The FirmFunding platform, a tool to concretize real estate projects thanks to private debt

Examples of project financing in the real estate sector of landowners, developers, or property dealers

FirmFunding is a digital marketplace that allows SME advisers to find a suitable financing solution from professional investors. The financing files that can be put online and consulted by investors concern all types of projects, development, transmission, asset financing, disposals, for amounts ranging from 1 to 20 million euros.

Companies in all sectors are likely to benefit from private debt financing. , as shown by the significant number of projects financed via the FirmFunding platform in recent years and the strong appetite of investors for them.

Real estate covers several different professions, each with their own specificities: the farmers (who manage and operate an existing real estate portfolio), the developers (who are in charge of the construction of the real estate structure) and the property agents (who buy existing real estate before reselling it after having valued it). The projects posted on the FirmFunding platform concern these three sectors.

Real estate projects can be classified into two main categories according to their purpose: either to finance the development of the company carrying out the projects itself (so-called « corporate » financing), or to finance a particular real estate project carried by the company (so-called « project » financing).

« Corporate » real estate financing

Corporate financing can benefit landowners as well as property dealers and developers. In this case, the financing obtained will be used to carry out organic growth projects (hiring, digitalization, working capital support, etc.) or external growth projects.

Depending on the size of the project and its foreseeable impact on the company's level of indebtedness, the financing is structured as dry bond or as mezzanine debt.

An example of corporate financing found via the FirmFunding platform:

The financing of a property merchant, located in Occitania (turnover > 10 million euros, Ebitda between 500K and 1 million euros). The financing obtained from a management company, in the amount of 2 million euros, structured in dry bonds for a rate of 7% over 5 years, with a guarantee on real assets, should enable the company to strengthen its working capital.

Financing of real estate projects

Project financing tends to concern the companies that are intended to carry it, i.e. promoters and merchants of goods.

The current and progressive entry into force of the « Basel IV » regulations, which were introduced in response to the subprime crisis of 2008, has the effect of increasing the minimum capital threshold required by banks to finance projects. This new constraint explains why real estate professionals are now structurally looking for financing in order to avoid mobilizing too much of their equity capital on a single transaction.

Generally of a short duration (2 to 3 years maximum) modelled on the duration of the operation financed, the rates charged are relatively high: this debt in fact replaces the equity of the real estate operators without giving access to capital, which explains why investors demand a significant financial counterpart.

Remuneration varies according to the timing of the financing: very close to an equity yield (around 15%) at the time the operation is set up, while there are still administrative uncertainties weighing on the actual implementation of the project, the rate falls below 10% when the operation is more advanced (building permit purged, pre-commercialization started).

The debt is borne either by a project company, created for and on the occasion of the real estate project in question, or by the parent company, which allows it to be allocated to several real estate projects. The latter structuring certainly allows for risk diversification, but requires the implementation of systems to control the allocation of funds to each transaction.

An example of project financing found via the FirmFunding platform:

The financing of a project company for the purchase and renovation of a villa located on the French Riviera. 800,000 out of the 1.7 million euros required, was structured as a dry bond, with a rate of 9.5% over a 2-year period.

If you need financing to carry out a project in the real estate sector, as long as it meets the platform's eligibility criteria (financing > 1 million euros, profitable company with a certain seniority), do not hesitate to contact us, our teams are at your disposal to help you find an investor ready to finance it.

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