Unfundable? Not always, with the help of an investment-banking partner
Andrew Bogdanoff, president, Remington Financial Group
As published in Scotsman Guide's Commercial Edition, June 2008
It's easy to turn down a deal because it doesn't look fundable on the surface - especially for brokers new to commercial lending.
Be they inexperienced, uncertain about who to turn to with questions, or uncomfortable looking outside the box, some brokers aren't aware of alternative, ethical ways to fund troublesome deals that could provide their clients with successful business ventures for years to come.
In some cases, turning to an investment-banking partner can help dig up tactics to close these difficult loans.
Learning to repackage
Projects may be turned down for financing for numerous reasons. Sometimes, the loans simply aren't viable. Other times, the deal as presented on paper doesn't make as much sense as it could.
When loans fall into the latter of these two categories, having a relationship with an experienced investment-banking firm can be the difference between creating opportunity and losing business.
Brokers should engage investment-banking partners for help evaluating deals that have been unsuccessful in securing funding. These partners can often tear down a project and reveal ways to reassemble or repackage the loan in a manner that makes better sense to lenders.
For example, a broker could have a borrower who wants to build condominiums in a market where condo sales aren't producing. Because of the stark market conditions, most lenders wouldn't consider this project.
An investment-banking firm, however, could analyze the business plan, the financing options and the current market conditions and suggest building a suite-style hotel on the site - then converting it to condos when market conditions improve. The firm could show the broker how lenders view hotel properties and explain how building suites in the hotel would ease a later conversion to condos.
The parties could restructure the business plan, approach lenders and find a creative way to repackage the loan to get the project off the ground.
Avoiding stereotypes
Many beginner brokers might consider the following situations impossible to fund:
* Someone with bad credit * An undesirable property * A project led by an individual inexperienced in the area * A loan with high loan to value
Experienced brokers, however, know the importance of avoiding traditional stereotypes. These brokers apply a positive attitude toward every potential deal. When it comes to the above situations, investment-banking partners can help analyze and restructure these unattractive circumstances into potentially fundable projects.
Consider a scenario involving an inexperienced borrower trying to build a commercial property. The borrower could be a successful builder but may lack the expertise to secure funding.
An investment-banking firm specializing in commercial projects could connect the broker and borrower with experts in these types of scenarios. Such a move could help secure funding and move the project forward.
Project problems aren't always insurmountable. In fact, thinking of them as challenges worth overcoming is a better mentality. Even though the market is changing quickly, snap judgments and negative stereotypes are a thing of the past.
Funding is available for more deals than you might believe. Working with a reputable and experienced investment-banking partner is a terrific way to discover creative techniques to close tricky deals.
Comments(0)