Not all that long ago, we were very liberal in making start-up loans to doctors. That environment has changed dramatically, with health maintenance organizations and the like. Fewer and fewer physicians are striking out on their own, preferring instead to sign up with the Kaiser-type group practices. Dean A. Rennell, who heads Wells Fargo Bank's Small Business Division in San Diego, Phoenix, Las Vegas and Tucson, recalls a time when Arabian horses were used as collateral for breeders' business loans. Many lenders found themselves holding the feedbag after the craze diminished.
Avocado groves are a current example of real estate collateral that lenders are wont to turn down.
It can be a pain to deal in those. What would-be entrepreneurs must understand is although banks are flush with money to lend, it takes more than a great idea and promises of hard work to attract a bank loan. The fact of the matter is, he hasn't produced bankable cash flow, but all he can see is the tremendous value down the pike. At that point, bankers agree, they advise the client that his is an equity risk, not a bank risk. Instead, private investors, who have greater risk-reward thresholds, or hard money lenders are areas to explore.