Private equity on an upward ramp
ALFONSO MERLOS
Vice President of DEXTER GLOBAL FINANCE
In the free market, it is not enough for the competition to make mistakes or leave open spaces for the development of one's own business. It is necessary to know how to take advantage of these gaps and optimise them in order to, de facto, compete, progress and grow.
The times in which alternative financing with private capital was a mere service road on the great motorway of operations via savings banks and the traditional banking system, in an almost monopolistic, undisputed and unchallenged manner, are surely a thing of the past for entrepreneurs.
Today, in a trend that has continued to consolidate, such alternative financing is no longer a last resort or even a solution sought almost in desperation when all the conduits through which capital can circulate are blocked or almost empty (the effect is the same).
Entrepreneurs are increasingly designing their own financial scheme for their companies and their projects, precisely by defining when, how and why, in each of the stages of the initiatives they intend to carry out, they resort to their own equity, tempt investment partners, turn to alternative financing or opt for bank financing: this is a pool that is increasingly being drawn up naturally, always in pursuit of business viability and, ultimately, margins and profit.
This ramp of total ascent of off-bank financing - a trend that is set not only to consolidate but to become more pronounced in 2024 - is not the result of chance, nor is it a one-day flower, nor can it be considered a sudden phenomenon, something comparable to a fad that will soon disappear or become marginal. There have been several causes, driven by the hand of financial managers and intermediaries, which have generated this situation.
The greater professionalism of those who operate in the field of private financing, proximity, transparency, security... are all elements that are contributing greatly to the expansion of this access route to credit, when it is demanded in small tickets -under 500,000 euros- or when the needs are large, exceeding 10 or 20 million euros, for example, for the development of ambitious residential developments anywhere in our country: north or south, east or west, inland or coast, consolidated capitals or new urbanisations.
Here again lies another of the axes and another of the variables that is moving in the right direction, widening the range of opportunities for entrepreneurs. Private debt in Spain is no longer viewed primarily from the perspective of the real estate sector - be it office, commercial, hotel, logistics... - but the focus has broadened to include firms that, in almost any sector of the economy, seek to knock and open this door to continue their growth, usually with a mortgage guarantee rather than a corporate guarantee, for the sake of speed.
The professionalisation of alternative financing is serving, at the same time, to bring out even more strongly the absolutely distinctive, differentiating features that make it an attractive product for entrepreneurs. The immediacy and speed, the agility and sense of urgency to 'set up operations' and proceed to their pre-approval remain undeniable competitive advantages over what other classic financial operators are able to offer.
Indeed, time is money. And there are countless occasions in which it is not only advisable to sacrifice financial costs in order to close a business on the best terms, but that this sacrifice is the only option for the entrepreneur. But even this reading, which has traditionally been difficult to understand in our country, is today much more understandable and acceptable in the generality of our business fabric.
Thus, the financial cost, like so many others - personnel, raw materials, administrative costs - has ceased to have the stigma of being the only one under close scrutiny and has become just one more. In other words, the profitability or interest that the lender demands from the borrower has ceased to be a kind of obsession for the latter, thus preventing it from being blocked.
The old business genius, Warren Buffet, maintains that "price is what you pay while value is what you get". In this sense, private equity will continue to prolong its golden moment in Spain, to a large extent, as long as those who engage in financial management and intermediation do so in full awareness that the money paid for such necessary services must inevitably be matched by the generation of added value, of real value, of value that drives and stimulates a business fabric that brings together clients who are ever more prepared and demanding.
Private equity, in the midst of an upward trend
ALFONSO MERLOS
Vice President of DEXTER GLOBAL FINANCE
In the free market, it is not enough for the competition to make mistakes or leave open spaces for the development of one's own business. It is necessary to know how to take advantage of these gaps and optimise them in order to, de facto, compete, progress and grow.
Certainly in a celebrated way for entrepreneurs, the times in which alternative financing with private capital was a mere service road of the great highway along which the operations via savings banks and the traditional banking system, almost in a monopolistic, unquestionable and undisputed scheme, were passing by, are long gone.
Today, in a trend that has continued to consolidate, this alternative financing is no longer a last resort or even a solution that is sought almost in desperation when all the conduits through which capital can circulate are obstructed or almost empty (the effect is the same).
The entrepreneur, more and more every day, designs his own financial scheme for his company and for his projects, precisely delimiting when, how and why, in each of the stages of the initiatives he intends to carry out, he resorts to his own equity, tempts investment partners, resorts to alternative financing or opts for bank financing: this is a pool that is drawn, increasingly, with total naturalness and always pursuing business viability and, ultimately, margins and profit.
This ramp of total ascent of off-bank financing - a trend destined not only to consolidate but to become more pronounced in 2024 - is not the result of chance, nor is it a one-day flower, nor can it be considered a sudden phenomenon, something comparable to a fad that will soon disappear or become marginal. There have been several causes, driven by the hand of managers and financial intermediaries, that have generated this situation.
The greater professionalism of those who operate in the field of private financing, proximity, transparency, security... are all elements that are contributing greatly to the expansion of this route of access to credit, when it is demanded in small tickets -under 500,000 euros- or when the needs are large, exceeding 10 or 20 million euros, for example, for the development of ambitious residential developments anywhere in our country: north or south, east or west, interior or coast, consolidated capitals or new urbanizations.
Here again lies another of the axes and another of the variables that is moving in the right direction, expanding the range of opportunities for entrepreneurs. Private debt in Spain is no longer only seen from the point of view of the real estate sector - be it office, commercial, hotel, logistics... - but the focus has broadened to include firms in almost any sector of the economy that seek to knock and open this door to continue their growth, usually with a mortgage guarantee rather than a corporate guarantee, for the sake of speed.
The professionalization of alternative financing is serving, at the same time, to make it shine even more brightly with absolutely distinctive, differentiating notes that make it an attractive product for the entrepreneur. The immediacy and speed, the agility and sense of urgency to 'set up the operations' and proceed to their pre-approval remain undeniable competitive advantages compared to what other classic financial operators are able to offer.
Indeed, time is money. And there are countless occasions when it is not only advisable to sacrifice financial costs in order to close a deal on the best terms, but also when this sacrifice is the only option for the entrepreneur. But even this reading, which has traditionally been difficult to understand in our country, is today much more understandable and acceptable in the generality of our business fabric.
Thus, financial costs, like so many others - personnel, raw materials, administrative costs - have ceased to have the stigma of being the only cost under close scrutiny, and have become just one more. In other words, the profitability or interest that the lender demands from the borrower has ceased to be a kind of obsession for the latter, thus avoiding its blockage.
The old business genius, Warren Buffet, maintains that "price is what you pay while value is what you get". In this sense, private equity will continue to prolong its golden moment in Spain, to a large extent, as long as those who engage in financial management and intermediation do so with full awareness that the money paid for such necessary services will have to be unfailingly matched by the generation of added value, real value, value that drives and stimulates a business fabric that brings together clients who are more prepared and demanding every day.
