Could rural broadcasters be the next lending niche?

Searching for your next lending niche? Consider the television and radio broadcast market.

Last year, the National Association of Broadcasters (NAB) piloted an initiative with a limited number of community banks designed to introduce them to the broadcast market.

When lenders consider broadcasting, they often think of the largest entities, such as CBS, ABC, Univision, iHeart, Entercom, Urban One and other big names. It’s true that broadcast lending has long been the domain of the nation’s largest banks due to the size of many broadcast transactions. As a result, transactions considered too small for larger banks can sometimes go unfunded.

However, there are numerous network-affiliated and independent radio and television operators who seek funding to grow their companies. These smaller transactions are sometimes a better fit for community banks, particularly when the broadcasters are within and serving the relevant communities.

Marcellus Alexander, president of the NAB Education Foundation (NABEF), recently spoke with Aaron Ness, executive vice president of $1.6 billion-asset First Dakota National Bank in Yankton, S.D. They were joined by Carolyn Becker, president of Riverfront Broadcasting LLC, an NAB member and a customer of First Dakota. Becker is also a 2005 graduate of the NABEF Broadcast Leadership Training program, designed to prepare senior-level broadcasters for station ownership.

Marcellus Alexander: Why don’t we start with a little bit of a background on both of you.

Aaron Ness: I’ve been a commercial lender here at First Dakota for the past 16 years. This is a community bank. Our focus here in the Midwest is not only commercial loans but agricultural loans.

“Radio ownership is what I’ve always wanted to do, and finding the right bank was a wonderful part of that opportunity.”
—Carolyn Becker, Riverfront Broadcasting LLC

Carolyn Becker: I’m president of Riverfront Broadcasting and started the company back in 2004. Prior to that, I worked in radio. Radio ownership is what I’ve always wanted to do, and finding the right bank was a wonderful part of that opportunity to continue to build and grow.

Alexander: Aaron, talk to me about broadcast lending. What does that mean from your banker perspective?
Ness: Broadcast lending is, in a nutshell, cash flow lending. We are lending to folks who sell their advertisements. They don’t have inventory or harder assets, other than the license itself, some equipment and possibly a building. We are looking at trends of the industry in the local community to make sure that their market can cash flow, put a reasonable timeframe on the amortization and have enough cash left to service the debt.

Alexander: Is making a loan to a broadcaster any different than making any other business loan?

Ness: Yes, it is. The most obvious [difference] is probably on the collateral side. If a loan ever went bad, and if for some reason the radio station is not able to survive, we, the bank, cannot gain access or control of the FCC [Federal Communications Commission] license. We can only get the proceeds on a sale [of the license]. So, the risk is totally different as compared with perfecting your collateral position if you have agricultural land or commercial real estate equipment—things that you can easily sell. That’s because the bank doesn’t have as much control on a radio station loan as it would on other loans.

Alexander: Aaron, what alternatives do community banks have to secure loans when they see a radio station’s potential and want to be involved?

Ness: Well, business bankers have to get creative on every deal, because every deal is different. There are different financials involved, a different industry, personal financial statements—everything is unique. So, when we take a look at a deal like this—because we are a community bank—the most important thing to us is to do a community-type loan with them. We have to look at other things that we can turn over easily if worst came to worst. Maybe a second mortgage on a home, other equipment or other things that they may have.

Quick stat


of Americans age 18 and up listen to radio each week

Source: Nielsen

Alexander: Carolyn, was there any preparation when you were looking for your loan?

Becker: Definitely. On our first loan, with First Dakota in 2007, we did a Lease Management Agreement to build a three-year trend on what we could do and how it worked. We showed them our track record and built their confidence in radio and broadcasting, and how it would work, and how we could make it work. We used a lot of articles, and the help of brokers, to show what radio stations’ values were.

Alexander: Aaron, from the banker’s perspective, how do you view broadcasting as a business—the radio side of the marketplace?

Ness: Radio has obviously been around a long time, and what’s been exciting is to watch radio develop new things with their apps on your phone. As an example, I was traveling with my wife and we were able to catch our local Yankton Bucks football team on the KYNT app. There are lots of positive changes in the industry that make it stronger as years go by.

Alexander: Any final thoughts for community bankers who want to get involved in broadcast business lending?

Ness: I would just tell them not to be afraid to take a look at this type of deal and to pull up the bootstraps and try to figure out how to get it done, and really try to be creative and give it a fair shake before you dismiss it. We have a tagline for our customers called “Account for Your Dreams,” and I feel like broadcast lending is an example of that. Carolyn called it a long time ago while she was working for KYNT and said she wanted to own it someday. Fast-forward 30 years later, and she’s living the dream with her husband, Doyle. They continue to look at deals, and I don’t see any end in sight. I think they’re going to keep coming back, and we’re going to try and figure out how we can do each and every deal.

Becker: You’ve got to be creative, and you’ve got to be able to work together. My goal is, if something is not going right, or there is something out of the ordinary, I tell the bank first before they ask me. It’s always better to be ahead of the game. Then always, just as in life, stocks and anything else, nothing goes up forever. You can’t believe that the revenue is just going to go in a straight line, up in perpetuity, because nothing does. Broadcasters have got to be prepared to make the changes necessary to keep the bank comfortable and keep their business profitable.