Types of Promoter Loans Explained

Financing is an essential component for property developers seeking to carry out construction or refurbishment projects. Developer loans are a financial tool that can be indispensable for overcoming financial obstacles and making a project a reality. Here we explore the types of developer loans, their characteristics and how to choose the right one for your needs.

What are Promoter Loans?

Developer finance is a form of financing that allows real estate developers to obtain the necessary resources to develop their projects. This type of loan can be essential in various situations, such as when traditional banks do not offer the necessary support, during economic crises, to complete projects that have been stalled due to a lack of liquidity, or to start new projects without the necessary resources.

Types of Loans for Developers

1. Loans for the Purchase of Finalist Land

These loans are intended to acquire land that has already reached a legal stage of urban development and is ready to be built on. The purchase of finalist land is crucial for developers seeking to secure a solid foundation on which to build.

Characteristics:

• Legal Development Phase: The land is now legally ready for construction.
• Flexibility: They can cover up to a maximum of 50% of the cost of the land.
• Agility: Faster approval process compared to traditional financing.

2. Construction, Rehabilitation and/or Refurbishment Loans

This type of loan focuses on financing the construction of new projects, as well as the rehabilitation or refurbishment of existing properties. It is ideal for projects that require significant investment in construction from scratch or structural and aesthetic improvements.

Characteristics:

• Full Coverage: You can finance up to 100% of the work.
• Disbursements by Phases: Funds are disbursed according to the progress of the work, generally based on work certifications.
• Interest Flexibility: Payment of interest only on disbursed amounts and grace period during the construction phase.

How Do Promoter Loans Work?

The process of applying for a developer loan through alternative financing, such as that offered by Dexter Global Finance, is simple and straightforward. The general steps are outlined here:

1. Initial Application: Complete a form on the website.
2. Personal Advisor: An advisor will contact you and guide you through the whole process.
3. Sending Documentation: Send the required documentation confidentially.
4. Feasibility Study: The company will analyse the feasibility of the project.
5. Approval and Disbursement: If the study is favourable, the loan is approved and disbursements begin.

Advantages of Private Finance Developer Loans

Privately financed developer loans offer several advantages over traditional bank loans:

• No Advance Fees: No initial outlay of costs is required.
• No Presence in CIRBE: Not reported in the Bank of Spain's risk register.
• Flexibility: No linked products and no compliance obligations.
• Lack during the work: Grace period on interest payments during the construction phase.
• No Penalty for Early Cancellation: Flexibility to repay the loan without additional charges.
• Disbursements for Work Certifications: Funds released as construction progresses.

Which Promoter Loan is Right for You?

Choosing the right developer loan depends on several factors including the stage of the project, the amount of capital needed, and the specific terms of the loan. Here are some aspects to consider:

1. Project Stage

• Start of the project: If you are starting from scratch and need to acquire land, a loan for the purchase of finalist land may be the ideal option.
• Construction or Rehabilitation Phase: If your project already has land and needs financing for construction or renovation, a construction, rehabilitation and/or renovation loan will be more appropriate.

2. Loan Amount

Assess how much financing you need. Developer loans can vary significantly in amount, from €1,000,000 to €150,000,000. Make sure you apply for an amount that covers all the needs of the project without exceeding your repayment capacity.

3. Loan Conditions

• Duration: Consider the duration of the loan. Some projects may require long-term financing, while others may benefit from a shorter term.
• Flexibility: Look for conditions that offer flexibility in terms of disbursements, interest payments, and early repayment.
• Guarantees and sureties: Although a personal guarantee is not always necessary, a mortgage guarantee for the project is a common requirement.

4. Lender's Reputation and Experience

Choose an entity with experience and a good reputation in the developer finance sector. Companies such as Dexter Global Finance offer a proven track record of success in private financing for real estate projects.

5. Professional Advice

Having professional advice can make all the difference. An experienced advisor can help you present a sound business plan, improve your chances of approval and ensure that the loan selected is the right one for your situation.

Developer loans are a powerful tool to turn your real estate projects into reality. From purchasing land to financing construction and renovations, there are a variety of options to suit different needs and stages of the project. By considering factors such as the stage of the project, the amount needed, the terms of the loan and the reputation of the lender, you can choose the developer loan that best suits your needs. Private financing, such as that offered by Dexter Global Finance, provides flexibility, speed and security to ensure the success of your real estate project.

To get advice or make a comparison on developer loans, please visit the Dexter Global Finance on developer lending.