Master the paperwork: What builders need to file to get financing

Maggie Marotta, principal at Plano, Texas-based Apogee Partners, spends all day every day trying to connect builders with AD&C financing. The problem that has her beating her head against the wall is getting builders to put together the information the investors require to even consider doing a deal. What they can't seem to accept is that builders who want financing have to follow the golden rule: He who has the gold, makes the rules.

"The reporting is a tough, tough situation," Marotta says. "They don't have people on staff to do it, and they're not accustomed to having to do it. One person didn't want to update his information from 2008. He said he didn't want to do it unless someone was really interested. We told him that no one would talk to him unless he did."

Steve Witt, managing partner of CalCon Mutual Mortgage, confirms the advice Marotta gave to her less-than-enthusiastic builder. Get your financials up to date before you make the first call to look for money.

"We're looking for people who are motivated," says Witt, who says his firm has a capacity of $30 million a month to lend. "If we give them an items-needed list and they give it back to us in 48 hours, we know they're serious. Otherwise, we're moving on."

What kind of information do the investors need to see from you before they're willing to discuss putting up their cash?

Here's what Marotta says you need to get you in the door:
    * Your company's current, correct financial statement
    * A tax return for 2009, at least; the past three years would be better
    * An executive summary about you and your project - not more than a couple of pages. It should include information about your company and the management team and specifics about the project, including location, any restrictions on the land, product type and time frame for development.

Don't skimp on the section about your management team, says Matt Osborn, president of Village Homes in Greenwood Village, Colo. Pro formas and appraisals on the project "The assets are fairly easy to quantify, and get an appraisal to justify it," he says. "A lot of the scrutiny will be on the quality of the operating team. It's showing you can build a plan you can meet, and not pad it."

You also need to figure out what makes you different from every other builder. "It's finding the niche that will separate your story from the next person down the street, the next package they see," Osborn says. "What's the differentiating factor for the operating platform? It could be assets, processes, the operating entity - a number of factors. There needs to be something to stand out, some element that differentiates you. There has to be value in the package you're putting together."

Witt wants an executive summary on the project that includes the location (city, county and state), number of lots to be built and estimated monthly absorption. He's looking for home builders with at least four to six years of experience and someone on the application with a FICO score of 700 or better. He also needs a cost breakdown per home and renderings and elevations of each home to be built.

If all that looks okay, he'll take a "little deeper dive," he says, and ask for proof of insurance, proof of ownership, "all the things builders were used to submitting for bank loans." Oh, and he wants all of this information submitted for every lot you want to build a house on. Four lots, four sets of information, even if you're building the same house in every lot.

"It's tedious and time-consuming, but we're doing that because the program is lot-specific," Witt says. "It's a pain in the butt to do it per lot, but they can't get money anywhere else, so they'll do it." Spoken like a man who knows the golden rule. Caption: Stanton Homes, a custom builder based in Apex, N.C., offers its buyers both traditional financing and construction-to-permanent loans. Nearly all choose the latter because of the easier approval process, says Penny Hull, Stanton's VP of marketing and business development.