CFO shares insights on the tools that help the company succeed
When you’re running a fast-growing business, financing is crucial and relationships are everything. That’s why it’s important to have a financial partner who can respond to your needs quickly because they’ve already taken the time to get to know you and your business really well.
That’s the most valuable lesson Misty Glass, CFO of Prominence Homes, has learned as a prominent player in the build-to-rent space in the central Alabama and Birmingham metro areas.
Finding a niche
A residential home builder since 2012, Prominence Homes specializes in building investor property. They build the homes and then sell them to investors to hold as investment. It’s a market the company entered long before the build-to-rent boom in recent years.
In its first year, Prominence completed nine homes. The goal this year: 450 to 500 homes. While they used to find a lot scattered here and there, today they build out entire communities—as many as 80 lots in just one neighborhood. The rapid growth could have caused some serious financing issues, but the company had an ally in the lending arena—West Alabama Bank.
Tools for success
“Working with a bank that’s willing to grow with you is something you won’t get anywhere else,” Glass said. “West Alabama Bank actually took the time to come to our office. They wanted to know who we were, where we were going and how they could help us get there. They were able to develop the tools we needed to help grow our business.”
Having the right people in the right place and nurturing those relationships is how they have built their business, Glass says.
You’ve got superintendents in the field who manage the construction of each home; land developers who find land at a good price; and, finally, bankers who provide the money they need to build the homes and make the process go faster. Since homes are in various stages of completion, to meet their goals they tart about 50 homes a month.
Feeding the machine
It’s like a big machine, Glass explains. There are houses going into the machine, with everyone doing their part of the process to get it built from the ground up. At the end, the company sells the houses to the investors and pays back the proceeds from the construction loans. Then more houses go into the machine.
In this systematic process, it takes an average of 88 days to construct a house from start to finish, which is a fast build time. “Time is money in our business like it is in a lot of businesses,” Glass says. That’s why they partner with West Alabama Bank.
Time is money
The lending team at West Alabama is easy to access and highly responsive. As Prominence progresses through construction, the bank goes out and does inspections of the jobs typically every 2 to 3 weeks, then provide draws based on the percent of completion. Prominence uses those funds to pay suppliers and labor costs.
“They fund our jobs as we go through this 88-day period and when we sell the house to the end buyer—to the investor—we repay the loan to West Alabama and we move on to the next project,” Glass says. “During that time, we will have submitted new projects to the bank so it’s a continuous rolling process.”
While there are challenges to any business, around here there’s also a community connectedness that helps everything run more smoothly. She speaks to the local lenders, developers and title companies who all work together to help her company and the community flourish: “We’re able to grow at an extremely fast pace. It’s a win-win for everybody.”
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