One of the most frequent questions we get asked at EstateGuru concerns the reasons developers approach us for financing when most banks offer lower interest rates. Although EstateGuru works with the banks (most of our loans are repaid with bank loans), several distinctions make our financing model the perfect solution for new and established developers looking for fast, flexible loans. We asked some of the experts in our management team to help cover some of the main points.  

Accessibility

As the banks continue to grow more risk-averse and bound by complicated protocols, EstateGuru provides for those who might otherwise be left behind.

“It doesn’t matter if you’re bringing them the best project in the city”, says Arturas Konusevicius, our Country Head in Lithuania, “the bank is still going to ask you; how old is your company? If your company is less than three years old, then it’s ‘see ya later.’ ‘Come back when you’ve grown a little bit.’”

“And if you have been around for longer than three years, then they’ll ask about the balance sheet and the cash flow. You’ll need a long history, a good track record, and a stable cash flow, and how many entrepreneurs can satisfy all of these criteria, especially when they’re starting out? Not many.”

When established developers are struggling to meet increasingly stringent bank requirements, it’s virtually impossible for new ventures to get financed.

“And that’s where EstateGuru is bridging the gaps in financing. We allow those entrepreneurs to grow to a level where they can secure financing from more traditional sources.” 

EstateGuru does away with impossible requirements to deliver fast, flexible finance for new and established developers. 

Willingness

Supermodel Linda Evangelista once said that she wouldn’t get out of bed for less than $10 000. When it comes to loan amounts, most banks have a similar attitude. If the amount is too small, they’re not getting out of bed, never mind jumping into bed with you.

“For the bank, when the loan amount is less than two million, it’s of no interest to them,” says Arturas. “The time of their loan manager alone is worth more than the amount they stand to make from smaller deals. They don’t want to read hours of application for a one million loan when they could spend that time on a 20 million loan.”

While the banks tend to do business with long-established, cash-rich clientele, EstateGuru is willing to work on smaller projects, giving entrepreneurs the support they need to grow to a point where the banks start to get interested. 

“In Finland,” says Matti Vansén, our Country Head in Finland, “where the banking sector is traditionally strong and the people relatively conservative, even long-established developers can’t simply go to a bank and get financing anymore. This is due to the effect of European regulations, on the biggest banks, and local banks, who’ve had to drastically reduce their balance sheets, especially on the corporate side. 

“This means, sadly, that the only companies getting loans, the Triple-A Credit companies, are the ones who don’t really need them. And that’s an issue, a gap in financing. When it comes to supplying loans from around 300 000 to 10,000,000 Euros, you could say that EstateGuru is solving a market problem.”

Speed 

“Germany is synonymous with banking,” says Nicola Picone, our Country Head in Germany, “but as we’ve discussed, the banks are centuries-old institutions, bogged down in protocol and fifty-year-old checklists. This is problematic and unfair because you end up waiting months for your loan to be approved, and then you get a negative response. ”

EstateGuru offers financing without any unnecessary admin, red tape, or waiting periods. It’s fast and flexible, with no lines, endless forms, or hyper-conservative loan managers twiddling their thumbs and then turning you away. And there are no hidden fees or nasty surprises.  

“Yes, you pay more interest, but all the fees are upfront, there are no repayments before the contract ends, if that is what the borrower wants, and we can give them an answer in a couple of days. They’ll get the money in a couple of weeks,” says Nicola.

The process with EstateGuru is simple and quick. First, we determine the market value of the proposed collateral, then we assess the options for liquidation of the collateral, and then we offer terms and a timeline. If the offer is accepted, the funding is fast. 

Mihhail Onohhov, our Head of global sales, doesn’t think it’s fair to compare EstateGuru to the banks. “They’re different tools that you can use at different times,” he says.

“In life, there’s always a trade-off. You win something, you lose something. In investment its risk and return. In our case, it’s speed and interest rate. If you want something fast, you pay a little extra.

“But developers don’t see it as an either/or question when it comes to us and the banks. As I said, they are both instruments that can be used at different times. In fact, you should be able to use both of those instruments because you don’t always know when you’ll need one or the other. Different circumstances require different solutions.”

“If I may add,” says Matti, “the way I see it, we are risk dividers, in conjunction with the bank. So for example, banks are turning down loans for construction projects but they want to finance apartments once they’re built. So in Finland, it’s common for the banks to pay our loans back. So we finance the construction, and then the bank finances the buyer. I see that as risk division and diversification in the market.”

Support

“When it comes to EstateGuru and the banks, I think that one cannot live without the other,” says Aleksandrs Mežapuķe, our Country Head in Latvia, “so our borrowers and developers are actually supplying the market with the properties that the banks are financing, by providing mortgage loans to end-buyers.”

“And one of the things our borrowers appreciate is the expertise we have in the team. EstateGuru was founded by developers and most of the team has experience in real estate, brokerage, sales, construction, and evaluation. The risk department mostly comes from a banking background. So when we speak to the borrower, we understand their needs, and we can provide a fast and suitable solution.”

Whereas bank loan managers may be experts in money management, they seldom know much about property or development. EstateGuru specializes in these areas, ensuring that our clients’ needs are not only understood but anticipated.

“Banks are not the bad guys,” adds Arturas, “they are partners, but in order to work with them, you need to get to a certain level. For developers, if they want to work with the bank, they need to secure special manpower, provide special procedures, and the money movement is completely different.” 

“I’ve been in crowdfunding for seven years now,” says Matti, “and I’ve seen the emotional paradigm shifting towards acceptance of alternative financing.”

“Alternative financing,” says Nicola, “isn’t just the future, it’s the present.”

If you’d like to hear more from our country managers, watch our webinar here.