Funding Secured: How RIAs Can Woo Banks Into Lending Them Money

Old-school business tactics can go far in landing a much-needed loan.

(Illustration by RIA Intel)

(Illustration by RIA Intel)

SkyView Partners, a Minneapolis-based company that matches RIAs with a network of banks willing to give advisors traditional loans for succession plans, mergers, and acquisitions, has already helped finance 71 transactions and over $166 million in debt.

The matchmaking business is doing well but, for the sake of the industry, those numbers need to continue to grow, according to Scott Wetzel, a managing partner at SkyView.

The average financial advisor is 52 years old and 40% are expected to retire in the next 10 years. The overwhelming majority of RIAs (92%) are considering an internal succession plan; they expect to sell their business to one or more employees, according to Charles Schwab’s 2019 RIA Benchmarking Study. Yet, the same study showed only 13% of firms said developing or enhancing a succession plan was a top-three priority, making it the least favorable.

This might create a problem down the road. Waiting too long to begin transferring equity to new owners internally might not allow them to accumulate enough personal wealth to help them purchase the firm entirely down the road, Wetzel said.

SkyView can’t force RIAs to get their succession-planning acts together. But in the meantime, there are ways advisors can woo the short list of banks willing to give them traditional loans.

Before SkyView makes an introduction to a lender, Wetzel reminds advisors that most lenders are regional or community banks, far smaller than the likes of JPMorgan Chase or Wells Fargo. They tend to have closer relationships with customers and advisors can use that to their advantage. To get a traditional loan, they simply need to engage in some traditional practices.

“They wonder why you’re coming to them for a loan and not asking your current bank. That is old-school banking,” Wetzel said. SkyView’s network of lenders also visit potential borrowers in person, he said.

But there are other ways to put some of that anxiety to rest. The easiest way to help a bank get to know a business is for them to become a customer, which is something advisory firms should consider, Wetzel said. Ideally, that would mean making a would-be lender the primary bank for an RIA itself. It’s easier to lend to a business if a bank is already intimately aware of its cash flow and finances.

Some advisors might not even consider such a change. Wetzel said that is understandable and certainly won’t preclude them from getting a loan. There are other ways advisors can begin building relationships with a bank, such as turning to it for a mortgage or other loan.

Even earnest exploration can tell a bank more about a would-be borrower and benefit both parties in the future. Like wealth managers, “banks are very big on having a comprehensive relationship.”

Advisors who have begun working with smaller banks outside their local area have benefitted, too.

One advisor told Wetzel that he loved no longer feeling compelled to visit a local branch in person but still got a high level of service from his lender. He once called his banker on her cell phone after 6 p.m., she answered, and happily helped him. That never happened before.