Surprise Traditional shop gets a conventional loan

September 17, 2010
| By Pete Daly |
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Proos Manufacturing Inc., which started out making casket hardware 91 years ago, managed to struggle through the worst six months of the Great Recession — and then the small company’s new owner obtained conventional financing from Fifth Third Bank.

“We’re a traditional job shop. As much as people don’t like to hear that term, that’s what we really are,” said Amy Engelsman, CEO of the company.

Proos Manufacturing, located at 1037 Michigan St. NE in Grand Rapids, does metal stamping, sheet metal fabrication, welded assemblies and custom electrical assemblies for office space.

Engelsman, whose maiden name is Proos, started working at the family-owned business 23 years ago, when she was in college. She had been studying to be a veterinarian, but that soon changed as she spent summers working at the plant in production and in clerical jobs.

“I just found that I loved it. It was exciting and fun,” she said. Her major changed to production and inventory control management and with her degree in hand, she went to work at Proos full time.

Engelsman bought the operations side of Proos Manufacturing in 2004 and began investing in equipment and more employees. In 2009, she began the process of acquiring the company real estate and equipment. A loan from Fifth Third Bank was finally approved earlier this year, and Engelsman signed papers in June making her the sole owner of Proos Manufacturing.

Her work with the Michigan Small Business and Technology Development Center at GVSU, which began early in 2009, helped grease the skids with Fifth Third Bank.

The SBTDC is a resource partner with the U.S. Small Business Administration’s Michigan District Office.

Dante Villarreal, regional director of the SBTDC, said Engelsman had met an SBA person at a conference and was referred to the SBTDC in Grand Rapids. There was no fee charged by the SBTDC for the consulting service it provided to Proos Manufacturing on strategic planning, financial analysis, internal management monitoring and preparing an application for bank financing.

“They came in and helped us take a fresh look at our company,” said Engelsman, which happened at a grim time in Michigan, when other companies were going under during the worst months of the recession in the first half of 2009.

“When we got done with that whole exercise, we sat down with our management group and we came to the realization that we’ve got a lot of good things going on here,” said Engelsman. “We have a small, strong management group that really is focused and committed to making this company survive.”

The hourly employees at Proos Manufacturing were told about the plan for survival when sales were plummeting, “and they bought into it and supported it also, so it really was a team effort,” she said. She said the entire company decided “we were going to make it through this rough time and this economy.”

With SBTDC assistance, the company understood its financial numbers and break-even point and fine-tuned its forecasting — things the company had never been in the habit of doing, according to Engelsman.

Key revenue had been coming from supplying the automotive and office furniture industries. Before the recession, the company had about 70 employees, according to Engelsman, but with the drop in sales in early 2009, “we got all the way down to 33 employees.”

“We had to revamp the way we did everything. We didn’t have all the resources, we didn’t have the people, we didn’t have the sales. Everything was cut: health insurance benefits, dental benefits. No raises, no bonuses. We cut salaried pay. We cut everything across the board,” said Engelsman.

Production was cut to four days a week. But when orders began to improve in the second half of 2009, and the company went back to five days a week, and salaried and office staff also worked in production until there were enough people called back to handle it.

“All our management had to work on the shop floor that fifth day. It didn’t matter who you were. The girls in the office were running 150-ton presses. The quality manager was running a 250-ton press. I was running a welder. We did whatever we had to do,” said Engelsman.

It was about that time when she decided she wanted to be sole owner of the company. But that required her to assume all the debt the company had, which necessitated a new loan request at Fifth Third Bank.

“Fortunately, I had a relationship with the bank beforehand, so they knew me, but I still had to prove to them that we were a good company to work with and we were back on track,” she said.

“2009 was a rough year to be going to a bank and asking for money, if you’re a Michigan manufacturer,” she added.

The SBTDC helped her prepare for the loan application, including a two-year forecast and cash flow analysis. It resulted in a conventional loan from Fifth Third.

“2009 was a terrible story to tell, but I could show that in the last three to four months, the company was making profits based on the choices we had made during the year. A lot of it was a reflection of the assistance we got from the SBTDC,” she said.

Timothy Doyle, senior vice president of Fifth Third Bank, said “general conditions, from a credit standpoint, are still fairly tight. However, I’ve seen things loosen up a little bit, at least here at Fifth Third Bank,” he said.

A year has now passed since the end of the worst six months of the recession, and that has made a difference in the lending climate, in Doyle’s opinion. “The first six months of 2009, there was a complete loss for a lot of companies throughout our footprint,” he said. “What we’ve seen (since July 2009) is an uptick in performance for a lot of companies here in West Michigan.”

Bankers are looking for positive trends in companies seeking loans, he said.

“We’re not completely out of the woods, but we are seeing some positive trends,” said Doyle.

Among the would-be borrowers, “there’s a focus on financial statement quality today more than there has ever been,” he said. Companies that have done their homework and hired strong CPAs who produce good-quality information, he said, will take “a lot of the risk out of it for the bank, in terms of understanding the company.”

Along with continuing tight credit, “the demand is down from where it was two years ago,” said Doyle. He said a lot of business owners are still wary of the recession: “Is it truly over? Is (recovery) sustainable? So we have a lot of business owners who are just really taking a wait-and-see approach”

Doyle said Fifth Third has been a lender to Proos Manufacturng for the last six years.

“Once we saw those trends (in Engelsman’s report on finances), we saw it was a great opportunity to get behind that company and that momentum. We saw an opportunity to help out Proos with that transition” in ownership, said Doyle.

Villarreal indicated that while credit isn’t loosening up significantly for business, businesses are becoming “stronger.”

“Before things fell apart in the fall of 2008, businesses had a little wiggle room for making mistakes or maybe not working as efficiently or effectively as they could — not maximizing resources,” he said. “However, as the economy went south and the banks came to really looking into the businesses to make sure they were sustainable, they definitely tightened up a little. What that meant was that businesses now have to live it and breathe it every day — every single day. There is no room for error.”

Villarreal said the Proos Manufacturing success story was “a strong partnership between Fifth Third Bank and some of our local (business) resource providers, such as The Right Place and the MEDC.”

Proos Manufacturing received property tax breaks from the city of Grand Rapids and state of Michigan in 2005 for investments in a plant expansion and factory equipment that allowed it to diversify and increase employment.

Today, the “traditional job shop” has 54 full-time and seven part-time employees, having added employees in the last six months. Engelsman said Proos Manufacturing will probably hire more in the next few months.

“If we continue on this path we are on, and it looks like everything will continue coming down the pipeline, we are going to continue to build our numbers.”

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