 The following program is supported by High Country Bank, which has been serving Colorado since 1886. While High Country Bank remains a true community bank, they offer many of the same services as the big banks. They specialize in mortgage, construction, and business lending and strive to provide an exceptional customer experience with every interaction. To learn more, please visit www.highcountrybank.net. Hi I'm Realtor Sara Morrow with Cell State Peak Realty. Welcome to Episode 4, Property Time. Today we're chatting about commercial lending and I'm thrilled to welcome Drew Balingham, commercial lender with High Country Bank here in Longmont. Drew is on his 20th year of service in lending. He's truly an expert and he's about to share some golden nuggets about how it's not so scary to take out a loan as a small business owner, whether you own property or not. Drew is a local family man who has worked with hundreds of entrepreneurs. He comes from a family of entrepreneurs and he's passionate about building stable financial futures alongside his clients and his customers. As a long-gamer myself, who's an entrepreneur, I cannot wait to hear his wisdom and I hope you'll join me whether you own a business, property, or not. Hi Drew. Hi Sara, thanks for having me. You're so welcome. Thank you so much for coming. Yeah. So let's dive right into this. So now that we're somewhat post-pandemic, I know that Longmont is rife with small business owners and all of us are clamoring for a little support maybe to make up for lost time the last couple of years and I don't know, you're the expert. What does a commercial borrower or a small business owner need to do to either qualify for maybe a mortgage or a purchase or even just to get money because let's be honest, some business owners need money more than they need real estate right now. So tell us about what you're seeing and who you're helping. They do. One of the hard parts that a lot of business owners are coming in contact with is like especially with the pandemic, maybe their banker is not there anymore. Maybe their relationship with the bank is now gone. And so they're looking to see who's out there, where they can go. It's nice to, we've got a location here in Longmont. It's nice to be in Longmont to have that local feel where people can go and mingle. And so a lot of times it's just word of mouth as a good start. They know other business owners in the area or work with other people. They can ask who do you bank with and stuff like that and that's a good start. So what are you seeing, do small business owners, do they already have existing relationships with you? Do they just walk through the doors? Are they applying for loans? Tell us about commercial lending just in general. In general. Okay. Well, there's lots of different aspects to it. So a lot of what we're seeing at High Country Bank because we're such a small community bank and we're new to the market. So we're trying to figure out what our niche is. What businesses are here? Where can we entrench ourselves in the community? And initially, since we opened in last November, right in the smack dab in the middle of the pandemic, businesses were closed. And so I was walking up and down Main Street and it was kind of like, it wasn't depressing, I don't know if it's the right word, but it was kind of like, it was sad to see that there were businesses that weren't around anymore. And so, but yeah, they can go online to look for a bank if they've got a specific request that they know of, if it's an equipment loan, if it's a line of credit or whatever it is, line of credit lender or whatever, they can go online and search for things like that. We don't have a lot of walking through the door business anymore and that's true with anything, any bank. And so a lot of it, yeah, it's just as word of mouth as we've, you know, done community events, gotten involved in the, in the community. People recognize us. They see us wearing this shirt. They ask questions and from there it just kind of snowballs in and you know, just to start the relationship and start the discussion. A lot of times it's either via email, someone introduced us via email or a phone call or at an event and a card has been swapped and then somebody calls in and we start the discussion at that point. So you mentioned, I really love your entrepreneurial and your go-getter, like you literally hit the pavement and I just so love that us realtors know what that's like. So you were, you were out looking for people to help and to serve and it sounds like there are some businesses that obviously survived, such as you guys. Tell me about one of your partnerships here in Longmont that's been rewarding that you could, that you've been able to support and see them through the pandemic and maybe even help them own property or expand or rent or pay their rent or. Yeah, I mean, I've had the opportunity to deal with a lot of different industries since I've been here and different aspects of businesses. You know, one in particular is a Main Street business here that had experience in the dog grooming industry and so elsewhere, but had come