky. Our our customer is typically between the age of thirty five and about sixty five. And that particular customer prefers word of mouth. They prefer—they prefer warm recommendations. So, for now, that’s been a great platform for us.

Joseph Crooms (06:29)
How long have you been operating as Vault?

Jeremiah Bush (06:33)
So it’s been a little over thirty-six months now. We—we started out just really just trying to facilitate client requests and then it expanded into, I’d say, over the past twenty-four months, definitely working more closely with the financial institutions and trying to make sure that they’re able to deploy their capital.

Joseph Crooms (06:57)
So when you started, what was your book of business and what is your book of business at this point?

Jeremiah Bush (07:02)
So when we first started, we actually I mean we started from zero, right? So my background, I spent over twenty plus years in in in corporate finance and commercial finance. So when I decided to start this company and start this, I knew that I was walking into this territory and I knew I was, you know, I was kind of starting from scratch. And today we probably service somewhere between a hundred and a hundred and fifty million in transactions annually.

So we’re growing. We hope to get to the point where we’re crossing the—crossing a billion dollars in transactions annually. So that’s what we continue to start pushing towards.

Joseph Crooms (07:42)
So from you being in the financial world, did that—can you explain how that benefited you dealing with lending institutions?

Jeremiah Bush (07:52)
Well, that’s—and—and that’s another great question. One of the one—one of the things about our company that I think that separates us is a lot of the intellectual capital that’s went into developing this company has come from people who have been boots on the ground in this space who understand the ins and—ins and outs. They understand risk policy and they understand risk guideline, which is important when you’re trying to negotiate with a financial institution.

So it’s not just so much about, you know, most consumers walk in saying, Hey man, we want the lowest rate possible. Well, it doesn’t matter if I give you the lowest rate and I give you horrible terms and conditions, right? Or if I give you a great rate, decent terms and conditions, and horrible covenants that you’re never going to be able to abide by. So the great thing about what we do is we’re able to walk our customers through that entire process. And honestly, most—most business consumers have no idea

what the covenant language is and their term and and and their loan agreements and everything’s good when you’re making your payments on time.

But if you miss a payment or, you know, maybe you need to—maybe you need more capital, something as simple as needing more capital, then maybe covenants restricting you from getting that getting that capital from another institution or even with the institution you’re working with. So those are the type of things we work very closely with our customers.

Joseph Crooms (09:12)
Can you give me an example, Jeremiah? They got the original loan and but they need more capital. What what is it that you look for that you that you say, hey, let me this is what I identify this and you now you need to present the problem to them.

Jeremiah Bush (09:26)
Yeah, absolutely. So, for example, there’s—there’s some financial institutions that will have liquidity covenants and most—this is often overlooked. And most customers, you do your loan and you don’t realize that the bank is requiring you to maintain a certain level of liquidity. And what that means is cash in your bank, maintaining that cash in your bank. You know, when you closed the loan you felt pretty good, you had a

certain amount of capital in it or vice versa, the customer may make the promise that at date XYZ I will have XYZ amount in my account, right? So if that doesn’t happen, now you’re in a covenant issue. And the bank has a lot of options. They can call that loan. They can, you know, they they can enforce some type of penalty. And this happens. And that’s just one of many covenants. Now covenants are not a bad thing. It’s the—it’s what the bank is doing.

Protect—to protect their investment, but it’s often misunderstood or overlooked by clients when they sign these loan agreements.

Joseph Crooms (11:07)
Covenant, I know—I—that’s really a theological term that you—we—we hear a lot. But now—but you’re using it with bank, can you name some of the covenant key points that that come out, you know, that you can share with us?

Jeremiah Bush (11:22)
So, I mean, there’s—there’s a—there’s a few. So there may be liquidity ratio liquidity covenants, debt to income covenants. It depends, so let me backtrack. It—it depends on the company and the request type. So I’ll give you an example. I’ll give you an example of a client I’m working with right now. So it’s a medical practice. They’re coming in, they’re asking for a lot of capital. They’re asking for ten million dollars in in capital. As part of that request,

They receive payments from—from Medicaid, like most medical companies do. When we review the financials, we notice that their actual receivables, medical receivables are increasing year over year. So we want to place a covenant in place that kind of protects the financial institution in the event the—the—the amount of these receivables that are strictly government related increase. So we wanna—we—we want to basically

Discount our loan against those receivables. So, for example, on day one, we may, for every one dollar in medical-related receivables, we may give you eighty cents, right? As a loan. But if we get to the point where now you have a thousand dollars, we may say, just because of the size and its percentage of your receivables, we may discount that down to sixty percent, right?

