Are you looking for project funding? We know when to choose banking and when non-bank financing
Are you considering financing a business project, be it construction, reconstruction or perhaps the purchase of an investment property? If you are not sure whether to apply for funding from a bank or a non-bank provider, read this article. We show you when it pays to apply for financing with Investown and when in a bank.
The answer to this question is not always simple or black and white, and depends on many factors. For example, the amount of the loan, the stage of the project and how quickly you need the money.
When to apply for financing in a bank
Banks are a traditional choice for larger firms that have a stable history, equity and a project in the advanced construction phase. It is also ideal for subjects that do not press time.
Banks, like non-bank players, build on a particular banker's direct relationship with a client. But remember that despite good relationships, you the bank usually does not lend, for example, for the speculative purchase of land without a building permit. He considers this too risky and, as a rule, waits until the project reaches a certain stage. You also need to document equity information, audited statements and go through an internal rating assessment.
Documentation and conditions
Banks have no more stringent documentation requirements than alternative providers. You must prove:
- balance sheets,
- the budget of the project,
- current estimate of the property,
- purchase contracts.
In addition to LTV (loan to value), the bank has LTC (loan to cost) metrics, which can be limiting when drawing up a loan. The LTC metric directly shows how much of a project's cost is financed by a loan, that is, what amount of equity the developer puts into the project.
There are also strict internal processes in place for banks. One of the fundamental conditions that banks impose on themselves is the pre-sale of the property in question. Clients are required that the property for the development of which they take out a loan must be pre-sold from 20 to 30%.
And last but not least, the funds from the sales of finished units must be deposited in a reserve account, and the developer cannot dispose of them further.
Early repayment and fees
Early repayment at banks tends to be associated with fees. The bank charges a resource reservation fee. Another important item is the retention rate of 10 to 15%. There is also a fee for not completing the framework.
When to apply for financing in Investown
Alternative funding methods are on the rise precisely because they fill gaps that banks often fail to cover. It is suitable for small and medium-sized developers who want to finance a specific project from the beginning.
Alternative funding providers, such as Investown, can finance the full start of a project. That is, even in cases where there is nothing more than land and a business plan available. For example, buying unnetted land without a building permit or refinancing a construction in progress.
We build everything on a direct relationship with a specific person who is available to you for the duration of the contract. Thanks to this, we are able to be very flexible and responsive to the current situation.
What are the conditions for applying with Investown?
The applicant must have:
- ID or company
- Business plan
- Pledged property that can also be subject to financing
- Standard documentation
- The amount of capital is assessed individually according to market value vs. LTV
“We do not just deal with the history of the company, but we look at the economic logic of the project. The client has a sales representative at all times, with whom he handles all the steps related to financing and thus has the confidence that he always communicates with a specific person who knows his project,” explains Alan Pock, CEO of Investown.
Documentation and conditions
The required documentation is essentially identical to that required by the bank. You must prove the balance sheets, the project budget, the current estimate of the property or the purchase contract. At Investown, however, we consider each case individually. This can speed up not only the approval, but also the adjustment of the loan to the current situation at the construction site.
Early repayment and fees
For some non-bank providers, such as Investown, early repayment or default on a loan is free of penalty.
Entrepreneur clients pay only two fees:
- Loan Granting Fee
- Interest rate
And in case of late payment of interest, the contractual penalty is calculated according to price list.
Check your funding provider
Whichever route you decide on, always check to see if the credit provider has license of the Czech National Bank and subject to her supervision. Not every non-bank entity has to operate under the same rules. In a rapidly evolving market, credibility is key.
How to apply for financing in Investown without obligation?
You can apply for financing at Investown online without obligation. No in-person meetings are needed. Just fill out the online form and we will get back to you immediately and explain everything.
TIP: Read 3 reasons why it's worth asking for financing of the project with Investown.