here and they were working, you know, with a dog groomer and getting paid contract, a contract with that groomer and that groomer then became is 70, I think. And so she didn't want to be involved in the business anymore. And so she came to them knowing that they had a bunch of experience and said, hey, you know, do you guys want to purchase my business? And a dog groom business is an interesting business because there's not much. I mean, there's some inventory. All it is is basically the least space, you know, with some like really particular type of space. Yeah. And so there's not much in way by the way of like collateral, you know, for us to lend against and especially if they're leasing the space, we can't use that as collateral because they don't own it. Sure. But we were able to provide them with funding to purchase the business. And we looked at, OK, this business generates X amount of money. There's, you know, there's a client base here already. And that helps them qualify. It does help them qualify. Also, you know, looking at their historical, you know, what they've been able to generate just on their own through their own, you know, contract with other with their other dog rooming place, you know. So they've got to have some kind of income that's generated to it. It can't be all pro forma and projections. But that was nice. It was a it was a small loan, but for them, it was huge because they were start up, they were pandemic. Exactly. They were renting. Yeah. And it was a business that was mature. It already had a customer base. And so they were just walking into and then with their expertise, you know, they've been able to just grow it exponentially from there. So that was kind of neat. That must be very rewarding. It is. To help the underdogs, to pun. Hey, there you go. Yeah. Thank you for that. Well, we mentioned qualification and I want to also touch on that. Were you done? Did I interrupt you? No, I'm done. There's there's many examples. Like I like that. Yeah. Just another one just to kind of throw it out there. Like e-commerce is a big thing now. So we actually have have a client now who's he started out in his garage selling barbecue equipment, accessories and stuff like that. Oh, OK. And not the food, not the food, but just, you know, everything around it. But like aprons and LED lights that hang on the barbecue unit and stuff like that. Fun. But he was, you know, he had a little bit of product and it was it would be shipped to his house. And so he was just out of his garage and from his garage, you shipping it. Well, the pandemic hit and he had a new product that he wanted wanted to launch. And so he got on Facebook and he did some some other advertising and marketing and hadn't really delved into that side of the business to date. And it just went like wildfire. And it went from, you know, making a couple hundred thousand dollars in revenue a year to now he's like almost up to two million. And that was pandemic fueled because everyone's online. And everyone's barbecuing. Everyone's barbecuing. And so his products just and so he went from a two hundred thousand dollar a year business to almost two million. And it's just going to grow and grow and grow. And so it was nice for us to get in on the ground level with him. And, you know, the reason he came to us is because he needed funding. Like he needed that boost. He didn't have cash to purchase all this stuff and get it made for eventual sale. And so we were able to help him with that, get him a line of credit. It's it's the line of credit has since increased as revenues increased and things like that. But now it's cool to see that. I mean, there's so many different businesses in this area. We all we hear about all the big, you know, ball aerospace and all the big companies and publicly traded companies that are here, which is awesome. Right. But yeah, there's a lot of smaller businesses that are scaling up or just starting. There's there's a ton. So it's nice. Well, despite this being a real estate show, I do appreciate you reminding me that Main Street is you know, the American dream is not just about our actual Main Street strip here. There's a lot of e-commerce. There's a lot of like I'm a realtor. I don't physically have a space on Main Street. You know, I've got an office in Kaufman, but it's like a lot of us are just doing this online. We're doing from our bootstraps and it sounds like you have some wins that must feel very good to partner with. So I wanted to also get you mentioned qualification and you mentioned business credit. It feels like a lot of us, particularly in this real estate space industry that we're in, you know, we know a lot about the 30 year fixed mortgage. We know about the amortized qualifying. I have to show you my tax returns. I have to show you my pay stubs. I know what roughly I can qualify for. Then I go shopping for a house and then I go shopping for a loan product. You're on the commercial side, which intimidates a lot of people. Even if I do have my own mortgage and I do have a small business, I might be really intimidated about getting a commercial loan, you know, small