How to get finance for building projects in Spain?

Do you need Finance for your building project?

Planning a Building Project

If you are an investor or developer planning on building a project in Spain, you need to think about where the finance is coming from and make sure you are prepared in good time. We would also recommend bringing in a trusted development partner to help you understand and overcome the challenges of developing a project in Spain.

We are project developers in Spain who regularly work with companies throughout the development process, including ensuring they have access to funds, so we wanted to share our insights and advice.

Are you well prepared in advance?

Spanish banks are quite complex when it comes to attempting to gain their finance for projects. We recommend preparing well in advance, as the successful disbursements of loaned funds may still be many months away. They require a lot of documentation that may take considerable effort to source and prepare, therefore starting the ball rolling early is strongly advised.

What you need before receiving a loan from a Spanish bank

They will require:

  • An urban plot free of liens (legal claims against the property). You will need to have the title deeds, nota simple and an independent valuation. Please note, they select who they want to do the valuation, but you are required to pay for it.
  • An approved design that has gained a building licence from the Municipality. In order to get to this stage, you will have already paid at least 40% of the architect fees and 20% of the technical architect fees. The speed of obtaining building licences varies from region to region, but it’s best to expect at least 6 months to obtain them.
  • A constructor’s competitive bid that has been accepted and contracted with a watertight contract. Please note you must have put this out to tender in an open market bidding process and the contract needs to have been expertly negotiated.
  • A technical team with deposit of fees paid and ready to undertake invigilating of the construction works.
  • Developers are required to submit a detailed business plan and proof that 60% of the available units are already reserved as sold.
  • All insurances must be active and paid and where the bank will be named as prime beneficiary.

Your level of knowlegde

Clearly, you require a certain level of knowledge, skills, time and patience to make it happen. Foreign buyers and developers also have the added issue of language and cultural barriers, which need to be overcome and we strongly recommend bringing in experts from the earliest stage.

In the case of developers, the Bank will also need to be assured that the Company is sufficiently capitalised and that they have a record of having successfully developed in Spain before. In many cases, although some developers are experts overseas in their home countries, they don’t have a proven track record in Spain and this can cause them issues.

That is exactly where MDCI can come in! We can supplement the developer’s track record with our own. As contracted experts to the Client we act as their local “development department”- thereby offering a track record of over 100 projects worked and delivered to date. We have a strong reputation of delivering many under budget and all on time and have worked with many local banks and high-profile developments such as Marriott Marbella. This provides a level of additional guarantee to the Banks to help assuage any doubts. Indeed, in many occasions we actually handle the whole process of document gathering and application handling to obtain the finance for our clients. This removes stress and worry, and speeds up the process as much as possible.

Alternatives to obtaining finance from banks 

Alternative or Mezzanine Finance

Besides lending from the banks, you may have alternative finance or mezzanine finance. The initial requirements to obtain this are relatively minor compared to the banks, but the main disadvantage is that the rates charged are quite high. This means one has to calculate carefully the impact to cashflow and potential overall reduction in profitability.

They will charge around 2.5 times more than a bank but you would not have to have paid as much  “front up” of your own funds as with the bank. They will not require things such as confirmed sales of the product, which are themselves made on the back of obtaining the building licence. To get to this stage, you will have invested about 25% of the overall development budget before receiving finance.

Evidently, they will need a detailed analysis and business plan to see that the project is viable and will give them a certain rate of return. Knowing that a vastly experienced project manager such as MDCI is managing the process, provides them with a great level of assurance and confidence that the project will be a success and therefore improves your chances of securing the funds.

How we can help

MDCI works with developers and investors as their trusted partner. We work throughout the process to ensure everything runs smoothly and there are no barriers in your way to project success. We start with a strategic analysis to ensure you can invest with confidence. Then we offer project supervision and monitoring services or project management throughout the build, to ensure everything stays on track.

Our expert team will use all our years of experience to resolve all levels of project development difficulties and support you every step of the way.

Contact us to discuss your project.

MDCI – on budget, on time, every time!

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