Banks are lending to investors

Banks are lending to investors

It is true, banks are lending to investors. For individual investors and companies (LLCs, etc.) that have a proven and financially successful track record, banks that service what they originate may be the answer to your financing needs. Especially for your fourth loan on, you need to be prepared if you want to grow your investing business. I know times are tough. But look at that poor banker. What does he do? His job is to lend to you. So get in there and make his day!

Prepare
The key to success is to be prepared before you walk in the bank's door. At the bottom of this post is one simple method to identify all the lenders in your area. Google each to get names/numbers then set an 10 minute initial appointment with the bank's commercial lender. Many will just say "walk in," which is fine. Just make sure you ask two questions: Are you lending to investors? and Do you service the loans you originate? If either answer is No, thank them for their time and leave. Be prepared to walk out as quickly as you walked in. In the current environment, don't waste time with lenders who are not willing to lend to you. Expect that four out of five will not fit your (or their) needs. When they answer Yes, set a follow up 30 minute meeting to make your pitch in detail.

Follow up
To land lenders that service what they sell, provide them everything they need to say Yes. Get all your documents together and put them in a 1/2 inch (or 1") three ring binder with tabs for each section. Put their bank's application in the second section, just behind your executive summary. Be precise in your one page summary -- detail what you want and emphasize your strengths. Generally these lenders are going to be more interested in your management ability than the property or project, or even your credit score. More detail is good, but make sure the information you provide is easy to follow and easy to understand. Generally I like to walk through the details of the binder -- I take two copies, one in front of me, and one I leave with the lender.

I often get positive feedback on the Quickbooks reports I put in as part of my package. These reports are more concise and much more flexible than the data-comparable tax forms. Hopefully you have each discrete property set up as a Quickbook class so for instance you can build reports by class over different time frames. Take a note pad to the follow up meeting and write down any additional information they may need. Provide them page (and section) updates later as needed. Treat you binder as a living document.

Checklist
Make a detailed list of goals of what you want to accomplish before any meetings. You do not need to share this checklist with anyone. You should make this kind of list regardless of who you talk to -- hard money lenders, bankers, or private lenders. These goals are not simple end results like "I want a loan". The list should be actionable items like "ask for the loan at least three times", etc.

Sections
The key sections to include in the binder are the cover page, the bank's application, management/operations history, and property specifics. Additional sections can include details of your operations, rental contracts, credit summary, local sector information, and the first two pages of your individual and company taxes. Each investor can modify sections to their particular needs. You add the most value by preparing a logically organized binder.

Summary
Seasoned investors with a good track record should not overlook their local small financial institutions. In today's skiddish market the bank's documentation requirements are really not that much different from private lenders and hard money lenders. Once you have the binder prepared, you can use it with any type of lender or financing/development activities, including limited partnerships and for LLCs.



To Find Lenders
To find banks in your area, you can use http://www.locallender.info. Put in the state and county in this format (http://www.locallender.info/{state}-banks/county/{county}/) to get the list. For instance:

http://www.locallender.info/banks/north-carolina-banks/county/Wake/
http://www.locallender.info/banks/south-carolina-banks/county/Horry/
http://www.locallender.info/banks/alabama-banks/county/Bibb/

You can do this by hand, but it's better and less error prone if done by computer. If you are on a linux machine, create a sorted list with a simple cut/paste through a simple filter:

{ this example is for Wake County, NC }
$ cat > ZZ        { paste lender data into  a temporary file, ZZ for instance }
$ cat ZZ | awk -F"\t" '{print $2}' | sort | uniq

Bank of America
Branch Banking and Trust Company
CapStone Bank
Capital Bank
Crescent Bank & Trust
Crescent State Bank
First Bank
First Charter Bank
First South Bank
First-Citizens Bank & Trust Company
Four Oaks Bank & Trust Company
Gateway Bank & Trust Company
Greystone Bank
KS Bank, Inc.
Mechanics & Farmers Bank
North State Bank
Nuestro Banco
Paragon Commercial Bank
Patriot State Bank
Peoples Bank
RBC Bank (USA)
Regions Bank
Southern Community Bank and Trust
SunTrust Bank
The Fidelity Bank
The Fort Sill National Bank
TrustAtlantic Bank
Wachovia Bank
Wake Forest Federal Savings and Loan Association
Woodforest National Bank

To get the list of banks in a particular city, just qualify your awk pattern to the city:

$ cat ZZ | awk -F"\t" '$1=="Holly Springs" {print $2}' | sort | uniq
Crescent State Bank
Four Oaks Bank & Trust Company
The Fidelity Bank
Wachovia Bank
Woodforest National Bank

linux utilities and tools like this provide great results for manipulating large volumes of data. Contact me if you need help getting the most out of your data intensive research.