I’m a partner in Billboard Loans, a private finance company which makes loans of up to $1 million to out of home advertising companies. No loan is too small. Our loans carry an interest rate of 12%. When I’m asked why someone would borrow from us at that rate I have two answers: we are cheaper than equity; and we are fast.
Private lending is cheaper than equity
If you can access bank financing, go for it. The cost of funds typically will be 4-6%. But if you can’t access bank financing and need to put equity into the business your cost of funds likely will be 20-30%. Borrowing at 12% from a private lender is far cheaper than taking on an outside equity partner who will demand those 20-30% returns, especially if the private lender does not charge a prepayment penalty. Equity partners also will typically be very involved in your day-to-day business operations so you will lose some autonomy.
Private lending is fast
Private lenders like Billboard Loans know out of home. Billboard Loans, for example, has three managing partners, all with extensive experience in the business. If we want to do a loan we do it. The three of us have owned an out of home company for three years and have been out of home lenders for almost 30 years. This makes us decisive, nimble and fast.
Here’s a success story. I received a phone call last week from an out of home company executive I’ve known for a long time. The out of home executive has a company with a valuation in excess of $10 million. The out of home executive was dealing with a bank which insisted the executive put 15% equity down every time he borrowed. Billboard Loans provided a $150,000 revolving line of credit financing for this executive in five days. Five days. Not to just issue a term sheet. Not to just approve the loan. Five days to issue a term sheet, approve the loan, document the loan and wire the money! That’s the benefit of dealing with a private lender. Kudos to the executive who had all the needed legal documentation in order which greatly facilitated the process.
Here’s an alphabetical list of private lenders who can help grow your out of home company:
We’ll profile each of these lenders in the coming weeks.
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