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The second choice of the RE developers become crowdfunding platforms

2021-03-07

As real estate developers are looking for financing, one of the main arguments is the rapidness of receiving loans and flexibility. Financing of RE projects in banks is not speedy - it can take at least a few months and commercial banks are getting more conservative every year, especially towards small and medium businesses. Therefore, businesses are looking for alternatives to receive financing and often they tend to choose crowdfunding platforms.

Crowdfunding in Lithuania is a relatively new sector, however, it already has attracted a quite substantial circle of investors. Therefore, it is possible to raise the needed money for the project just in 2-3 days. RE developers start looking for financing at the same stage as acquiring assets, meaning that there is very limited time in this stage to pay for the asset. In this case, crowdfunding platforms become a great tool as it speeds up the process. For example, asset acquisition from an auction requires payment in less than 1 month. 

It is not necessarily business loans worth a few hundred thousand euros - some of these projects are valued at over a million euros. For instance, Vanagupe Valley project, in the first stage investors raised 1 million euros just in 3 hours. The money was used to acquire the asset from an auction and to develop it.

The development of RE can be sensitive to various factors. There are often unplanned disruptors and to tackle them, effective solutions are required. A financial partner helps to find them - a crowdfunding platform, which analyses every business request and picks the best matching financing structure. One of the most effective 'Profitus' solutions for business that dwindles to use all the money at once and takes time to use it - as it is unfavourable to pay interest in such case, Profitus divides project financing into stages. Businesses can use all the money right when it's received. As the value of mortgaged developer's assets is constantly rising for investors, they can observe construction development, loan revenue and according to the previous stages, investors have an opportunity to invest in a project he already is familiar with.

It is evident that crowdfunding platforms that not too long ago were new in the market and people were reluctant to use, today have become a stable business partners. In most cases, they surpass usual businesses loans; financing tools and cheaper loans are not the only tools for solutions anymore.

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