PTS Products Expands with Financing from CorTrust Bank
In 2014, PTS Products President Paul Soberg knew it was time to make a move. The company he founded in 2001, had outgrown its 6,000 square-foot building in Mound, MN, and was passing up additional work because it lacked space for additional employees and equipment.
"We were literally using every square inch of that building," Soberg recalled. "It was to the point that we had some people working out on the back dock."
Soberg found an ideal building just 10 miles north in Independence, MN, with 12,800 square-feet and 6.5 acres - plenty of room to grow. In order to bid on additional contracts, he needed to get in that building as soon as possible. There was just one problem: financing.
The listing price of the new building and land was $800,000. Around that time, the community bank that Soberg had been working with for several years was acquired by a larger bank. Although PTS Products had excellent credit history, the new bank refused to provide financing until a sold sign was placed on his existing property, which was worth around $325,000.
PTS Products couldn't wait much longer for additional space, however. The high-volume manufacturer of electrical control panels, assemblies,wires, and cables for OEMs had been at capacity for over a year and was letting one bid after another fall into the laps of its competitors. Most of its control panels are used in food packaging and bottle labeling - familiar products in high demand. And some are quite large, necessitating ample space.
Enter Paul Stecker with CorTrust Bank. Stecker happened to notice the building for sale in Independence, and contacted the realtor to see if there were any interested buyers. The realtor put him in touch with Soberg. Soon after, they were sitting across the table from each other, discussing the possibility of a deal through CorTrust.
Over the next several months, Stecker learned more about PTS Products and its potential for rapid growth. The prospect of making two mortgage payments for a period of time wasn't ideal, but CorTrust, which has several manufacturing clients, understood how increased efficiencies coupled with work in the pipeline could make a major impact on growth in the near future.
Stecker advises small businesses, especially manufacturers, to be as clear and detailed as possible when making the case for financing. He appreciated that Soberg laid out all the facts, pulling together history reports broken out by customers among other reports. He also appreciated that Soberg was realistic about which jobs were on the horizon.
"Some owners will say they plan to do a million dollars in sales next year, but they don't give enough information to back up that projection," Stecker said. "Paul based his projections off past detailed reports and year-to-date performance. He also showed what would be possible the following year with additional capacity."
Less than six months later, PTS Products was fully operational in its bright new facility in Independence, capitalizing on double the space. "Getting into a new building allowed us to get re-organized and show our capabilities so much better," Soberg said. "We've taken on a handful of new customers and expanded the breadth of business we're doing for existing customers. It was definitely the right decision."
CorTrust helped PTS Products secure a SBA 504 loan to purchase the building, requiring just 10 percent down compared to an average of 20 percent down with traditional financing. With a SBA 504 loan, the bank finances 90 percent, but sells off 40 percent of that, putting its stake at 50 percent.
Although there are additional fees using 504 financing, the extra fees are far less than the products that would have been lost had PTS Products not moved. It took two years for PTS Products to sell its old facility. During that time, CorTrust serviced both loans.
"I was just grateful for the loan, so we could expand sooner rather than later," Soberg said.
In addition to securing a loan to purchase the building, CorTrust provided PTS Products with a working line of credit and an equipment loan. The equipment loan was used to purchase a new CNC machine, eliminating the need for manually drilled holes in its custom enclosures.
Over the next three years, increased efficiencies and capacity set the stage for robust growth - far exceeding initial projections. In fact, the 35-person shop is already in the process of expanding. In 2019, it doubled its footprint from 12,800 to 25,600 square feet. Additionally, they will add another 10-15 employees over the next two years.
"We didn't plan on an expansion right away, but we have some bigger contracts coming down the line that we'll need space for," Soberg said.
The new facility makes it easier to showcase the company's capabilities, from manufacturing high-volume control panels to customized kits that include pre-packaged miscellaneous hardware and electrical items.
"When people tour our facility, they're surprised how clean and organized it is," Soberg said. "They also notice employee morale - our workers are very happy here."
Looking back, Soberg said his decision to work with CorTrust was a pivotal decision in his shop's 18-year history.
I have a great relationship with Paul," Soberg said. "He comes to the table with ideas and gets the job done, whether it's putting together financing or wiring money overseas. In my view, CorTrust is a small-town bank with big aspirations.
This article originally appeared in Precision Manufacturing magazine.