Getting finance solutions for Real estate project in Romania - Part II
Let's open a local company (and meat with the local bureaucracy...)
By: Osnat Peled
Marketing & Business development manager
Mentor Invest
The first and the second phase are now behind us - we have located for you the right bank, the best finance structure and now it is time to start with the formal procedures needed to get your bank loan.
We are heading the hardest part in the process - getting lots of "papers", certificates, approvals…meeting the notary so many times, can be pretty exhausting…
Actually, during this phase we can also reveal legal issues exist with the land or the project (some can be real and some can be just a caprice of the bank).
At any way, it is recommended to be patient and take in consideration that delays will be occurred.
If your case demands getting finance in 30 days, you must be aware that the task is not easy and you will need to use some inside connections.
Now it’s the time to open a Romanian company. The process costs around 400€ and involved a lawyer. It’s an easy process that usually take 10-15 days.
What kind of approvals I need to prepare for the bank?
Each bank has it own rules. In the exist Romanian banking, it is very possible that the list you will be presented with, at the beginning of the process, will be changed during time and that’s because the heavy bureaucracy the Romanian are so used to follow.
For us, the "Westerns", it can be mentally hard, but in most of the cased there is a "happy end".
Of course, a professional consultant can assist you in locating the necessary "shortcuts" and prevent difficulties before they appear. Usually its saves time and money.
The certificates list that is common to most of the local bank is built from:
- Company certificates – declaration for opening a Romanian company.
- The Shareholders structure + experience and portfolio.
- Balance sheet declaring with the incomes of the Romanian company - if your case is a new company with no local incomes, you will need to provide proofs for incomes of other companies you own in other countries.
- Reference letters from your banks.
- Business plan for the project and the company (presentation).
- Architectural plans (with 3D simulations).
- The selling pre-agreement for the land.
- The owner certificates for buying the lands.
- Valuation report (made by a local international company).
...these are the basics only. Most of the banks will ask for more papers.
Eventually you will have a magnificent portfolio full with documents that proofs you are serious and your project is the best.
If you choose to hire professional company to assist, they will provide also assistant for getting the right documents and on time.
The entire docs should be in Romanian; in some cases, you will be required to sign by a notary or a lawyer.
The necessity of a good lawyer to assist in signing fast is high. However, don’t count the lawyer to prepare the business plan, valuation etc., they usually know their material only.
How much time until I get the approval?
We recommend starting the process with at least 40 days a head.
However, if you sign a pre-agreement for buying a land and you need to buy it in less the 30 days, it is better to purchase it from your own source- the seller wouldn’t wait much time, and the good lands are sold in days...
Another option is to pay the advanced payment from your own sources and then take at least 40 days for the loan process.
At anyway, all the banks will refuse to obligate for any result or schedule, especially if you are not familiarized with them or you don’t have the right contacts.
Is there an option I’ll receive a "No"?
Well... there is a chance for a "No".
We are here to point some of the most popular reasons to get a negative answer from the bank.
- Providing false information on your company or information conflicts – If the bank wont trust you will sure to get a negative answer.
- The valuation report – there is a possibility for the valuator to provide a lower estimation then you need. It is possible to prevent this situation in advanced, based on your marketing presentation to the valuator.
- The Shareholders structure - it is very important to agree between the partners about the management structure of your company. We do not recommend trying and changing it during the loan process. The bank doesn't like these changes! Therefore, it is likely you will get a total refuse for your loan request after trying to change it during the process.
- Your first project - if it is your first project in Romania... it is likely to have some difficulties, but its is possible to receive a Yes!
All the above can be predicted and can be solved. As long you are "ready" and act as professional, the banks will respect it. Having strong relationships and the right contact will prevent having these negative answers.
We hope you enjoyed reading our articles about financing real estate projects in Romania.
If you are interested in more information you are welcome to contact us.
