Having gone around in circles with their existing banker for over 3 months, trying to lock in the consistently promised approval for construction of their 54 townhouse project, they were getting beyond frustrated. Well to be honest, having completed earthworks and a fair number of slabs – off the back of the promises that approval was just around the corner – they were actually getting VERY anxious.
“The Banks aren’t REALLY open for business…”
So we’re always hearing from finance brokers and developers. “Private Finance is the only way to go these days”, they say.
In this case, we begged to differ.
Investing the time to gain an in-depth understanding of the project and the specifics of the proposed capital stack, we worked out the real reasons that their existing banker wasn’t managing to get an approval across the line.
Our view was that these problems were deal killers.
For THAT particular bank, under THAT particular structure, that is.
Leveraging our experience, capabilities and relationships, within just 1 week we had identified alternative banks that would be receptive to the proposed capital stack, then negotiated a revised structure with a new bank (and don’t forget getting the lawyers on both sides on board too!).
After over 3 months of frustration and anxiousness trying to arrange finance, the stress was allayed, leaving them able to focus on what they’re good at – developing property!
Morals of the story?
- Don’t trust your banker when they promise that approval is just around the corner. Bankers are in sales, they’re not the decision makers anymore. Until you actually have a formal approval, you don’t actually have shit.
- Banks ARE still open for business. But you need to know which banks have appetite for what, the terms and capital stack structures that each will go along with, as well as which individual bankers within each bank have the internal pull to get it over the line.
- Strategic Capital Stack structuring is critical. Banks care about more than just their own loan these days.
- Don’t waste your time and effort on critical and stressful parts of your business that you’re not an expert in. Like finance. You focus on being an expert property developer. Outsource the finance to the experts.
