A strong analysis is what bankers search for as they negotiate specific deals, so be ready to prove that your deal performs satisfactorily under stress.
Wrap It Up Nicely
The best way to apply for a loan is to provide everything in a nice binder with an easy-to-read table of contents. Bankers are used to asking for documents related to a deal, additional tax returns, or balance sheets that are not provided with the initial submittal. Do yourself a favor by removing this obstacle from the beginning. You need to spend time explaining details to your banker, not faxing tax returns. Here’s an example of a nice flow for your next loan-application binder:
Loan request: Name(s) of borrower(s), property description and address, loan purpose, amount, requested terms, loan-to-value, debt-service coverage ratio, project name, guarantor names and addresses
Detailed project description: Acreage, number of units, cost, engineer, architect, general contractor, project manager, location detail, aerial pictures of site, survey, site plan schematic, renderings of project, descriptions of other nearby significant locations (housing, shopping, highways, etc.), actual unit mix and schematic, office layout, signage
Due diligence: Feasibility study, phase I environmental study, pro formas, financial analysis, rezoning documentation, contract for sale, local governmental approvals
Personal information: Resumes of partners, contact information, borrowing and supporting entity documentation, three years of tax returns (personal and business, with detailed balance sheets with schedules of assets and debts), individual credit reports
Detailed construction budget: Line item budgets, bids and estimates, contracts, names of contractors, and construction draw schedule
Business plan: Marketing strategy, key personnel, training initiatives, management qualifications, third-party management information, goals and objectives, strengths, weaknesses, opportunities, and threats analysis (SWOT analysis)
Once you’ve compiled your loan package and prepared yourself and your team to answer the tough questions, set up the meeting. Allow yourself plenty of time to walk the lender through each nuance of your deal. Prove to him that your loan is a strong one, you’re a strong borrower, and your deal is a good one. Take the time to put together a quality loan package, and the conversations and negotiations over terms and financing options will materialize quicker, be more definitive, and cement a solid professional relationship between you and your lender.
Benjamin K. Burkhart is a principal of BKB Properties and StorageStudy.com. He works exclusively with self-storage owners, developers and managers to develop strong sites, measure and respond to market trends, and maximize financial performance of self-storage operations. To reach him, call 804.598.8742; e-mail email@example.com.