But as you’re growing your company, if you don’t have this calculation built in, you may mis-mis-miscalculate how much capital is going to be available to you. So just small things like that. Now, this is for a very large company, right? But even with startup companies, right? A—a more common type of loan, let’s say an SBA loan, your standard SBA loan may have certain

Rules tied to it. Now you typically don’t have as many covenants with an S—well, any covenants with an SBA loan, but every type of loan agreement is gonna have some type of protection for the lender in it and it’s—it’s best that you understand.

Joseph Crooms (13:36)
That’s not easy, with so many covenants to be able to disseminate—to—to—to—you disseminate them for the bank, but you’re also protecting the the consumer.

Jeremiah Bush (13:51)
Correct, correct. The goal of our company is to make sure everybody’s on the same page. Okay. So the the first thing just to walk you through our process. So typically we’ll have a consumer come in, they may—they may apply for a loan. Let’s just—let’s say, you know,

Right around eighty percent of all small businesses are between one and twenty million, zero and twenty million dollars. So let’s say a company, three million dollar business comes in, they want to purchase the building they’ve been renting for the past five years. Okay, so we typically will come in, we’ll gather all the information we have, we use proprietary tools that we have to create what’s called a deal sheet. Inside of it, it will include all the metrics for the particular financial institutions that we have partnership agreements with.

We then take that data in that deal sheet and we then will share it across all of the financial institutions. They will then look at that information and say, based on what we see, this is a great match for us. We’ll actually alert them to the—to—to the match and then they’ll agree to move forward. And then from there they’ll kind of come back and say this is our—our—our rate, basic terms, conditions, and then we’ll take that information, present it to the client. Hey, there’s eight banks interest—interested in your transaction.

Based on our initial conversation, five of them fit what you’re asking for. Now—now we get to really go to work and let’s see out of the five remaining financial institutions, who’s going to give you the best set of terms, conditions, and covenants that you can live with for the life of this loan. And then we make the agreement, we close the deal.

Joseph Crooms (16:08)
Thank you. Now, every operator I know has a—had a moment when things don’t—they think they—maybe a deal that went sideways or a time that you had to pivot fast. Do you mind sharing one of those moments for us, Jeremiah?

Jeremiah Bush (16:14)
Wait.

Yeah, yeah. I’ll—I—I’ll say this, especially early on, it—we—it—accuracy of data is important to us because it helps us provide accurate information to our clients. And you would think the consumers are the ones who are the ones lagging behind on the accurate information. It’s been our experience, it’s been the financial institutions. A lot of times, you know, when they make changes to policy or changes

to maybe a particular rule or maybe a particular lending bucket. You know, we we need them to update us and tell us so we can make sure that the the the matches and notifications they’re receiving match what they’re looking for. So I—I—I would say there’s been early on maybe several situations where we’ll have five matches. Two of the five the bank is either

Filled up in that bucket and they didn’t tell us. So and you know we’re—we’re getting excited with the customer and hey we got five matches; we find out you really don’t have five. You have two matches. Right. So something along those lines. So it’s just making sure and a big part of that was for us was making sure that we’re doing a better job, communicating more often to make sure we understand when they make changes, we can make the necessary changes. So it improves the process for the consumer and the business owner.

Joseph Crooms (17:53)
What’s been the key to keeping your machine running smoothly?

Jeremiah Bush (17:58)
Great team, great teamwork. I’ll say that. That is number one. Because we have—we—we have so many moving parts and I will say a commitment to—to—to service in—in the—in the customer experience. So I’m a real big advocate of making sure that the customer only has to tell us the story once. You know, when that customer takes the time to take that fifteen-minute, twenty-minute conversation and talk about their requests.

And provide whatever information they need to provide, that needs to only happen once for the life of that relationship. So whether it’s today or five years from now, I shouldn’t have to go back and ask you for a document that I previously asked you for. So we take that piece of—of what we do very seriously and making sure that we accurately understand the customer’s request—request and what they’re looking for. Now sometimes the customer doesn’t know what they want, which is okay, which is perfectly fine.

And even in that scenario, we want to make sure that we listen to and—and—and—and carefully take care of what they need.

Joseph Crooms (19:06)
That’s the kind of stuff people don’t talk about. And what I mean by that, the—the—the—the being transparent, being open to your customers, you know, that’s—that’s—that’s a new business model. That’s the—and thank you for sharing that. And honestly though, it’s also what separates folks who are dabbling from the ones who stay into the game for the long term. Let me ask you this. What’s your—what are you most focused on solving or scaling next? What’s your next real goal?

