A complete Guide of Real Estate Financing Firm

What is a real estate financing firm and what does it do?

A real estate financing firm as the term suggests is an organization offering a plethora of financing solutions to Real Estate companies. Their unique approaches are designed to meet the financial needs across a real-estate project life-cycle, right from the inception till project closure. Such projects are capital intensive and each of the project phases, like deal sourcing, land acquisition, constructing, renovating, managing inventory require, meticulous planning and execution, which is what real estate financing firms excel at. Projects at nascent stages are very slippery and either require substantial collateral for loans or equity for funding. Once the project plan matures, a combination of loan and equity funding might fit right. Just like other Project Finances, loans for real estate projects too are obtained on the basis of future cash-flow and estimated operating expenditure. Whether the project would generate recurring revenue (commercial buildings like a hospital, School, hotel) also helps determine the span and structure of the funding.

Service of real estate financing firm:

Real Estate financing firm often need to wear many different hats to service their clients. Some roles are advisory whereas others are core financial solutions to arrange funds as per the specific requirements of each client. Let’s find out what type of services does a real estate financing firm provide.

• Land Acquisition Finance: For a new real estate project that needs to start from scratch, many issues need to be dealt with, which if left unattended, can disrupt the project, such as solving past legal, social, or political disputes. Before correct funding can be sourced, these issues are often dealt with by a Real estate Financing firm. Land Acquisition finance is fundamental to real estate projects being built ground up. The solitary purpose of this finance is to purchase a building site only and expert foresight of a real-estate financing firm is considered paramount for gauging the true value of the land.
• Pre-construction Finance: Even though construction may not have begun, that does not mean there aren’t any bills to pay. Pre-construction Finance caters to supporting developers before the influx of construction finance. This funding helps clear the preliminary tasks such as obtaining approvals and paperwork before construction can begin on the site. By offering this finance, a real-estate financing firm arranges continual cash flow and helps in the timely completion of the project. Since these loans are interim to the major chunk of the project, they are secured against tangibles, like alternate property as collateral.
• Construction Finance: This category of Real estate finance help builders start constructing commercial or residential premises. The funds can be utilized towards construction costs, paying suppliers, purchase of machinery, or adding to the working capital. These funds come in various forms of secured and unsecured loans against sales receivables. Construction finance comprises a large sum and hence the repayment conditions and tenor are generally kept flexible.