How to get a YES from the lender?
How to get a YES from the lender?
1. The first thing to tell you is that the bank already wants to lend to you. Your job is to simply not give them a reason why they wouldn’t lend to you.
A bank exists purely for the reason to make profits through lending money and because this is their primary objective through lending you money, they are then able to meet their own business needs. Because of this they already want to say YES to you.
This should change your mindset around the way that you perceive banks. If they say NO to you, they have wasted time and effort through engaging with you, looking through your deal and ultimately, they have established no outcome.
So, the first and most crucial point to remember is that banks want to say YES to you from the beginning.
2. The second aspect that you need to start thinking about is not only do the banks want to say YES, but you are actually a valued client.
They are not doing you a favour; you are being their customer which means that you have every right to ask them questions and be treated with respect. you need to ensure that you don’t let this aspect get into your way.
Don’t be nervous of going to speak to the bank because you are just a customer. To put it into another example, you wouldn’t be nervous if you were going to buy a new Sofa or couch or if you went down to B&Q on a Sunday to go and buy some new decking for the garden so you shouldn’t be nervous when it comes to approach banks.
3. The next thing to know about banks is that they are looking for long term, repeat customers.
This means that your bank is actually invested in the idea of working with you not just on one deal, but on multiple deals going forward.
Banks love proven developers and they love working with people who they know are reliable and will deliver. After your first deal with your bank, you will change the story when it comes to banking. You will have the energy of that bank chasing you for a deal rather than you chasing them for money. Banks don’t want to do due diligence of you, they would much rather build up a good rapport and relationship with you.
4. The next point that you need to remember is that not all banks are the same.
I think a lot of people get turned down for finance from one bank and assume that this is what will happen with every other bank. The key thing to remember is that banks are just like any other business. Every business has is own unique strategy just like banks.
So, some banks really like property and others don’t really like to involve themselves into property. Some banks like working with 1st time property developers and other banks may dislike working with them. Some banks like buy to let and some banks like development finance.
It’s important to understand that just because you get a NO from a bank, it might actually be nothing to do with you. it could simply be that it doesn’t correspond with their own internal strategy. So, if you do get a NO, that shouldn’t stop you from trying again and until you get results.
It can be quite easy to understand a banks strategy. Some banks advertise their strategy online and other banks will provide you with an insight into their strategy if you go and talk with them. Another thing to consider is to have a look at their marketing materials. What is it exactly that they are telling you that they are looking for?
Some particular high street property banks include Santander, Lloyds, NatWest, Barclays to an extent, Virgin Money and even Halifax. Therefore, there are lots and lots of banks that have high street within their strategy.
Something to also remember is that there are also lots of challenger banks that we can access through our brokers such as Paragon, Keystone and Cambridge and County. Again, they all lend in different ways on different properties and none of their criteria are the same. This is incredibly important for you to understand because you could be talking to the wrong bank about the wrong product.
If you have a broker, they will always direct you in the right direction, but in the absence of a broker its important that you get to know your commercial bank manager. The best way to become engaged with your bank manager is to start with the deal. There is no point ringing them up and having those hypothetical conversations. It is much better to call them with a particular deal and lending terms.
Something to not is that in the first meeting, you don’t have to go in armed with lots of paperwork. You could just go in with an idea of what it is that you are looking to pursue and ask them what their criteria is. The more questions you ask the better your outcomes will be. Ultimately, the more you understand their strategy, the more likely you are to see if you fit into it and it could give you the knowledge and capabilities to make yourself more likely fit into it. an example question that you could ask…
What do you require from a developer to be able to release finance?
They will then be able to give you a list and you can start systematically ticking of that list in your mind until you know that you are in apposition where you can approach them for finance. Something to also mention here is that very often the bank manager that you need to speak to is often called and referred to as the relationship manager.
This important as different relationship managers have different layers of autonomy. For example, some have the ability to work up to £1 million and others may work from £1 million-£5 million and so on. So, the scale of your development’s and where you are entering the space is going to affect which relationship manager it is that you need to be speaking with.
5. The next part that you need to know is what type of product that you are looking for.
For example, if you are looking to do a buy to let, then you will be looking for buy to let lending. If you are looking to retain commercial properties, then you will be looking for commercial mortgages. So, by having a deeper understanding of what it is that you are looking for, you will be able to have a more intellectual conversion with your potential bank lender.
6. My next top tip for you is to under promise and over deliver.
For example, when you are speaking to banks don’t go in telling them that your deal is going to make £300 billion when in fact it is only going to make £50. You need to go the other way. If you go into your bank and show your bank manager, the worst-case scenario, and the best-case scenario but under promise on both cases. Then when you walk out on the other side of that deal and you have over delivered on what you have said you will then have a lender who wants to work with you for life.
Ultimately by under promising and over delivering you are going to open up a better space for a long-term relationship with the lender. To be honest, I believe that you shouldn’t come into a space ad try and speak their language, don’t try, and say what you think other people would say. You need to go into the bank and be yourself, be honest and be truthful about your deal. you just need to position it in the best light possible.
7. Don't forget the obvious bits…
You need to remember you need to go in and look the part. You should turn up to your meeting looking smart, presentable, tidy, and organised. You should also show up and be early or at least on time.