Bridge lending is an upward trend around the world and is growing in popularity in the Spanish real estate market in particular.
Bridge mortgages, essentially a form of micro-lending, are part of a large private finance market, a growing alternative to the traditional banking sector. This private form of lending is firmly established in both developed and developing countries.
The British company Preqin, which collects and sells financial data in the alternative investment market, published information in January 2021 that in the United States 80% to 90% of loans for small and medium-sized businesses are issued by private companies.
Moreover, according to Preqin, bridge lending provides private institutions with more stable returns than any other private sector financing strategy. Net IRR (Internal Rate of Return) between 2011 and 2017 ranged 7.6% to 8.8%.
According to Antoni Quintana, financial adviser at TQ Eurocredit, a private lender, the paradigm shift in the Spanish lending market is being felt very strongly today. The new form of loans provides high flexibility for borrowers, due to the ability to obtain large capital in the shortest possible time and for repayment periods, for example, up to a year.
TQ Eurocredit is one of the leaders in alternative finance in Spain. The company has been present on the market for more than 16 years, and its offices are located in all key cities of the country, such as Madrid, Barcelona, Palma, and Girona. In these cities, the company has issued loans in the amount of more than €375,000,000 by this moment.
Bloom of Bridge Mortgage Lending
“Intermediate mortgage loans” develop especially rapidly in recent months in the Spanish real estate market. These are short-term loans, usually for a period of 1 to 3 years, which allow you to solve specific problems with a lack of liquidity "here and now." Such a mortgage is often used as a "bridge" until the borrower can take out a traditional loan from a major bank. This is where the name of this form of lending comes from: intermediate liquidity to a full-fledged loan.
Such loans are also useful for making urgent investments, when access to sufficient funds is currently not available. Lenders can also invest in a profitable venture that will bring them significant benefits in the long run, but at the current moment they do not have enough money on hand. Private financing is tailored to the needs of the client, which ensures great popularity.
According to Quintana: “We observe an ever-increasing interest from entrepreneurs and individuals who want to finance their investments faster. We just struve to do it at reasonable rates and with more flexible repayment plans, something that traditional loan systems cannot provide.” In his opinion, it is extremely important to clearly understand the clients’ needs, as well as their current and future financial situation for the success of organizations involved in issuing this form of financing.
Quintana adds: “Remarkably, many clients, once using this lending alternative, often return to it. And not just once." Individuals may be wary of taking on such secured loans, but the whole area is well regulated by current Spanish law. Both the loan and the financial institution to which an individual may apply should be registered in the official register of the Bank of Spain, which supervises the sector.
TQ Eurocredit is a member of this register and its activities are approved by the Central Bank, which allows potential borrowers to expect all the necessary guarantees and transparency of activities and information.