I’ve made lots of out-of-home advertising loans over the past 15 years but there are several portions of the industry I avoid, including:
Loans to floating billboards.
Loans to finance vehicles with billboards on them.
Loans to finance gigantic advertisements on fields outside airports which are capable of being viewed from the sky.
Loans to finance in-store advertising above checkout stands.
Each of these sectors is a one of a kind business model. I avoid one of a kind business models for two reasons.
First, I can’t easily value a one-of-a-kind business. I have a good feel for outdoor billboard values from years of lending. There is a liquid trading market. Right now you can go to Sign Value or Outdoorbillboard.com and find dozens of signs for sale in each state of the country. No such market exists for floating billboards or gigantic ads on fields outside airports. If I can’t place a value on the collateral I will probably get talked into advancing too much money against the collateral.
Second, it’s hard to know how to fix a broken one of a kind business. If I have a billboard client in trouble and I have to take over the company I know what I have to do to fix things because all billboard companies look alike. Leasing and sales are the same regardless of where you are located. I can always find personnel to fix the problem.
