At Bagger Capital we are specialist in financing businesses in the construction sector and real state development, since these types of projects usually require significant amounts of funding.
For Bagger Capital it is not an impediment, since one of our characteristics is that we do not limit the amount of funding.
Currently, the traditional banks do not provide financing to developers because they have very demanding requirements and risk criteria for the real state developer and construction sector, which have been tightened since the COVID-19 crisis. In addition, they demand very high capital contributions of their own.
Banks, at a minimum, demand these requirements:
- Land already paid for
- Free of encumbrances
- The project
has been drawn up and has the license already granted and paid for
- At least 50% pre-sales
- It must be a developer that has good track record and a sound financial situation
If these requirements are not met, any access to bank financing will be denied. In addition, they have a very strict monitoring conditions for each of the stages of construction, which may cause them to stop a project for which they have already granted funding.
When banks deny funding, which with such strict financing requirements is usually very common, it is necessary to look for alternative financing to be able to finish the work, such as private financing.
One solution is the bridge loan with private capital. You may see the main advantages in our blog. A quick summary to argue the features are:
- Short financing duration; typically one to five years.
- Financing used to obtain the liquity neeeded to carry out a specific objective, such as hiring a construction company, paying for permits or paying for the land.
- Financing is granted according to the developer’s needs, focus on ensuring that the project may be carried out without incidents, even 100% of the investment can be financed if necessary, by providing additional guarantees.
- They have the mortgage guarantee of the acquired land or some other real state asset.