What are the keys to the growth of alternative finance?
In economics, trends are what matter, and the financial world is no exception. At the height of the alternative financing boom, the experts' conclusion is not only that this is not just a fad of five years or a decade, but that there is no expectation of a return to the traditional model of bank financing, which accounts for practically all demand. Neither in Spain nor in Europe.
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.
