I Can’t Get a Loan! HELP!
Question: The national bank I’ve been with for 10 years won’t give me a loan for my business, so what am I doing wrong?
Answer: You’re going with too big of a bank! This is a very common problem for new investors. What you have to do is look for the local banks who will spend the time understanding who you are and the properties you invest in. The big boys don’t have time for that because they’re focused on doing big dollar loans. The local banks care about your business and care about what you’re doing. They’ll spend the time understanding you and ultimately will write the loans, whereas the big boys will just push you on a pile of paper and never talk to you again.
Also, you do need to make sure that you have good personal credit and a solid business plan for how you’ll repay the loan. If you go into the bank with a vague idea of “maybe buying some property around town and trying to sell it” your banker will very likely not give you the time of day. However, if you go into the bank with a purchase price, construction costs, and a list of what similar properties are selling or renting for, most banks would love to talk to you. Another great idea is to provide them with a projected timeline for your project and any additional details you may have already covered. Remember, your banker probably has a very limited knowledge of construction and might need you to explain WHY the investment will provide a good return. In any case, preparation is key when speaking with a bank.
Find your smaller, local banks and begin to develop a relationship with them. The more you prove that you’re worthy of a loan, the more money they’re willing to give you!