My Banker Wouldn't Back My Building
DeParle, Jim
My Banker Wouldn't Back My Building by Jim DeParle "We . .are pleased to welcome you as a PREMIER ACCOUNT customer. Through this relationship, we hope to provide you with financial services...
...They'd get a receptionist up front to greet the clients, unlimited use of a conference room, and a mail clerk to prepare and receive packages from UPS and Federal Express...
...Now where would we find the $225,000 we needed to finish the building...
...Whew...
...I found myself whispering to my partner...
...Plus, by moving my office to the new building, I would become the first tenant and an on-site manager...
...And waited...
...Then I borrowed another $8,000 from a relative...
...I'm looking out my window now at the empty lot we own next door and just beginning to picture another building rising from the turf...
...Meanwhile, nearby office buildings that offered similar services were full, while starting their rents at $320, much higher than ours...
...the banker kept us waiting for 20 minutes past our meeting time, which further unnerved us...
...One month later and $900 poorer, we found that the certified appraisal confirmed our projections...
...The idea wasn't ours alone...
...Financial service tailored to my needs...
...After all, I had banked at one of Florida's largest banks for 15 years without so much as bouncing a check...
...I explained that square footage- alone didn't tell the story, since our rentals stressed the amenities...
...He was always going to be getting right back to us...
...He shopped far and wide to save a dollar a gallon on paint...
...Our friendly banker's first question was "How much rent are you going to charge per square foot...
...This left us with only $6,000 in reserve funds to cushion us from disaster...
...Conference room," I replied...
...He sure seemed friendly...
...When my partner and I asked for a mortgage on our proposed office building, we thought we would have no trouble...
...We showed up 20 minutes early for the meeting...
...Meanwhile, we moved ahead on other fronts, wrangling with government agencies for all the permits and approvals we needed, meeting with our contractor to iron out our plans...
...My partner had recently retired after 32 years of successfully meeting the payroll at his Venetian blind shop...
...Then we waited...
...When we finally pinned down our friendly banker, he said, "There are too many office buildings going up in town ?' We regrouped and explored our options with a new sense of reality and a new bitterness toward bankers...
...That saved us $15,000...
...I began preaching the virtues of our rentals to anyone who would listen...
...Having spent two days in a seminar on "how to properly package your loan request," we were ready...
...Through this relationship, we hope to provide you with financial services tailored to your needs ." A premier account...
...My partner went to work as job supervisor and shopper extraordinaire...
...He ground down the subcontractors to bottom dollar, casting a bookkeeper's eye on every brick and nail...
...Plus, our loan-toequity ratio would be well within the bank's guidelines...
...We met with our contractor, cutting some nonessentials from our plan and agreeing to do the job supervision ourselves...
...Now, with 12 of the 15 offices filled, our Bishop's Square is home not only to my insurance agency but to the contractor who built our building, an environmental consultant, a computer programmer, and an artist, among others...
...Our combined financial statements showed net assets of more than $400,000...
...I was even being assigned my own Relationship Banker...
...I sold my home and bought a new one, taking a higher mortgage and putting the $10,000 difference into the pot...
...By August 1, we had rented four spaces...
...We'd already dished out $10,000 for draftsmen, surveyors, civil engineers, and government permits, not to mention our investment in the land...
...they just look for private backers...
...We took a giant roll of the dice, with everything on the table...
...Entrepreneurs never quit...
...I moved in July 15 to oversee the finishing touches...
...just the right place for an insurance agent or sales rep to park his filing cabinets...
...our carpeting came in $2,800 under budget...
...Now the letter was promising me a $15,000 line of credit and a Gold Visa Card that would allow me to charge $5,000 more...
...We're past breaking even, and we might even have a small profit to show by the end of our first full year...
...In the middle of our excited preparation, reality hit...
...but it had shown steady growth for eight years...
...Three months of conforming to the rules had just gone down the drain...
...The appraiser said the building would be worth $375,000...
...But our relationship was soon to sour...
...Our mortgage would only be $225,000...
...Business theorists at many universities have plugged the idea too...
...Gazing about his plush corporate nest, it occurred to me that this was not a man who had ever found himself in want of a conference room or receptionist...
...After all, our credit files were clear...
...Okay," I said, "$16.50 a square foot ?' "I don't think that you can get over $12 in that area," he said, comparing us to buildings that offered no services at all...
...I need to know," he said...
...Our banker always seemed to be in a meeting when we called (making good use of that conference room, no doubt...
...On a fee-for-service basis, they'd also get use of the office copying and Fax machines, and a secretary to type letters and answer phones...
...I hung the wallpaper and together we planted 65 bushes on a Saturday...
...But just barely...
...We would provide small business people with all the office services they needed at a price they could afford, starting at $199 a month...
...He persisted...
...He told us to get a certified appraisal supporting our projections...
...At that point, we'd be earning $34,086 after expenses to cover a mortgage of $26,520...
...After paying for office machines, utilities, a secretary, and interest, we lost $2,200 that month...
...We knew we had the competition beat...
...No wonder he wasn't getting the point...
...The entire place was deathly still...
...My Relationship Banker referred us downtown to the commercial loan department...
...We realized if we didn't rent the offices quickly, we wouldn't have much staying power...
...My little insurance agency wouldn't turn Clement Stone green with envy...
...I explained the concept and threw in graphs, projections, and surveys, even including a copy of the Entrepreneur article...
...Fax machine and receptionist," I said...
...Square footage," he said...
...Square footage," he said...
...Like most small businessmen asking a bank for a loan, we approached with some trepidation...
...We were not going to get our loan...
...We'd throw in a microwave and a refrigerator—everything right down to and including the kitchen sink and an endless pot of coffee...
...We made it...
...We forwarded the good news to our banker, with all the accompanying proof...
...We set off to get the documents our banker wanted...
...Fortunately, my partner was selling the building that had housed his business...
...When the receptionist finally ushered us into a spacious office, a thirtyish-looking man greeted us as if we were there to join the Jaycees...
...We knew we could make it...
...One week in late August brought three more rentals, stemming our losses and our rising blood pressure...
...This meant we were asking for a mortgage of only 60 percent of the project's final value—far below the bank's 75 percent limit...
...I felt I had arrived...
...By setting our rents lower than other offices with our services, we could achieve a 90 percent occupancy rate in the first year...
...Entrepreneur magazine had touted such "business development centers" as the ideal home for a new enterprise Jim DeParle is a Jacksonville, Florida businessman...
...If it showed our loan request to be less than 75 percent of the building's estimated value, "we can probably do the deal!' The nest egg This wasn't the relationship we'd hoped for, but still we had a chance...
...And why not...
...Our concept seemed hot...
...He used that money, and virtually all of his retirement nest egg, to give us a $190,000 mortgage, with the partnership agreeing to pay him 11.5 percent annual interest...
Vol. 20 • January 1989 • No. 12
