There are three sources for billboard loans: niche finance companies, sign vendors and banks. I will discuss the pros and cons of each source.
Niche finance companies such as Billboard Loans or Stark Capital specialize in one or two industries including billboards. Pros: (1) Niche lenders know the industry so you won’t have to waste time educating them about why you have a valuable business. (2) Niche lenders are unregulated so they can be faster and more creative than banks. I can issue a term sheet in a day, a commitment in a week and can close a loan in two weeks when I have to. (3) Niche lenders are committed to the billboard business and won’t abandon the sector in a recession. Cons: Niche lenders are more expensive than banks. Your financing cost will be 10-15% with a niche lender rather than 5-8% with a bank because niche lenders don’t have access to cheap federally insured deposits.
Sign Manufacturers – Yesco finances signs. Daktronics has a vendor finance relationship with PNE. Pros: (1) Vendors may be willing to finance 100% of a sign purchase. (2) Vendors may be cheaper than niche finance companies because they are making money on the sign sale. Cons: (1) Vendors only finance their own signs. (2) Vendor leases will have a large prepayment penalty.
Banks – I have seen an increased willingness of banks to make outdoor loans. I have had three outdoor clients refinance my debt with bank debt over the past year. This is a sign that the lending market is coming back after a credit crunch from 2009-2011. Pros: Cheap rates (5-8% interest rate) because banks can fund loans with cheap deposits. Cons: (1) Lack of knowledge of the industry. You will need to spend lots of time educating your banker on why your company is a good risk even though it has few tangible assets and an annual net loss. (2) Fickle credit appetite – I saw banks abandon both the billboard and radio loan markets during after 9/11 and again during the 2009-2011 recession. I have several borrowers who are staying with me even though they are paying a higher rate than they can get at a bank because they know I will not bail on their industry during a recession.
