Private Money Lenders for Real Estate
3 years ago
Real Estate developments of any type or size are capital intensive, fact. Funds required for executing real estate projects from start to finish are not available 100% of the time.
We have in previously, discussed the various options through which individuals/organisations can finance their dreams of property ownership/development. Mortgages, Bank loans and an array of real estate joint venture arrangements are some of the options. You can check them out on our Blog
All these options have their pros and cons, and the process of applying for and accessing some of them can be cumbersome. A lot of people are not considered unqualified to access bank loans and the joint venture developers can be difficult to find. For this reason, a lot of people search out alternative sources of finance to patch-up their financial deficiency.
One of such alternatives are private money lenders who could be individuals or corporate entities licensed by enabling laws to carry out the business of lending money to borrowers. In simple terms, they render non-bank financial services.
We reached out to some private lenders with the intention of sharing our findings. The bad news is that many private money lenders don’t offer loans to borrowers who intend to develop real property. The good news is that some of them do, but getting information was surprisingly hard. You would expect these lenders would welcome you with wide arms, when asking about their interest rate, minimum and maximum loan obtainable or loan tenor. That did not happen in most cases.
Here are some companies we came across.
1. Crownrise Finance Plc
2. Core Capital Finance Ltd.
3. First Marina Trust ltd.
4. CFS Financial Services
5. Rosabond Financial Services
6. Finance and Commercial Services Ltd.
7. Jukes Consults Ltd.
8. Dada International Resources Ltd.
We can’t talk about all these companies, so we decided to look at 3 companies that had what we consider interesting offers.
Jukes Consults Ltd is not a lender but is a facilitating, advisory, brokerage and finance consulting firm based in Lagos, Nigeria with direct access to offshore funds via their relationships with 12 international lenders, monetizers and financiers spanning all the continents of the world. To get funding from them, here are some of the options.
1. If you can provide collateral in the form of quoted shares listed on the Nigerian Stock Exchange, or any major stock exchange in the world, they can loan a minimum of N180 million at Interest rates of between 6%-8% per annum. Loan tenor is up to eight years.
2. They can also arrange funding if a prospective applicant can make equity contribution or investments of between 2%-10% of project amount. This is particularly targeted at construction, mining and real estate development projects. For your equity investment, Jukes consults financier will provide a guarantee to protect & secure your equity investment. Loan tenor can be 5-8 years and interest rate is between 3%-5% per annum.
3. They can also provide funding in Naira at 5% per annum. Loan tenor is five years with eighteen months moratorium. Collateral requirement is Bank Guarantee from a good rated commercial bank in Nigeria
These are just some of their loan offers that speak specifically to real estate development.
They are also financial services consultants that help individuals and companies secure funding for projects. They get funds from foreign investors, but they have high minimum loan amount of Ten Million Dollars or Four and a half Billion Naira. Now that is a lot of cash which might be more than the requirement of the average property developer.
We still approached them requesting for a loan of N400 million for development 10,000sqm of land on the Lekki axis into an estate. Though this was less than the minimum amount the finance, they had a way out for us. If we were able to provide a local Bank guarantee (BG) to the tune of Five Billion Naira, they could get and investor to monetise 30% of the BG. This means we would get 25% of the 5 Billion and 5% will be for commissions.
Still a tall order.....and the terms.....well we will let you make your own conclusions. Dada international Ltd clearly is for the big players. If you think you have the muscle, you might want to independently engage and investigate them to see if they are worthwhile.
This company is incorporated to do business in Nigeria as a non- bank financial institution. They are licensed by the Central Bank of Nigeria to provide financial services. They offer project finance services for real estate, and according to the information provided have been in this line of business since year 2000. Projects they have funded in the past range from residential complexes in different parts of Nigeria, school developments, office building, conference training institutes and event centres.
Sounds exactly like what a real estate developer will need.
What would it take to get funding from them?
Here is what we got from our enquiries.
Finance and Commercial Services Ltd fund real estate projects with a loan tenure of between 12- 18 months. Loan amount which a borrower can access will depend on the peculiarities of the project. The most important factor though is that the borrower is able to show how the loan will be repaid. In other words, proof of steady income flow for the loan repayment.
Collateral will be required. This could be a property different from the one being developed. Deposits from off- takers are an advantage, but payments must be made directly to FCSL. Interest rate on the loan is 5% monthly.
We have never worked with any of these companies, but you could engage them, find out more and decide if they can help solve your funding requirements. To get their details, just sent an email to email@example.com and we would gladly make the details available