I was speaking with one of my coaching clients this morning whose has purchased some killer deals using his Home Equity Line of Credit and private lender funds. This client now needs to recapitalize to get the cash out of these properties so that he can continue his buying spree.
During the course of the conversation his primary question was… “Are banks still lending?”
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Are Banks Still Lending?
Well, if you believe the president they should be. In fact he brought them all to Washington to twist their arms to get them to loosen up their purse strings. Did it work? Only time will tell. Keep in mind that the regulators are telling these same lenders to tighten their lending standards.
Based on what I am hearing, but have been having trouble verifying, many lenders aren’t lending because they claim no one wants to borrow. Obviously, these lenders are not talking to active and successful real estate investors.
Keep in mind that the banks that got called to the White House are the “too big to fail” banks, and these lenders typically don’ t know what to do with customers like you and I. We just don’t fit the model and of course our business model just happens to be in the one asset class that is killing them figuratively and literally… real estate!
Getting back to my client and his question.
Yes… lenders are still lending!
I have spoken to this subject on many occasions. There are lenders who are lending. They need our business! And the really great thing is they understand our business and are comfortable with the risks and how they are managed.
Regrettably, there aren’t as many of them as there used to be. The meltdown has claimed many of them, and many others are on the brink of failure. So finding them is a process that involves more then just walking in and proving that you can fog a mirror!
My specific response…
My response was simple and is captured below…
- I’ve said it a million times… so I will say it again — you should only be talking to small (less then $200M in assets) banks.
- You need to separate yourself from all the other customers that come through that bank looking for a loan. Specifically, how well do mitigate any risks the bank may perceive?
- To do stand out amongst the crowd you need to demonstrate that you, your business and your business plan represent a worthy risk to this bank.
- You need to answer these questions for the bank…
- Who are you (corporately and individually)?
- What is your relevant real estate experience)?
- Are your business goals consistent with your previous experience?
- How does your plan leverage your strengths and mitigate your weaknesses?
- What systems, advisers, processes, etc. have you implemented/use to successfully manage your business?
- What do your financials look like?
- Is the deal a solid deal?
And with that advise my client marched off to prepare to start the process of interviewing lenders.
Yes… you read that correctly!
Even in today’s market every lender I know puts their pants/skirts on just like you and me. And when you go to visit them or speak to them on the phone, you are giving them an opportunity to do business with you. Not the other way around.
Remember… they need your business just as much as you need theirs. Don’t grovel and don’t be timid. Own it and you will be amazed at the outcomes!