Entrepreneurial Tales

I thought it might be interesting to post about some recent tales of woe and success with regards to dealing with banks for business and getting loans!

I've spent the last year in Norway, after 6 months of scouting trying to put together a real estate project.

I found a suitable piece of land to build 8 houses, and then approached an investment group in Sweden I worked with before to raise a fund to buy it and develop it, with a view to trying to do some bigger projects down the line after dipping our toes in the norwegian market and system.

Within 2 months they managed to raise 1mil euro which was enough to buy the land and fund project design, permit application, and my expenses living in possibly the most expensive country in the world.

The next step was to put together a bunch of contractors to build the project, and to get a bank on board to fund the construction, and retrospectively a % the land acquisition.
So last February I sat down with 3 banks in the city Im in.

A comprehensive presentation was made showing the project, the equity we put in ourselves, and the various contractors (local guys doing digging and concrete, and houses being delivered from latvia).
All 3 banks said they liked the project and there should be no problem with funding 80% of the construction and 70% of the land, and that we would get our decision in a week.
A week later nothing, two weeks later nothing, and finally 4 weeks later all 3 banks rejected the applications, because we were using a latvian company to supply the houses and they wouldn't be comfortable with the warranties/guaranties.
They told us we needed a local company to guarantee the houses then it would be ok.

So I set about finding a local company that I would offer around 150k to guarantee the houses to the bank. Pretty sweet deal for someone since Im basically paying them to take a maintenance contract as the houses have a warranty anyway from the manufacturer who is very solid and delivered many houses to norway already.

It took me 2 months to find a company to do this, making money is not the priority for many businesses here whereas people would be biting my hand off for it in Ireland. Proposals were now rejigged and sent back to the banks. Low and behold the company to guarantee the houses failed a credit check with the bank so they wouldn't approve.
Start again, took me another 6 weeks to find another company to guarantee the houses. A guy who had solid books and good references to guarantee and maintain the houses.
But, again the banks say no we won't approve it, he is not big enough. Actually now we want 1 local company to guarantee the whole works - concrete, digging and the houses, not just the house. Very frustrating.

So another solution needed. I spent the next month trying to find a norwegian house supplier instead of a latvian one. I have to take a hit on the profits, but at least now I have 3 local companies from the same city as the banks, all with their own warranties and guarantees and solid accounts.
I am now mainly dealing with one bank who were the most positive. But guess what, just when I finalise the paperworks to present the latest version, the banker Im dealing with retires and a new person is appointed to my case.

She wasn't briefed properly despite my requests to the guy retiring and so we have to start again. She decides that overall they don't want to fund our project despite the changes we made to make it suitable for the bank. They feel its too risky still, even if I fund all the first contractor instalments.

So in order to try and reduce the risk further I offer to pay 60,000 to a specialist company in Norway that provides financial construction guarantees and maintenance guarantees. This means the bank can't possibly lose money on their loan with this financial guarantee in place.
Not only that but I have worked out very detailed payment terms to all the contractors in the case, in order to reduce exposure for the banks at any one time.
But the new banker rejects the proposal with no real valid reason. She spins various nervous nonsense to me on the phone for ten minutes, while I question her for moving the goalposts constantly. The conversation ends with the bank with no real hope no matter what I would do now. No solution at all.

Im now in the position of maybe having to wrap up the land, which now has its granted building permits and sell it off with planning permission, and if really lucky get out without the investors from Sweden losing too much money and having wasted 18 months of my life messing around norway.

So whats the problem? The problem is Im Irish and my partners are Swedish and we are in Norway. Despite the facade in scandianvia of being the most liberal people in the world, theres a deep xenophobia. They don't want foreigners to mess with the status quo, they don't want to trust foreigners, and don't want to take any risk on them. As people have told me "you can't make money in Norway". And if they can't they surely don't want a foreigner to come in and do it. No more was this demonstrated but in the local newspaper where they did an article on me that more or less painted me as an evil capitalist introducing evil efficient construction methods to their beloved home!

So how do I make it work? The only solution is to have locals involved in the project at director level, that the bank can communicate with in norwegian, and that get tied to the project. So its no longer a foreigner project but a local one.

Fortunately I had negotiated good payment terms with the company we bought the land from. They had only received 66% of the cost, with the last 33% being due when the project was going ahead for sure. These guys had multiple acquisitions going on and were very short of cash-flow, counting on this last payment.
Solution - we added two norwegian directors, non shareholders, or signatures but to liase with the bank on our behalf.

Another meeting with another local bank. Were told we would get a decision within a week. A week goes by and nothing, 2 weeks go by and nothing. The end of the third week letter from the bank - We are happy to fund the project, all in all around 3 mil Euro in loans @ 6%

Various morals in this story. But at Xmas time I was 95% ready to pack it in, thinking I had brought it as far as I could. But I decided to fight, and played serious hardball with the land sellers and so on. About 10 xmas day emails. Giving the last drop of blood got me over the line.

I feel inspired again after this result, I hope it can inspire a couple of other entrepreneurs here. Even when it looks like there is no hope, there is still hope!

Graham

Fantastic tale El Rifle and for me that epitomises a true entrepreneur, the ability to keep getting back up after being knocked down so many times.

Peterdalkey

Just because "they" don't see that they are mistaken, you never deviate from your own belief and commitment to your own vision. Winners never quit!

Well done!

EIREHotspur

Totally agree.....perseverance through adversity.

As Steve Jobs said "It is really important that you have a good filter system".

dgerryd

Well I read to the end great story it sounded like a fairly stressful time. I would think the rewards of sticking with it outweigh any financial gain, cheers for the tale.