Private credit fills global lending gap for traditional banks

As regulatory pressures have tightened and traditional banks have become more risk averse, private credit has emerged as a vital component of the global financial ecosystem. In mature markets such as North America and Europe, it is already an attractive alternative to traditional financing.

The global lending gap has been driven by a number of factors, including increased regulatory requirements under regulatory frameworks such as Basel III, regulations which, according to experts, "impose strict capital reserve requirements, limiting banks' ability to lend to businesses, and as a result, traditional banks are withdrawing from many market sectors, leaving businesses, especially small and medium-sized ones, underserved"..

It is precisely private credit that is effectively stepping in to fill this gap. "by offering tailor-made financing solutions, addressing the unmet needs of borrowers and reshaping the global capital landscape"..

Off-bank financing, such as that made available through DEXTERThe new loan structure, which is based on a flexible, immediacy, borrower-centred approach, offering fast approvals and more customised financing structures, is a key element of the loan structure. Loan approval times are often reduced, well below those of most banks.

The Risk Analysis Department of DEXTERIn this regard, its director, José Enrique Chasserot, points out that "One of the things that clients value most is our in-depth knowledge of the local area and the real estate sector in particular, as most of the loans are backed by a mortgage guarantee.He adds that "We are not just filling a gap left by banking, we are helping to support economic growth and empowering businesses to pursue ambitious, growing goals..

            Private loans are becoming increasingly well understood by the business class, and have become popular as a formula despite the fact that they are still a relatively young (although enormously thriving) sector in Spain.

            The downward trend in bank financing for construction and real estate development is due to a combination of factors, such as increased regulatory requirements and a risk aversion on the part of banks after the crisis almost two decades ago. Especially when it comes to providing resources to small and medium-sized developers: conditions will remain restrictive.

            In fact, since the bursting of the real estate bubble in 2008, the construction and real estate development sector has experienced a significant reduction in bank financing, with a fall of close to 37% between 2015 and 2022. Banks no longer finance land purchases, and require developers to have a high percentage of pre-sales (minimum 50% and 60%) before accessing financing.

            From DEXTERits president, Yeidy Ramírez, points out that "Alternative financing has been and continues to be able to transform these barriers into opportunities, into solutions, into business niches; and thus, we are making the economy grow and avoiding the paralysis or slowdown of a sector in which progress cannot be made exclusively with equity, with the entrepreneur's own resources".concludes Ramirez.

The measure, which eliminates the granting of residency to foreigners who invest more than 500,000 euros in real estate, threatens to curb the arrival of large investors and is a direct blow to the economy of especially coastal cities, and in the Mediterranean (including the Balearic Islands), where this type of buyer has been key.

Sources in the sector point out that the problem is not that they are clients of half a million, but clients of four, five and even ten million euros. They are investors who not only buy properties, but also generate employment, boost the economy and attract more wealth.

And the fact is that the data support this. As the vice-president of DEXTERAlfonso Merlos, "In recent years, the Golden Visa has made it possible to attract investors with high purchasing power from half the world, not only Europeans but also from North and South America, to Madrid, Andalusia and the Balearic Islands, but also to other enclaves such as the Valencian Community or the Canary Islands themselves. The door is now open to these buyers to explore other Mediterranean markets, such as Portugal, and stop contributing their wealth to that of Spain"..

Over the last five years, DEXTER has led the alternative private equity financing sector, to a large extent, serving the needs of foreign developers and builders, but also, to a large extent, providing liquidity to international entrepreneurs who have opted for one of the most sought-after products: the bridge loan with mortgage guarantee.