Real Estate Investor · Greenback, TN · Member since 2012 · 269 posts · 115 votes
I have a question for the highly experienced lenders and investors that have multiple active lenders. I've got a really good lender (bank) that gives me market rates (4% range) for my flipping operations. I'm extremely happy with the service they provide but as my business grows, I'm bumping against the lending ceiling they've provided. They are willing to increase my funding but that's pretty much limited to once a year and is usually a relatively small increment. I want to be in a financial position where I can act on any good investment (or business) that I find but that means having more that one lender. I've always felt that I need to be 100% transparent with my current lender but I'm wondering if that's really the expectation in the lending circles.
I've heard of people that have many businesses running at the same time that I'm sure required many different investors/lenders to fund but I don't see how it's possible to bring in a new lender without losing the primary lender because they don't like their perceived risk. I want to do this right, I just don't know what's "right" (acceptable) in this situation.
So, the question is.... If I have multiple lenders, is it necessary/required/recommended that I let each of them know exactly what I'm doing with the other lender(s)? Does everything need to show up on the balance sheet?
@Michael Woodward I am sure you are not required to let everyone know but you may want to for two reasons. One, if you start using other lenders for acquiring properties, your portfolio will grow. Next time you go to use your current guy, they are going to find that information out. So first and foremost, they will find out anyways unless you plan to never use them again (which doesn't sound like it is the case).
Secondly, it may be beneficial for you, to let them know that and see how they react. It sounds like it is a more relationship based product anyways. The bank may prefer to keep it to one lender and hold onto your loyalty. You may find them making some exceptions they originally weren't going to make. That said, a lot of solid banks probably have their thresholds figured out and it is simply an easy, risk-based decision that has nothing to do with how great you are as a client.
From being a lender and also the consumer, I always like to err on the side of transparency. It has always served me well.
@Jeff Dulla Thanks for your reply! That pretty much summarizes my thoughts but I wanted to get it from an outside perspective. The tough thing to figure out now is how to move forward if/when the bank doesn't want to take the next step. I have a lot of business ideas I want to pursue but I don't want to make my banker nervous. I guess I'll need to approach it incrementally and make decisions along the way.