Jeremiah Bush (19:34)
I think our—let me—let me—let me—let me answer this correctly. I—I—I don’t want one of my team members to try to choke me for saying the wrong thing. But I—but I would say right now our primary focus—well, what we wanna scale is our number of partners. Right now we have over a hundred and sixty financial partners. We wanna push that above a thousand. Like I really wanna get that above a thousand. And I would like to hit that number

By end of 2027 for sure. So that’s a target for us. We cover so many products on the business side, but we want to fine-tune what we do there. And in order to accomplish that, we need more diversified partners. So we’re doing that. So that’s—that—I—I would say that’s our primary focus.

Joseph Crooms (20:28)
When you say diversify, in what areas of the market are you looking to diversify?

Jeremiah Bush (20:33)
So right—right—right now, I—I—I think we want to target more specialists, right? We have a lot of partners who are more like you—you think about—I’m gonna just gonna use them as an example—Chase Bank. A bank like Chase, they obviously, you know, they’re—they’re not really specializing in a specific product mix. They’re—they’re kind of focusing on the business—the—the business consumer and not specifically a specific industry.

So what we want to do is find more partners that are going to be more industry-focused, right? Just to add more diversification within the product pool. So a good example is let’s say like a construction company, right? When you’re banking a construction company, yes, they may need the equipment loan, yes, they may need the working capital loan, but they may need some factoring, right? They may need some payables and receivables.

And receivable solutions. So there’s a—you know, they may need some insurance solutions. So finding diversified partners that we can work with to encompass the entire small business experience.

Joseph Crooms (21:47)
So that next move can either compound things or create chaos depending on how you play it. Now, I know a lot of people listening are—are either early in their journey or looking to level up and I think they’ll benefit from hearing this. What is it about building relationships and growing your network that’s made the biggest difference for you?

Jeremiah Bush (21:55)
Yes.

I’d probably say just, you know, being straightforward with—with—with—with a lot of the customers we communicate with, there’s so many—first of all, I love small business owners. And if you’re—if you’re running a small business and you’re doing it well, you’re not just running your business, you’re the janitor and you’re the accountant and you’re the—you know, you’re—you’re—you’re wearing—you’re wearing several hats. So I think one thing we’ve been really, really good at is

Meeting the customer where they are in their process. So whether it’s that small business owner who is, you know, he’s—he’s—he’s running his janitorial company and, you know, he—he has thirty minutes to do—to conduct this meeting before he has to go pick up the kids for basketball practice or soccer practice. We’re meeting them where—where they are. We’ve met clients at the airport, we’ve met clients, you know, at the park, whatever it takes to make sure

That—that—that we’re meeting them where they are. We want them to know we understand what they’re going through. And this is not a cookie cutter. We’re not a cookie cutter company. We’re here to solve—solve problems. That’s fantastic.

Joseph Crooms (23:21)
Well, you can’t fake that. Relationships are everything in this space. Jeremiah, thank you for joining the podcast. All right, before we wrap it up, if someone wants to reach out to you, connect with you, maybe collaborate or learn more about what you’re doing, what’s the best way to reach you? Say it twice because, you know, there’s some people like me that may be fumbling for their pen.

Jeremiah Bush (23:45)
Absolutely. So I would say you can just go to our website, which is VaultAtlas.com, V-A-U-L-T, A-T-L-A-S dot com, and just schedule an appointment. And that’s as a partner or as a—as a business owner. So if you’re a partner who sells products to small business owners and you would like to have a different avenue to connect with them, we’d be happy to hear from you as well.

As we’re expanding our—our products and services.

Joseph Crooms (24:18)
Run it back, Jeremiah. Something about the people getting the pen.

Jeremiah Bush (24:24)
And once again, VaultAtlas.com, V-A-U-L-T, A-T-L-A-S dot com, and we chose that name because our goal is to help you navigate this entire banking industry.

Joseph Crooms (24:38)
Thank you so much. Perfect. Well, listen.

Trenton Bush (24:40)
Even me, you can reach out to me directly, and I’ll make sure to get it to Jeremiah, at [email protected]. You send me a message, email, I’ll get it right to—

Joseph Crooms (24:48)
Well,

I’m not gonna chance it. Say—say it one more time.

Trenton Bush (24:54)
It’s [email protected]. So T-R-E-N-T-O-N at VaultAtlas.com. Absolutely.

Joseph Crooms (25:03)
Jeremy’s—that’s his Robin, so they—they’re rolling like a good team. I love it. So listen, I appreciate your time, your story, your perspective, your philosophy. Trenton, it’s nice meeting you, young man. Jeremy, we need more people in—in this space who are doing it right. Thanks again for being here, guys. And as for those of you tuning in, I know you got some value from this. Make sure you subscribe. We got more conversations coming from operators just like Trenton Bush and, of course,

Jeremiah Bush, who are out there building real businesses but more important, helping real people. So see you on the next episode of what? Investor Fuel Real Estate Pros Podcast.