Skip to main content

Columbia Business Monthly

Three tips for approaching banks with an 'appetite' for major building projects

By Ryan Hyler | The Styx Companies

When you take a look at our newly opened and refurbished Claussen's building in Columbia's Five Points district, you can see the area’s hunger for sophisticated living accommodations in historically preserved buildings that add character and charm to the area. 

When the Styx Companies partners—David Tuttle, Julie Tuttle, Jesse Smith and myself—teamed up with architects at 1x1 Design and Cohn Construction, we transformed the legendary Claussen’s Bakery into 29 unique boutique studio apartments.

In addition to these partners, there was another vital contributor to our success—our bank. We've developed a great relationship with local banks in South Carolina, and those relationships are key. 

In looking at a project like Claussen’s, one thing we knew for sure was this: the bank you choose has to have the appetite for a project and the capacity to fund it.

Here are three tips on how developers can approach financing for construction projects. It’s important to note that each bank approaches every project differently; this is a general overview of considerations for developing your pitch. 

Develop a relationship with your bank

A personal and professional relationship with local banks should be your first route. 

There was a time when a bank would just fund the construction loan. After the Great Recession, however, this is rare. Today, banks want to have a relationship with the owners/developers of a property outside of the construction project itself. In other words, banks are looking to move beyond one-off, transactional arrangements. 

With the Claussen's project, each team member had a personal relationship with the bank. Having a long-term relationship with the banks helps us build trust for working together on bigger projects. 

The bank’s capacity matters to your project

When it comes to banks and project financing, bigger is not always better. 

How can you tell what type of capacity a bank has?

A financial institution’s size can dictate what construction projects fit in their bank’s lending profile. For example, a bank that has $1 billion in total assets may only have the capacity to lend a borrower up to $10 million. Therefore, the size of the construction project would help the owner/developer choose the appropriately sized bank. 

As you plan your development project, research your bank of choice and ensure they can give you want what’s needed for financing.  

Increase your lender’s appetite for your project 

Construction lending comes in many forms. Broadly, construction financing exists in the residential and commercial sectors. Within the commercial sector, there are sub-sectors of retail, office, industrial, and multifamily. 

It’s important to work with a bank that has an appetite for the type of development you’re doing. A bank that likes to fund dental office projects, for example, might not have the appetite to issue a loan for a storage facility. While a bank might have an appetite for certain types of projects over others, they are also looking for diversity in their portfolio. They don’t want to put all of their eggs in one basket.

So, how do you get the bank to buy into your project? Simple: Your resume. If you’re a new development company and this is your inaugural project, the bank will want to know that your business acumen is strong. If a bank has never done the type of project you’re requesting funds for, they will likely not back your project. 

For Styx Co., the ideal fit means the bank is comfortable lending on all types of their real estate and has a successful track record with construction projects. 

With projects like Claussen's and 1310 Lady St. under our umbrella, the relationship between the Styx Co. and a trusted lender is key to our success. That relationship is also key as we work to fulfill the growing consumer appetite for living in beautifully restored, energetic spaces in South Carolina’s capital city.