Community Bank Loans: A study in tenacity
Advice for getting a loan from a community bank
Three years ago, St. Louis resident Randy Gornbein’s father-in-law needed additional care. “We researched senior day care facilities and saw several where we wouldn’t leave a pet for the day,” Gornbein said. “Then we found SarahCare, and my father-in-law looked forward to going there two days a week. A month or two later, it came to our attention that this was a franchise. I’m a financial planner with a focus on long-term care and I knew demand would grow for this kind of facility.”
Gornbein and his wife, Carol Butler, did their due diligence on SarahCare, based in Canton, Ohio. Since St. Louis already had two centers, they focused on opening a franchise in Denver, Colorado, where Gornbein grew up. “We visited about 20 senior-care facilities in Denver,” he said, “and the only two of the same caliber had waiting lists, so we bought a franchise in September, 2008. We had 800 credit scores, could put up $125,000 in cash and could pledge $250,000 in equity in our house. A lending institution out of Texas that had financed five or six other SarahCares gave us preliminary approval on a loan, pending our signing a lease for a site.”
By the time Gornbein found his perfect location, it was the end of November, 2008, the credit markets had crashed and the Texas institution pulled its loan commitment. At first, Gornbein wasn’t worried. His father-in-law had been the president of a bank in St. Louis and thought one of its branches would lend the money. “I talked to officers my father-in-law had mentored, but, because of the lending climate and the fact that we were doing business in Denver, none could give us any assistance.”
From December 2008 to October 2009, Gornbein carried a detailed business plan into at least eight Denver banks—including Citywide Bank, where he’d been referred to the president and owner by a family friend—but they all turned him down. “I finally told the leasing agent we were pulling the plug on Denver,” Gornbein said. “He said I was the most tenacious person he’d ever met, and he’d see if the landlord could help me. He couldn’t, but it bought more patience.”
In the meantime, someone suggested Gornbein try the Denver Office of Economic Development. “I scheduled a meeting,” Gornbein said, “but I knew that they supported businesses in parts of town far from the site I’d chosen. It so happened that just before my meeting, they’d received additional stimulus money and their finance guy said SarahCare was just the kind of project they were looking for—it creates jobs and is socially responsible. They could see themselves financing 25 percent, about $200,000 of the total cost, with a low interest loan.”
With that commitment in hand, Gornbein called back the Citywide president, who referred him to the president of a branch near his chosen SarahCare location. “I spent an hour and a half with that gentleman,” Gornbein says. “He has a mother with Alzheimer’s and understood how viable this service is.” Within a day, Gornbein had a loan commitment for $265,000, pending SBA approval, which came through in January, 2010. His SarahCare is now being built and should open this June.
Gornbein offers the following advice for obtaining a loan from a local bank:
• Don’t make cold calls. Network with the local business community and ask for references to lenders.
• Look like someone a banker would want to do business with.
• Provide professional-looking materials. “I was always armed with bound presentations that included profit-and-loss statements for the first three years of my franchise. I had a title page printed with the name of the person I was going to see,” Gornbein says.
• Have people around you who support you.