or large scale business. So can you help me figure out? Do I run from it? Do I wait? Do I just dive in because it's really not that scary? I mean, it's not scary. And I hope that when people talk to me, their initial thought, you know, their initial, you know, introduction with me, I try and say it's not scary. This isn't a scary thing because it's not. I mean, it's but I do get a lot of feedback that that's why, you know, people waited till the last minute till they needed funding in a week or two because they were just so scared. Yeah, I noticed the fear leading to procrastination myself. Exactly. Yeah. But I mean, there are some similarities. So mortgage lending, there's typically like an application process. And you have, you know, you have to provide tax returns and income statements and financial statements and so on and so forth. Similar with commercial lending, no matter what it is, you've got, you know, whether it's a line of credit, whether it's an equipment term loan, whether it's a commercial real estate deal, whether it's $10,000 that you need or whether it's $5 million that you need. The packet is pretty similar. It's the same. But there are there are a lot of different products. So mortgage lending, yeah, you've got your 30 year fix. You've got jumbo, you've got, you know, it's pretty standard. A lot of people understand like what those loans are all about. But on the commercial side, it there's, you know, for a commercial real estate loan, you're typically looking at like a 25 year amortization period where where and your your loan is only fixed for five or 10 years of that 25 years. And so there's going to be a time where there's going to be a big balloon payment. Right. Which is different from mortgage, where it's different from the 30 year fixed rates. Yeah. So there's a lot of because there's there's a lot of risk with lending, you know, at 4% rates. If in 25 years, it's going to be up to 10 or 15% or whatever it is, you know, so there's just and so that's why and I don't want to jump jump the gun because I know we excuse me, we talked about this earlier, but that's why it's good to know somebody or have somebody to talk to, especially on the commercial side, because you've got there's so many different options and it's it's such a there's a wide array of doing. You could give two or three products to somebody when they only really need like this line of credit or something like that. Right. It's very tailored. Yeah. I'll get to that in a second. Can you say more about you mentioned the qualification, the terms you mentioned, the interest rate, you know, a lot of us that own homes, we refi within a couple of years to improve the rates. That's very normal. We don't see, you know, things spike or change or the risk. Like is that does that kind of operate the same way with this 25 but five year balloon? It does. Typically, there's on the commercial side, there's a prepayment penalty. OK. So within like the within that five years or 10 years, if you go to refinance elsewhere, there's a penalty for doing so, whether it's a percentage of the loan amount or some other formula. But the interest rates in the terms are pretty similar, right? Fourish percent right now, depending on a bunch of different factors, I'm sure. Right. Yeah. Typically, a dollar amount is a factor. You know, if you're doing a three million dollar commercial deal, you're you're probably getting one of the best better rates just because to stay competitive. But yeah, it's pretty similar. We're generally commercial real estate loans are generally a little bit higher than what you what you'd find on the mortgage side. Yeah. Cool. And people do the 20. You said 25 year is kind of what they naturally automatically default get. Do they have a choice about that? I mean, that's like the conventional like 25 year am five year fixed and then it reprices after five. But there's also I mean, you can do 15 year fixed rates. Ten year fully amortizing fixed rates. Obviously, your payments are a little bit higher monthly. So it doesn't make sense to a lot of for a lot of commercial real estate owners and investors because they're they want their rents to be able to pay for the loan. And so, of course, you know, for the numbers to make sense. Yeah, can you share a little bit more about like details on your specific products and how they are competitive to other banks and other lenders? I know you guys did a lot with PPP during the pandemic, which I'm sure was part of your hitting the pavement hustle. And then, you know, I'm sure you guys work with Chaffa. We do check a little bit how you subsidize. You're the conventional side who subsidizes that and allows for that. Yeah. So we do. So instead of going SBA on a lot of like so we get a lot. We feel a lot of inquiries because we are new to the to the area and we're a smaller community bank. So we get a lot of small business type inquiries. And where other banks may say, OK, this is an SBA product. You need to go. I see. We need to partner with an SBA. They sort of qualify that and then bring an SBA for you. Exactly. We'd use Chaffa, the Colorado Housing and