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Three Tips for Preparing for Bank Financing

Three Tips for Preparing for Bank Financing

Written by Anna Taylor

Buying or building a business, or investing in your current business to help you reach an untapped market, expand your physical location or generate new streams of revenue often requires more capital than owners and entrepreneurs have on hand. While the prospect of financing your project may seem overwhelming it can be critical to take your project from an idea to reality. So where do you start? When you begin the search for financing, keep these three things in mind to set yourself up for success.

Get organized 
Any lender is going to require documentation about you and the project. Before you reach out to potential lenders, get organized. Have tax returns in PDF form ready to be sent. Make sure you have access to your bank accounts so you can readily pull statements or put together a personal financial statement (PFS). Keep an eye on your credit score — many times you can keep tabs on your score via a bank account or credit card statement. Investigate any sudden dips in your score. You may be unaware of a delinquency or collections notice that is impacting your score. 

Find the right lender
Selecting the right lender is crucial—this may be the biggest financial decision of your life and you need to work with someone you can trust. Finding a lender who has financed projects in the industry before can be helpful. Because they have experience with similar projects, you don’t have to explain your project to them, and they’ll know the right way to structure your project. For example—does your lender understand the lease-up period? Many lenders simply view these projects as a construction project, but totally disregard the operating deficit that comes as the facility gains occupancy. A good lender will understand that while this is a construction project, interest only and working capital will be needed after construction to help support the project before it’s able to shoulder debt obligations from business cashflow. 

Start the conversation
It’s never too early to reach out to potential lenders. Even if you’re not quite ready to apply, you can talk to lenders about your project and they can share their requirements and guidelines enabling you to prepare. When discussing financing options, share what’s most important to you so the lender can put together a financing package that best meets your needs. For one customer, leverage might be the most important factor, for another, maybe it’s rate and fees. Ask questions about their requirements, what they look for in an application, and what it takes to get approved. You can even ask for a sample application and start pulling items together so that when you’re ready to apply, you can hit the ground running.     

At Live Oak Bank, the storage team has closed over $1 billion in self-storage loans,1 winning the “Inside Self Storage Best Lender” award each year from 2015 to 20222. We pride ourselves on being a resource to our customers through education and collaboration. You can learn more about your financing options and access small business resources at liveoakbank.com/self-storage.   

  1. This data is sourced internally and is from inception to 7/27/22. Data compiled on 7/27/22.
  2. “Inside Self-Storage Best of Business 2022.” Inside Self Storage, 01 July 2022. https://www.insideselfstorage.com/best-business/inside-self-storage-best-business-2022. Accessed 27 July 2022.
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