Most of us would never machine a part without checking the tolerances first — so why do so many shop owners sign off on financing agreements without understanding the performance “tolerances” our banks are quietly measuring us against? 

In this episode of Buy the Numbers, commercial banker Danny O’Keefe returns to break down two terms that sound like dry legal jargon but carry real operational consequences: loan covenants and personal guarantees. If your shop relies on bank financing to grow, these aren't just details — they’re the guardrails shaping what we can do, and what could get us in trouble.

Loan covenants aren’t just something we sign and forget. They’re the metrics banks use to judge whether our business is still a safe bet. From debt service coverage to balance sheet leverage and owner distributions, these numbers can quietly restrict how we grow, how we pay ourselves, and how much flexibility we have in tough times. If we’re not checking them ourselves when we close the books, we could be tripping violations without even knowing — and that’s a problem our lender won’t ignore.

Then there’s the personal guarantee — something a lot of us sign with a shrug, not realizing what it really means. We dig into how it works, when it’s enforced, and why it's not usually about losing your house — it’s about staying accountable and engaged if the business hits rough waters. With real-world examples, Danny explains how guarantees play out in practice, how banks try to resolve issues, and why going dark is the worst move you can make.

The biggest surprise for many: almost everything about your loan is negotiable — including the covenants and guarantees. But only if you understand your balance sheet, your bank’s priorities, and how to advocate for yourself. Whether you’re taking out your first note or renegotiating a renewal, this episode gives you the tools to treat your financing like a partnership, not a one-and-done transaction.

By the end, you’ll walk away with a clearer view of your bank relationship — not just as a source of capital, but as a strategic tool. One that, when managed well, can protect you and your shop… and when ignored, can quietly start to chip away at your freedom to operate.

You will want to hear this episode if you are interested in...

• (0:00) What personal guarantees really mean—and why banks don’t want your keys
• (0:29) Achieve on-time delivery with ProShop ERP
• (1:58) Guest reintroduction: Danny’s background in commercial lending for shops
• (4:48) Defining the "big scary words": Loan covenants and personal guarantees
• (8:12) How banks evaluate owner distributions and when limits apply
• (9:50) Balance sheet leverage: Why your assets vs. liabilities matter
• (12:53) UCC filings: What they are and why they get overlooked
• (14:37) Proactive vs. reactive reporting: How to stay on your bank’s good side
• (23:44) Types of personal guarantees and what really triggers enforcement
• (26:46) Learn how to grow your top and bottom-line with CLA
• (30:24) What happens in worst-case scenarios—and how communication can save you
• (34:14) How outside consultants and investors can step in when banks get nervous
• (40:57) What a strong balance sheet might mean for guarantees
• (46:43) Negotiating your covenants: Why the whole loan is a conversation
• (52:54) The most important things to pay attention to at closing
• (56:35) Why you need to listen to the MakingSparks podcast

Resources & People Mentioned

• Achieve on-time delivery with ProShop ERP
• Banking Secrets for Manufacturers: How to Secure the Cash You Need, Ep #12

Connect with Dan O’Keefe

• Busey Bank
• Connect on LinkedIn

Connect With Buy the Numbers

• Follow on LinkedIn
• Connect with Mike Payne on LinkedIn

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Audio Production and Show Notes by - PODCAST FAST TRACK