How to collaborate with your banker.

When you are rehabilitating a vacant building in a developing part of town, it’s expected your banker— or their appraiser— may not be as bullish on your rental projections as you are. Don’t take it as an insult, their job is to protect their investment— and by extension, you— from calamity, so they really do have your best interest in mind.

We had a similar story, as our initial appraisal came in reasonable, but conservative. We ended using our initial loan amount to create a “minimally viable project”. When this test showed there was demand for the creative collaborative space we had a vision for, this proof-of-concept gave us— and our banking partner— confidence to fund the remainder of the fit-out.

What if our initial guess was wrong? We would have been ok. Because we did not take on a large initial debt burden, project could have been rented as storage or industrial space at a lower rate that would have supported the carrying cost. We would have been disappointed we didn’t get to bring our vision to life, but our initial test would have been a successful study.

• Listen to Feedback: Your banker wants you to succeed, so listen for the “Why” behind the “No”— that will usually lead you to where the “Yes” is.

• Incremental Approach: What is the minimally viable project you can launch as proof-of-concept?

• Alternative Exit: Having a pre-prepared fall-back plan lowers your risk and can bolster your— and your financial partner’s— confidence.