Finance Authority. And so what that does, yeah, there is. So it's basically the same kind of thing as SBA. It's like an insurance type product. But, you know, just to like mitigate risk, essentially. But so like, for example, if you've got a hundred thousand dollar line of credit and you only have collateral of one hundred and ten thousand. So there's, you know, for lines of credit on like business assets, typically we're lending like sixty five to seventy five percent loan to value. So, you know, for a hundred thousand dollar line of credit, you need to show one hundred and fifty thousand dollars in collateral. So there's sometimes a shortfall there. Gotcha. You mean if I require a hundred for my project? Yeah, it can only show that I'm earning up to X dollar amount. Right. That's when Chaffa can fill in the. So there's a there's a gap there. Yeah. So Chaffa essentially comes in and for they charge a one percent origination fee and that money goes into a pooled account of money that the bank has. And the origination fee money goes into there. And and that essentially is the the the buffer, the buffer. Yeah, yeah, the gap filler. Yeah, it's not so different from like a down payment assistance program in the residential side. Yeah. But you're saying I don't apply for that. You apply for that on my behalf as a business. Exactly. Yeah. It's just a partner. Yeah. And then compared to SBA where SBA lending is very arduous. It's a it's a it's a long process. Yeah, you have to wait two months, right? It's a little more expensive, you know, higher origination fees. This is a two page document that goes with our credit presentation. And it's technically more local because it's Colorado only. Is that correct? It is. So the bank has to have a relationship with Chaffa. Right. And we do. Yeah. Cool. So you've got but PPP, Chaffa, SBA, these are government subsidized programs, whereas you bring on the conventional bank side, but the two together lower the risk for lower the risks to you from me. Exactly. Yeah. So if you're like a newer business that doesn't have a track record of success, then that's when we would use Chaffa. If you're, you know, an existing business like I'm working with a company now that's 22 years in business, we're not going to don't need Chaffa. We don't need it. Yeah. Right. So cool. I guess my last question is, yeah, you touched on it is, you know, you can watch TV and you can call on one 800 number and you can see things like get pre approved today, get funded, get your business lines of credit. Like it seems like it's easy, but you touched on this. In my experience with these cut rate realtors and just sort of like going down the wrong path myself and seeing clients do it. Tell me the real the real reasons why you need a human, why you need a branch, why it helps that you're local, why it helps that you're a local small business that's new yourself. Right. You know, can you give me some sense of like, what if I'm saving more money by calling the one 800 number and I'm getting a better rate? Like, isn't that a better deal? Yeah. And there are, I mean, we obviously, a lot of banks share the same sentiment that we're like relationship driven. And so, yeah, if someone's going out and looking for the best rate, you know, and cheapest money shopping around, so be it. Yeah. Go, go, find. I don't believe what I said, by the way, go, go, find, go find that. And that's fine. You know, maybe at least I've had this conversation with you. There's, you know, we've built some kind of rapport, you know, if that doesn't work out, come back to us and we'll figure something out. But what was your question? Yeah, sorry. Why use a human? Oh, yeah, yeah. So a lot of a lot of customers that we've received so far, they've gone to a bank and just because the industry they're in, maybe it's a restaurant where, you know, for the past year and a half, if you go to a bank and say, I'm a restaurant and I need a loan, they're just like, no, like, I don't know if you're going to survive COVID. Yeah. Yeah. And so they get kicked out. And so it's like, okay, but, okay, you want to open a restaurant. Do you have other assets? You know, do you have a home that you own that you now have a lot of equity in? Because the market is hot. We can, you know, put a second deed of trust behind your first mortgage. If there's equity, yeah. Make it work. And so if you don't have that relationship with the banker or, you know, if you don't have somebody to talk to and you go to a bank, it can be frustrating because the creativity is out the window. Yeah. And they're like, no, thanks. And so, and then also for, you know, customers, like the e-commerce person that's growing, you know, we gave them a small line of credit, but now three, four months later, he needs, he needs that doubled, you know, sure. Needs change. Yeah. And, but, and so he can, he can quickly facilitate getting me information. I already know, is it his, you know, what's happening in his business? Yeah. And so it's really helpful to have that human touch. Drew, thank you so much for your time. Thank you, Sarah. Appreciate it. That's the proper tea.