I really cannot say what your bank would be willing to do, although I can tell you what I think made the difference for me.
I went in as prepared as possible. I had my business plan written up, I had financials for myself and forcasted financials for my business. I knew what I was planning on doing. I was able to describe how I would deal with an actual property that I found on the market that afternoon, and in two minutes told him what I would do, the expected holding period, and what the expected profit would be on that deal. I think the ability (and the confidence) to do that showed the bank that I knew where I was going, and I wasn’t just some Joe Schmoe off the streets looking for some money.
Get yourself organized, do research. There are sample business plans on the net, in the library, look in the bookstore, etc, etc, etc. It’s out there, go get it. And I rewrote my business plan over and over again to focus my vision of what I wanted to do. For financials, I would say at a minimum do a cashflow statement and balance sheet for yourself, and you should be able to roughly forcast what you expect to accomplish with your company and be able to translate that into financial statements. Rough numbers seem to be fine, but be able to back them up if questioned.
And in the end, I think what it is all about is show them why this is a no-lose deal for them. You obviously have security if that is what they need. If you have both places rented, you obviously have the cashflow. I told them that when I am ready to sell the places, I would have no problem sending in potential buyers to them to have them pre-approved. What better business for them but to turn an line of credit loan into a secured mortgage and do it over and over again with someone who wants to do it for them.
A minor success ! I have been developing my own business plan, forcasted financial statements, etc for my REI company. I have read a few statements lately about people looking into using lines of credit to finance deals. I knew that there was no way that I would be able to get approved for the $200,000+ lines that some were talking about. But then, I am not that advanced yet, and don’t need that kind of money just yet. So, after updating all my latest docs and preparing my presentation, I went into my bank and made my pitch.
Here are the results: After sitting down with the AVP of Business Banking and describing my business plan (rehabbing, which areas, projected returns, and expected turnaround, etc) he told me that he sees no reason why his bank could not help me out.
With a CD of $5000 in his bank(which I have) for collatoral, he is willing to set up my company (with me guaranteeing the line) with a $20,000 Line of Credit. Not stellar, but not bad. So I can leverage my $5,000 savings to help me get into some smaller projects as I build up capital in my company.
Bottom line, I now have a foothold to be able to really get into the game. I have already identified a couple of potential profit makers, and it is time to dig in and do my due dilligence. Thanks to all here on the board for sharing these pearls of wisdom, and I hope that my story can help inspire others as well. I will update you as my story unfolds…
Posted by Todd B. on September 09, 2001 at 08:15:12:
I have found an area with a proposed development project, and plan to make a strong move in the area. I’m in the process of speaking with some people who may be able to wrap a line of credit with an insurance policy for the lender so I can get a much more substantial line of credit.
Due to the time sensitivity of my situation, I need more money fast. If anyone else has suggestions, please let me know. I am ALL EARS.
I own two rental properties free and clear. Their combined value is roughly $170k. At a recent investor’s meeting, the speaker mentioned a secured line of credit. Previous to this meeting, I intended on getting cash out loans on the two properties to fund new rehab and rental purchases.
I am going to put together a business plan and portfolio of my business before visiting my local bank. Given the example above of a $20k credit line on a $5k CD, what might I be able to expect? I do all my banking with this local bank, and am hoping they can help. On the other hand, this bank is not considered a small bank.