For developers looking to finance their development or resort property, there are a number of steps to go through to make this happen. Lets look at the typical steps and document requirements, which will make the process as pain free as possible.
Step 1: Executive Summary
The first step is to submit your executive summary. This summary highlights the property details, developer details and the capital requirements for the project. The summary is basically the entire deal parameters put into a shorter ‘marketing’ piece. I say marketing piece, as this document will be what sells your project to the prospective lenders, so any extra features on the summary to draw the reader in is a good thing.
Step 2: Supporting Docs
Once the lender has reviewed your summary and would like to proceed to the next step, we need to give them the supporting docs. These would include proformas, appraisals, feasibility studies, developer bios, construction budgets, detailed use of funds etc. In a nutshell, they want to know what you are going to be using the money for, and how long it will take to get your project making money to pay the loan back.
Some of these documents are more of a ‘nice to have’ rather than ‘must have’ at this point (ie appraisal, feasibility study), however the more we can supply now, the stronger case we can make for your deal.
Step 3: Letter of Intent
Once the lender has seen enough of your deal to determine it is something they would like to proceed with, they will issue an LOI or letter of intent. This is also often referred to as a term sheet, and summarizes the agreement in principle. This should not be mistaken for a final commitment. This LOI simply outlines the parameters of the deal for the developer so that they can either accept, negotiate the terms or pass on the deal as presented.
Step 4: Letter of Commitment
The letter of commitment or LOC, is the final agreement between the lender and borrower. This document outlines the terms of the mortgage, and requirements to complete the process (due diligence). At this stage, the lender will also have requirements that must be filled before they are able to finalize the deal. These due diligence requirements can include an appraisal, feasibility study, environmental, title searches, site visit etc.
Step 5: Funding Your Project
The last step is the closing of your loan. This will most likely be done in stages, where funds are distributed at construction benchmarks. The entire process can take a while to complete, often 60-120 days depending on the size and scope of the project. If your project is existing or you are simply looking for bridge or mezzanine financing, the closing can happen much quicker.
Talk to us today about your Caribbean development, and the steps involved to make your project a reality with our debt options!
