Brewbound Live Winter 2020 Virtual: Live Oak Bank Interview

Ray [00:04] Hey folks, I'm Ray with Taste Radio, and right now I'm speaking with Randall Barns, who is the vice president of wine and craft beverage for Live Oak Bank. Randall, how are you?

Speaker 2 [00:14] Doing great, Ray. How are you?

Ray [00:16] I'm doing great. Great to see you. Uh, so yeah, let's talk about Live Oak Bank. Um, for folks who are not familiar with what you guys do, what is Live Oak Bank and how do you work with craft beverage companies to support their growth strategies?

Speaker 2 [00:30] Yeah, so we're, we're set up a little bit different. Uh, we, we took an industry approach to lending. We, we lend into about 30 different industries, and then we hire a team of specialists to focus just um in that space. Uh, whereas most lenders will hire a loan officer, give them a certain geographic territory, and then they're, they're just kind of a, a general lender. We took the opposite approach. Um, our team out here in California, the wine and craft beverage team, we focus on, on lending primarily to wineries, breweries, and distilleries. And uh we, we do it nationwide. So we're, we're in all 50 states. We're also the largest SBA lender in the country. Uh, SBA is not all that we do, but it is what we do best, uh, by, by leveraging the SBA guarantee program, we're able to uh offer our, our craft beverage customers more favorable, uh, structures on their loans.

Ray [01:29] So I'm sure you have a lot of insights on my next question, which is, you know, what's the lending environment like for craft beverage companies in the current economy?

Speaker 2 [01:38] Yeah, it's, it's all across the board. Uh, you know, when the pandemic first hit, the, you know, the capital markets were actually very strong leading into the pandemic. Banks were very well capitalized, interest rates were favorable. Uh, the immediate reaction for most banks when the pandemic hit was, uh, to err on the side of caution and allocate excess funds into, to loan loss reserves. So the, the, the, the short-term impact was, was really rough for small businesses who needed access to capital. Um, certainly the stimulus and the PPP that, that came out, um, in, in March and April, um, I think saved a lot of small businesses in this country. We were very active in the PPP program and, uh, we're, we're just really happy that we're able to help a lot of our customers sort of get through a really tough time. Um, banks are still lending for the right opportunities. Uh, we, we're, we're certainly for the live oats, wine and craft beverage team specifically, we're absolutely, uh, you know, aggressively looking for, for opportunities. Our, our sort of ideal customer is a, is a growing craft beverage producer, you know, maxed out on capacity, needs, needs, uh, the capital for expansion. And right now that profile is, um, it's, it's rare right now. Not a lot of, um, breweries are, are expanding in this environment. Um, but there are a number of exciting projects that we're working on, um, some, some really, really strong breweries who are actually thriving during this pandemic, and Need, uh, need access to capital to continue to grow. And of course, we're also paying a lot of attention to our existing customer base and, and, uh, are prepared to, to deploy additional capital there as needed as well. But I, I, I think though, Ray, overall, um, The, the lending environment right now, um, I would say it's, um, Banks are, are, are cautiously optimistic, um, about, about the future. Banks need, need to continue to lend money in order to grow and, and, and meet their shareholders' expectations. So, yeah, there, there is, um, there, there is still capital available, but I, I think, um, a lot of banks are still looking at this from a really cautious standpoint, just not knowing how long this is gonna last.

Ray [04:04] So Randall, how are your existing clients holding up uh amid the COVID crisis?

Speaker 2 [04:10] Surprisingly well, actually. Um, when we did our, um, our initial outreach and, and when the pandemic first hit, um, there was a lot of panic and uncertainty. Uh, we were lucky again to be able to, to deploy the PPP funds to give everybody some breathing room and provide some much-needed, uh, cash on the balance sheet. Um, but, you know, subsequent to that, we've been doing regular check-ins, talking with our customers, um, on a, on a weekly basis sometimes. And we found that, um, again, doing surprisingly well. About 80% of the folks that we're talking to are saying, look, it's not ideal, um, but I, we're gonna be fine. And then there's 10% who aren't sure they're gonna make it through, and then there's 10% who are, are doing better than they've ever done before. So, overall, I would say that, um, surprisingly well, and just another reminder to us as to why we love this vertical and just how resilient and creative this industry is. We've been just so impressed with uh, the creativity and just the hard work and passion that our, our customer base demonstrates every single day. And, and uh that character really comes out during tough times. So we're, we're really proud of what our customers have done. Um, as you might imagine, the guys who are, are reliant on, on-premise sales are, are hurting pretty bad. And the irony there is that the, you know, the model that we've been saying Everybody needs to be gravitating towards over the last 24 months is, look, you got to own your local market. You gotta invest in your taproom. It's all about DTC. It's too hard to compete on the grocery store shelves. So all these uh producers and, and, uh, craft craft beverage producers who've done everything the way that they were supposed to do and invested heavily in their taprooms are, are being hurt the worst right now. Um, we, we do think there will be another round of stimulus coming soon to help some of those folks. Um, but, you know, we're, we're also finding that, that this is, um, this whole pandemic has created a little bit of a shift back towards brand loyalty, um, you know, the, the sort of, um, I guess experimental type of uh consumption that we've seen over the last few years. It's, it's harder to do right now during the pandemic. So, uh, people aren't drinking any less, they're just drinking differently, and we're finding that some of the larger producers who were, who had the resources available to shift to, to packaged beer, um, the packaged craft beverage in general, are, are actually doing really, really well in this environment. And while you can't replace The margins of, of pouring a, a, a pint of beer and selling it over your counter. You know, we are finding that um that, that some of our, our customers are actually doing incredibly well and I, I think that, that, that flight towards um brand loyalty and quality will, will resonate even post-COVID and, and might create some opportunities for some of these producers to not only survive through this, but, but even to gain market share and we're prepared to To partner with, with those folks to, to provide the expansion capital needed when the time is right.

Ray [07:23] So I'm sure that there's a lot of folks uh watching and listening that would want to get in touch with Live Oak Bank. What's the best way to do so and what should they be bringing to the table for that initial meeting or call?

Speaker 2 [07:34] Yeah, we're, uh, there's a lot of information on our website, Live Oakbank.com. Um, you'll find my contact information on there along with the rest of our beverage team. Uh, some, some videos on there, some testimonials, um, quite a bit of information on, uh, not only the, the wine and craft beverage vertical, but the bank as a whole. Uh, so Live Oakbank.com is the best place to go. And for that initial call, you know, we'd like to keep the initial conversation pretty high level. Um, you know, if, if you're, you know, in, in a situation where you had a, a, a brewery or a distillery or a winery that was doing really, really well pre-pandemic, and, um, you're struggling because of that, you know, we'd certainly wanna, wanna talk with you about what we might be able to do to, to, to help come out of this. And obviously, if you're in a position where you are growing and um need capital to, to facilitate that expansion and Your existing lender might be um a, a, a little nervous about the current environment, then uh we'd certainly like to talk with you about that. And then if you just have general questions about the industry or banking in general, um, you know, we, we love talking with, uh, with, with our customers and anybody within the space, whether or not you end up being a customer of the bank. Uh, we'd love to talk. We're big supporters of the industry. Love being a part of, uh, an event like this. I wanna thank you guys again for, uh, for doing this. I wish we were doing this live in Santa Monica. Uh, we know how hard you guys are working right now to put this event on. So thank you for doing it and for, for letting us be a part of it.

Ray [09:07] Well, Randall, thank you for all that you do for the industry. It's been great speaking with you today. Thanks so much and for folks watching at home, once again, check out Live Oakbank.com to learn more.