By Duke Dennis
YOU CAN’T HANDLE THE TRUTH!
If you are a developer, buyer, builder or, investor who prefers working directly with a bank, as opposed to using a finance intermediary, let me ask you a question…on your last purchase/development/re-development/refinance how many banks did you approach or engage in discussions with? 5? 10?? 15??? If your answer is any of the prior numbers, the TRUTH is that you approached less than 10% of the active banks in the state! The TRUTH also is that you spoke/approached just 1% of the total number of bank branches in the state! This approach is more along the lines of taking what you can get, than instead trying to find the best alternative out there. And wouldn’t you really prefer to know you were getting the most executable financing with the highest probability of closing, and no change of terms?
Below are essential facts about Colorado Banks, per the FDIC.
Fact: 156 active banks are operating within the State of Colorado with a combined 1,504 branch locations in the State of Colorado.
Fact: Of the 156 active banks in Colorado ONLY 99 of these banks are headquartered in Colorado, with the other 57 headquartered outside of Colorado in other states.
Fact: Of those 57 banks not headquartered in Colorado, they are headquartered in 24 of the remaining states in the US.
Fact: 20 of the banks headquartered in Colorado have merged or are affiliated with other banks located within the state that are operating under a different name/brand.
Below is a table detailing which state the 156 active banks in Colorado are headquartered in and, another table detailing the Top-10 Banks with the most Branches / Locations in the state.
I focused on Colorado banks because that’s where I reside and work day-to-day, but the truth is the number of banks in your state is directly proportional to the population and the growth of the population. Even more of a reason to make sure you are covering the market if you live in a populous state or, more importantly, if you’re prospecting a lender in a state with a smaller population.
How do you know you’re talking to the right person?
As I mentioned previously, if you are approaching banks on your own behalf, chances are you are getting little to no “coverage” or attention relative to the total number of banks/lenders out there that would be more than willing to give you a loan. I can completely understand when a potential client comes to us saying, “there’re no lenders out there that will finance my deal,” after they’ve only spoken with a handful. Often I ask, “well who or how many banks have you talked to?” This brings up a core tenet in commercial real estate, the math of prospecting. We’ve all heard the funnel math for prospecting…
“Look at 100 deals, to bid on 10 prospects and hopefully 1 of those will close. “
Here’s a little secret…financing commercial real estate transactions operate by the same law of numbers.
The biggest difference between Metropolitan Capital Advisors (MCA) and our clients is that we focus solely on capital placement assignments and work to continually manage the network of lenders one must maintain in-order-to be successful in such a role. MCA is familiar with most, if not all, lenders in the state, and as a result, we can make sure your deal gets the proper attention and coverage when you need your loan to close. Additionally, we can add value by saving time with a focused approach. All lenders have unique criteria for lending. Given our experience closing with these many banks, we know which lenders are real players for your particular deal and not wasting time with banks that we know from experience will not be a good fit.
Secondly, were you happy with your terms? Or, because you only had 60 to 90 days to shop the market, with finance not being your expertise, and approaching fewer banks than you would have otherwise preferred, were you left wondering if indeed, there might be better terms on the table? Or, if there was a “unicorn bank” out there that would have done your deal with the terms you wanted? With wider marketing comes greater visibility. Greater visibility will ensure more options come to the table so we can flush out the best terms available or, make sure that the terms you are getting from your supposed “relationship” bank are in-line with the market as a whole.
At Metropolitan Capital Advisors, our thesis is that finding the right banking partner for your acquisition, development, redevelopment or refinance is a numbers game, where the best lender always emerges by leading the pack either on the certainty of execution, better terms and many times, both. To give yourself the best odds, you need to cast the widest net possible and speak with the most lenders possible who would reasonably consider bidding terms on your commercial real estate transaction. This is why you hire a mortgage broker.
Show me your Rolodex with 156 banks and their 1,504 branches that are located in Colorado?! My bet is you don’t keep up with all that information. Let us do that, so you don’t have to, and in doing so give you the best chance of finding financing for your project.
The author, Duke Dennis, is a Senior Director with Metropolitan Capital Advisors. To learn more about how Metropolitan Capital Advisors can help you, Duke can be reached at [email protected] (720) 527-8173.