Big Nerd Ranch needs a loan | Hacker News Reader

Big Nerd Ranch needs a loan

possibleprobable.com

81 pointszdw35 comments

Posting because I had zero context and had to research:

- BNR builds software for mobile / desktop via http://www.bignerdranch.com/software/

- BNR has become "known around the globe for the quality of the experience we produce", except to me [edit - read RunJake's comment]

- Since 2001 BNR has been running trainings for other programmers and writing well accepted texts on software dev.

- They want to build an actual location, a la 37signals, to host their trainings and develop a "monastery for learning".

- They already secured a loan with which they purchased 13 acres near Fairburn, GA in two transactions.

- They need ~$4,900,000 to build the facility and cover debt, and SBA will lend them 35% of the project at just over 4% interest.

More background:

Aaron is legendary in the NeXT and Apple Cocoa world. He writes the bible for Cocoa programming and has trained many, many Cocoa programmers, including the ones at Apple.

And I didn't mean to sound like I was lambasting you. Not everyone is familiar with the Cocoa world.

I just wanted to point out that (most likely) the vast majority of objc/Cocoa programmers in the world got started by reading his book (along with Kochan's objc book).

Not at all - much appreciated and good to know!

While I'm not nearly rich enough to make the loan anyway, if I were I'd be disinclined to give a better deal than the bank. It seems like a fairly risky loan; your money is guaranteed by a property which probably can't be sold for its construction cost and some shares in a business which may or may not go broke.

OTOH if the building is made to last, it will retain its value over time in a way that a prefab construction with a 20 year lifespan will not.

Whenever I go to a really old, really cool building, I think, “This building was built by men with chisels and hammers. How come the modern world, with all its power tools and advanced materials, can’t build such cool stuff?” The answer is “Banks won’t let you.”

That's a fantastic opening sentence if ever there was one.

If you wanna build a really cool building out of stone, save up your money until you have enough to build it with cash. That's what the men who built those cool old buildings did.

It also helps if you can wait until a period of enormous wealth inequality so that skilled labor is basically free.

Wait?

Thats what Dubai and Abu Dhabi did.

Waited for the slave labour to arrive

Give it a year or so, if the Govt and Fed can't stave off deflation anymore, will be perfect timing then.

I don't have data, but I suspect that labor costs these days are lower than they were back then due to a greater use of machinery. e.g., a foundation trench that would have taken a dozen men a week to dig with pickaxes, shovels and wheelbarrows can be done with one guy and a BobCat in a day.

Don't forget that technology offers massive leverage in construction.

Or they announced a special sale on indulgences.

Doesn't Groupon sell those now?

I saw some online during a Woot-off, between LED toenail clippers and the 'bag of crap'.

That was either one of the more hilarious comments I've read on HN, or I'm too drunk to know any better. Either way, have an upboat.

If you're talking about centuries old buildings, wealth back then was usually accumulated by way of your family passing along wealth, your inclusion in the favored aristocratic class of the era, or through businesses built on slavery.

I think they mostly depended on:

1) extremely cheap to free labor.

2) community effort. Everybody contributed to important buildings. Private homes would be built by the entire family, and possibly neighbors too.

I immediately thought of this building I see frequently in Orlando: http://www.ferran-services.com/images/building_head.jpg

Off-topic but 'The Affair of the Oaks' came to mind when you mentioned old school construction

http://web.archive.org/web/20031121174515/http://www.new.ox....

http://beebo.org/smackerels/new-college.html

I looked into having a small stone wall built a few years ago. It would have cost more than my house.

I find it fascinating that after all the progress of the millennia, skillfully stacking stone is still one of the most costly things men can do.

It gets more costly over time. There's not much that can be done to increase the efficiency of building a stone wall, except for prefab when it's possible. All other goods become cheaper to produce so the stone mason becomes more and more expensive in comparison. At least to some degree, the same principle applies to education and health care.

I find it fascinating that the result of this effect is that it's unlikely to be able to build a high quality brick house ever again. Most brick houses today are just wood frames with prefab brick cladding. The brick row house tenements of 1910 are now the million dollar condos of 2010.

Well except that it isn't true. As many have remarked, those things weren't funded in the past by banks, but by kings or similar autocratic rulers. Secondly, many people chipped in for free or almost free for religious reasons. Thirdly, ornate buildings are simply out of style, that's why they're not being build so often any more. Fourthly, any modern sky scraper is technologically much more advanced than those old ones (who just took a long time because of all the details), and in that sense I'd argue just as 'cool' as the old ones. And lastly, intricate ornate buildings are still being build, even if only few and between - e.g. the Sagrada Familia.

Whenever I go to a really old, really cool building, I think, "This building was built by men with chisels and hammers. How come the modern world, with all its power tools and advanced materials, can’t build such cool stuff?" The answer is "Banks won’t let you."

A bit of literary trivia: This is exactly the insight that lies behind one of Ezra Pound's most famous poems, "Canto XLV":

http://emsh.calarts.edu/alumni/bkeresey/

(Note that I don't intend to suggest any deeper comparison to Pound. For him, the idea was an insidious one, leading him on a dark path that would take him from Fascist Italy to a psychiatric institution for the criminally insane in Washington, D.C.)

One reason the banks are going to be wary is that construction projects are even more prone to cost and time overruns than software development projects are. Thus they expect that the requested loan won't be the last, and if the company doesn't have resources for it then things could go badly south.

Plus there is the fact that if things collapse half-way through you've got a company which could be hard to get value out of, and a piece of land which probably has the start to a foundation that will only be a PITA for whatever anyone else wants to do with said land.

For some reason, I don't think that's the issue is here. They don't have much credit history - seems to me that they have bootstrapped up until now - doing everything from profits and retained earnings.

`Harsh penalties for prepayment in the first five years` that shows that the banks are concerned that they have been debt-free or low debt (i.e. there is no money in providing the loan, because they will likely pay it back quickly).

The bottom line is that the banks don't think they will make much, if any, money on it.

Construction loans are usually done as a line of credit which is extended in tranches based on progress. Banks have people who are experienced in construction (and hence are able to judge risk based on cost estimates).

I have a feeling that he would be offered similar terms if he was purchasing a building outright. I know of somebody who recently applied for a mortgage on a ~$2M property, and the only bank that offered the loan to him also requested a 50% deposit.

One of the comments made me laugh:

"Dear Aaron, If I had it, I’d give it to you! Mom"

> Some folks have asked about smaller loans. This is would be great.

When you're asking for large sums of money and very non-trivial support of others, it's probably a good idea to be extra careful with your typing. No offense.

edit: I don't mean to nit-pick, it's just good to put your very best foot forth on these kind of requests!

That's obvious.

As a recovering banker I can tell you that banks a weary of lending on these Taj Mahal type projects because in the case of a foreclosure all that extra work to make the building look nice doesn't easily translate into rents high enough to justify the cost. Also, keep in mind most bankers have no clue how technology companies operate. Another reason why this might be hard for you is because virtually every commercial bank is getting hosed on commercial real estate and many have exceeded the regulatory limit on real estate lending, so the underwriting is much tighter.

Poor societies can't afford the luxury of throwaway architecture. With the cheap prefab construction today, you're lucky if your commercial building lasts until the mortgage is paid off. By then you'll want to rip it down and reconfigure it to the new retail hotness anyway - witness the number of '80s-era strip-malls currently getting rebuilt into big-box plazas.

There is a new site up by the guys/girls who created kiva.org: https://www.profounder.com/

I think you would be a good fit for it.

Kickstarter is another similar way to get funding- although $5 million is asking a lot.

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