Choosing and Working With Your Lender
|Copyright 2014 by Virgo Publishing.|
|By: Scott Weissmann|
|Posted on: 11/01/2003|
Few partnerships are more important to business owners than those with their lending institutions and the lenders who represent them. When the partnership is working well, it’s the proverbial win-win for both. When it’s not, it’s a painful pairing. So how does the astute business owner select a lending institution and, more important, build the relationship? What makes the partnership work? The answer is it takes effort by the lender and business owner. Here are a handful of ideas for what to look for in a lender to facilitate the relationship:
Expertise in the industry. Your lender must understand your industry— that’s a given. Look for a lender with experience in self-storage. How? Ask for references. Ask your peers—and your competitors, if you are comfortable.
What if you have to “educate” the lender? If that becomes your role because the relationship—or the lender—is new, it’s an excellent investment of your time. Many business owners say that just as they get their financial representative “up to speed” on the business, he gets promoted, and someone new comes onto the scene. That happens, and it can be frustrating; but it’s necessary. Ultimately, you will be helping educate a corps of financial experts whose involvement you may need in the future.
Time to invest in you. Even if your lender is well-informed about your industry as a whole, he must be willing to invest the time in getting to know your specific business, goals, markets, competition and challenges—not to mention your cash flow and physical plant. It is also important for you to understand what the lender needs. How often does he want you to communicate your requirements? Does he want you to initiate all contact, or does he plan to be proactive in making frequent contact with you? What lending policies and measures of risk determine how the lender does business?
Minds that think alike. In determining what’s important to you in a lender, it’s helpful to have the mind set that it’s not the rate that matters, it’s the relationship. A basis point saved here and there may not be worth the difficulty of working with a lender whose business practices or financial products don’t meet your needs. A lender-partner who understands you don’t always make decisions based on price, but instead on service and the relationship, will provide the most effective support for your business.
An inquiring mind. A luxury is the lender who continues to learn. Does the lender subscribe to (and read) trade publications in your industry, attend industry tradeshows, scan the financial press for trends, and scan the local newspaper for tips? Effective lenders are lifelong learners. Though you may occasionally have to “tutor” someone who is new, the lender intent on building a relationship and a career will be the one who’s constantly asking questions and gathering information.
An innovative sharer of ideas. That’s what the lifelong learner should be. What has he gained from learning that you could put to work in your business? How many ideas does he suggest for improving your operation?
An analytical mind. You’ll want a lender who puts pen to paper or clicks on a calculator to help you do the “what ifs” of your business, who can analyze the impact of your decisions and the forces beyond your control. Sometimes, this may mean a lender who’s willing to say “no” when something doesn’t make economic sense.
Know your options. For every business, establishing good credit is an important and ongoing financial priority. At some point in their business cycles, owners may require financing for a number of different needs, such as construction and expansion, receivables, capital-equipment investments, working capital, etc.
Once you’ve done your homework and selected the right lender or partners, it’s time to look at the different products they offer. It’s important to understand not only the products, but how they affect your business as it grows. According to R.K. Kliebenstein, president of Coast-To-Coast Storage in Boca Raton, Fla., today’s self-storage owners can tap into a variety of financing options:
As your business evolves, you will likely find your financing needs change. The product that provides a good solution for today may not suit tomorrow’s issue. Initially, cash flow may be your biggest concern, as you need time to lease up to breakeven targets. In this stage, you’ll likely consider an acquisition and development or a construction loan.
Later, as you experience different stages of expansion, equity or other loan ratios may limit the plan. You may need to explore refinancing or lease financing to fully execute your growth plan. Or you may have a “good problem,” such as figuring out how to expand while managing profits to reduce your tax bill.
These are just a few of the different changes a successful business owner will face, yet all can be handled through a balanced approach to the different financial products and partners available to your business. Victor Behorim of Best Land Use Corp. in Kingston, N.Y., is an example of an owner who chooses differing capital sources to manage his self-storage business.
“My first mini-warehouse is being paid off through the bank,” Behorim says. “For the second one, I was approved with the bank, but they wanted more of a down payment; so I went with a lease because I could borrow everything— 100 percent.” Behorim’s lease enabled him to continue with his expansion plan by working with his lease representative while continuing to work with his banker— a good business move, and a good example of taking advantage of products and expertise from all your lending partners.
Scott Weissmann is a business-development manager for Wells Fargo Financial Leasing Inc., a national leasing company headquartered in Syracuse, N.Y. The company offers lease financing for building, equipment and vehicle assets. For more information, call 800.451.3322 or e-mail email@example.com.