More and more projects depend on bank financing — and sometimes proven financing is a contractual condition of the land deal itself. A bank, however, does not finance intentions; it finances a managed, documented and controllable project. Here is what the process looks like from both sides of the table.
What the bank wants. Behind the differences between institutions stands one and the same question: is the risk controllable. The answer is sought in a handful of documents and mechanisms: a financial and economic model with scenarios and sensitivities; proven own participation; for residential projects — the pace of pre-sales; a clear budget and a contract with the contractor; and a mechanism for controlling disbursements — the bank wants certainty that every lev goes into the construction. The statutory acts under the Spatial Development Act (the building permit, the Act 14 protocol, the permit to use) often double as credit milestones: drawdowns and conditions are tied to them.
How the process is managed. The road has eight steps: a project memorandum — the facts, the model, the risks, the scenarios, in the language of the credit committee; a comparative analysis of several banks' terms; negotiations with the finalists — interest, fees, collateral, covenants; assembling the signing package; establishing the security — mortgage, special pledges, registrations; managing drawdowns during construction — requests, documentation, covenant compliance; partial releases on sales of individual units — so the buyer receives clean title; and the final release after repayment.
Where the process most often breaks. Three places: a memorandum written out of enthusiasm instead of numbers; covenants accepted without judging whether they are achievable within the project’s real schedule; and a lack of discipline in drawdowns — late documents, mismatches between reported and actual progress. All three are preventable through management.
One thing we always say upfront: the final financing decision belongs to the bank. Our job is for the process up to that decision to be run optimally — and after it, for every condition to be met so that the financing works for the project, not against it.