Today we are featuring Wilmington, North Carolina-based Mike joined Live Oak last summer, bringing with him 27 years of insurance industry experience. He has worked on the carrier side with major insurers in claims, marketing, and branch management, and was Managing Director of Field Operations and CEO of a $70 million revenue insurance agency in upstate New York. Kelly also has a rich career in the insurance sector, having worked more than 25 years for carriers, MGAs, retailers, and a reinsurer. She has been in the insurance industry lending business for more than 10 years.
"Chip Mahan, our CEO, along with others founded Live Oak in 2008," explains Kelly. "Chip is known for innovation in banking and technology, having started the first Internet bank in the world as well as achieving success in other entrepreneurial banking ventures. In forming Live Oak, Chip and his colleagues established a vertical strategy focused on industry-specific lending in lieu of being a generalist bank. Today we have 11 verticals that include agriculture, family entertainment centers, funeral homes, healthcare, hotels, insurance, investment advisory, pharmacy, self-storage, veterinary, and wine and craft beverage. Consider us a program-type bank, similar to the insurance program business sector. For each of these verticals, we have experts that understand the industry and how it operates, which facilitates the entire lending process.
"Additionally, from the onset there has been a strong emphasis on leveraging technology for a smooth lending process and to provide a quick response to our clients. Clients know exactly where they stand every step of the way throughout the loan process with our online portal."
Competitive SBA Product
Live Oak's product is available exclusively through the SBA loan program, providing tremendous flexibility and the ability to lend funds based on cash
flow, not on collateral. "We look at a firm's cash flow and the ability for borrowers to repay their obligation," notes Mike. "This is a great fit for independent insurance agents, as their assets are their books of business and the revenue stream created from them. We understand this and, unlike most banks where agents spend a great deal of time explaining their business, we are well past the initial stages of requiring borrowers to educate us on their business. With us, it's getting into the details of the specific deal to make our decision. Our dedicated insurance team, combined with the bank's philosophy of quality service and access to the SBA product, enables us to get past what typically bogs down the entire loan process. We take a look at an agency's book of business to determine the true [vigor of the] operation and quality of the credit."
In addition, based on its loan volume, Live Oak is a preferred lender with the SBA. "We have the ability to make all our loans internally without having to seek SBA approval before we originate a loan," which is very different from many other banks, explains Mike. "We have the ability to make quicker and better decisions in-house. Along with our advanced technology, this allows us to be very nimble and efficient in the time it takes to process a loan."
"You could say, we have the pen," adds Kelly.
A Different Kind of Bank
Live Oak works primarily with retail Property & Casualty agents in addition to MGAs, program managers, and wholesalers. The loans from Live Oak
typically include funding for a management or partner buyout, internal perpetuation, or a succession deal with a third party looking to buy the agency. "Most loans are for acquisitions," notes Kelly, "and we also provide working capital, which is generally pegged for growth initiatives. This can encompass funding for everything from producer hiring to marketing staff and initiatives and technology upgrades. What's more, we have a lot of refinancing activity, where we see old seller notes or previous debts, providing refinancing at compelling and competitive terms with our SBA products."
"Our approach is consultative," Mike emphasizes. "Many buyers want to be fund-ready, so if they are working on an acquisition, they know they have the funding behind them. We frequently work with the buyers, pre-qualify the deals, and make sure they have the funding source behind them so they can have meaningful negotiations with the sellers once they know that the funding parameters are in place."
The loans from Live Oak are affordable and come with no origination fees. The only fee is the SBA guaranteed charge, and the SBA gets 100% of it. Interest rates are typically 5% to 6%, and 10-year fixed rates are also available. Additionally, there is no pre-payment penalty, which gives the borrower tremendous flexibility to pre-pay and ensure he or she is making the best use of capital. Loans are up to $5 million with many at the $1, $2, and $3 million range.
"We also have an SBA Express program which provides funds up to $350,000 for which we have developed sophisticated technology," says Kelly. You apply online, answer certain questions, and we can typically providing funding within 20 days. It's good for working capital needs, refinancing, and small acquisitions."
"This is an underserved market," adds Mike. We'll look at the recurring revenue of the agency - its ‘DNA' - its revenue drivers, the quality of carriers, and the types of products being offered when making a loan decision - this is a big part of our analysis."
Establishing Long-Term Client Relationships
Both Mike and Kelly also emphasize that along with a heavy reliance on the bank's technology platform, human connection is paramount. "We have people answering questions along the way, talking with our clients. There is a lot of interaction once our clients apply for a loan online.
"It's a very high-touch, high-tech approach," says Kelly.
In fact, one of the hallmarks of Live Oak's success is its commitment to being a long-term business partner with clients. "Typically, we are providing
10-year loans, and they can run longer if there is real estate involved," explains Kelly. "When talking about a 10-year relationship, we are not just here to fund your deal initially but also to provide long-term support and industry assistance where possible."
"We know the business, have a great product through the SBA, a technology platform that allows us to make quick decisions, and a dedicated insurance team supporting you," says Mike. "We want the customer experience to reflect confidence in the fact that we know their business and are here to back them in making the right decisions. We can be a resource for our clients, a business partnership of trust not only through the loan process but also long after."
Many of Live Oak's clients are referred by advisory and consulting firms working on insurance M&As. The Live Oak insurance team is also very involved in the insurance industry, as a ProgramBusiness.com storefront and in attending tradeshows throughout the country. This year, in fact, plans are to attend 20-25 tradeshows.
If you are interested in discussing funding, you can contact Kelly at 913.980.7773 or via email at Kelly.Drouillard@liveoakbank.com; or Mike at 910.550.2884 or via email at Michael.Strakhov@liveoakbank.com. You can also visit Live Oak's website; just hit "Apply Now" and they will give you a call.
*SBA 100 Most Active SBA 7(a) lenders by lending volume in FY 2015