The big advantage of non-bank financing

If in the past the financing of real estate projects by the bank was considered the only option, today the situation has changed and more and more entrepreneurs are turning to non-banking entities. These bodies are able to operate more efficiently and provide the financing more quickly - without affecting the quality of the financing.

Construction in Beersheba (Photo: Reuven Castro)

Ramot Beer Sheva neighborhood (Photo: Reuven Castro)

In the last decade, as everyone in the real estate sector is aware, the real estate finance sector has undergone significant change. If in the past the main sources of financing available to the developers were the banks, the market is now much wider and wider, offering the entrepreneurs a variety of sources of financing in the form of dozens of non-bank financing bodies operating in the country. A situation that only a few years ago was considered imaginative, has become the reality in the industry, and today every entrepreneur knows that financing is a much simpler and more flexible process than before.

What is the major change following the introduction of non-banking finance bodies into the game? "In the past, when entrepreneurs were working exclusively with banks, they had almost no access to institutional money," explains Guy Rosen, co-CEO of Lider Top Capital's Lider Top Capital at Capital Markets, "while today, the leading non-bank entities are successful To make entrepreneurs accessible to institutional money, which has many advantages, both because of low capital prices and the unlimited possibilities for financing projects on all financial levels. "

The change that Rosen is talking about, which led to the entry of non-banking finance bodies into the picture and to become significant players in the real estate financing industry, also necessitated a significant change of perception, which was growing with the experience of entrepreneurs in the field. More legitimate, and the bank - thanks to its professionalism, supervisory ability, control and financial management - is a more successful gatekeeper for the entrepreneur, today we are witnessing a different situation: the non-bank finance bodies give the same level of professionalism, with a small twist - a high level of efficiency and flexibility More".

Alternatively: the way to speed up projects in projects without the consent of all owners

Approved financing request within days - opening an account within a month

Guy Rosen, Top Capital (Photo: PR)

One example of how the effectiveness of the non-banking financing bodies is expressed is the speed of obtaining the approval for funding for the project and, subsequently, the shortening of the time to start the actual project escort. "A significant reduction in the amount of time can be observed from the day the project is presented in the financing body to the day of the escort," Rosen notes. "If, in the past, at the request of funding from the bank, an entrepreneur would have waited many weeks and sometimes even more than two months for the bank's discussion with a credit committee regarding his project, then an application from an outside bank would be approved within a few days.

"In addition, if, after obtaining the approval, the developer requesting bank financing will have to wait for another two or three months to open the escrow account, vis-à-vis an outside bank this procedure - which requires a certain legal procedure and different underwriting procedures - may take less than a month."

True, with regard to the big and strong banks, an out-of-bank body is a much smaller body, and that was the beginning of the stated concern of many entrepreneurs. But according to Rosen, it is precisely the relatively small size of these entities that allows them to be more efficient and flexible, to think in a business way - and to respond more easily to the demands and requests of the entrepreneur.

"The non-bank bodies are 'small' and 'lean', so their capabilities and flexibility are also much higher," says Rosen. "Among other things, this flexibility allows the non-bank financing bodies to also fund several projects at the same time. Unlike the bank, an outside bank is a body that can mark the entrepreneur as a strategic customer and give it an overall envelope that allows the entrepreneur to invest less and less equity in each of the projects. His next. How is this done? The non-banking body enslaves surplus from existing projects under its management, thus actually increasing its collateral, enabling it to reduce the equity requirements of the entrepreneur. "

However, Rosen emphasizes that the flexibility and responsiveness of the non-banking entities for the entrepreneur's needs does not come at the expense of the quality of financing and financial supervision. "The supervision and financial management procedures of the non-banking bodies are completely identical to the usual supervisory and management procedures in the banks within closed escrow accounts, so that despite the efficiency and speed, the quality of the financing and the quality of supervision are not impaired."

The result: healthy competition in the real estate finance industry

The entry of non-banking entities into the real estate playground has undoubtedly led to increased competition in the industry, which, like any business competition, has a major role to play in improving efficiency and service and reducing prices.

"It's no secret that initiation procedures in Israel are very cumbersome, almost without exception," says Rosen. "I am talking, among other things, about the planning of the BCA, the building permit process, the construction process itself; Even producing Form 4 for a complete building involves a bureaucratic and complicated process in itself. Therefore, entrepreneurs are constantly looking for solutions that will ease them and simplify their engagement with the project. The financing process is certainly not a straightforward process, but the non-banking finance bodies strive to make it a more positive, easier and more efficient experience. "

According to Rosen, the change in trend is also reflected in the high windows - the encouragement and support of the state, and the government policy it is taking. "Every entrepreneur knows today that getting an offer from an ATM or financing a project with an ATM is not a bad thing, as it may have been in the past. In many cases, it's even the right thing to do, especially in light of the governmental legitimacy of non-banking entities - From the Financial Services Providers Supervision Law, which came to regulate the conduct of the non-banking bodies, and to the range of options available to them, in order to raise the funds needed for their activities. "

Bottom line, today any entrepreneur can, with relative ease, receive funding for his project - provided he provides the required collateral and presents financial strength, of course. The flexibility of the non-banking bodies, and their openness, will also enable them to obtain funding for ventures that they could not previously receive, and even some of them at the same time. It is, in every respect, a meaningful news for the industry.

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