Developers are looking to construction companies to find alternative ways of financing their projects. If they have problems meeting the conditions to acquire a bank loan, they are trying to convince suppliers to invest money in the project. The company Real Estate Karlín Group (REKG), for instance, recently negotiated about a supplier loan.
It was to help fund the continuation of the construction of another administrative building for the Corso centre in Karlín. “In the end we managed to get a bank loan, and we will not need a supplier loan. Besides Metrostav there were other big construction companies willing to provide the loan,” said REKG partner Milorad Miškovič.
The builders talk about this form of gaining commissions with caution. “We are not interested in publicising how our clients finance their projects,” said Metrostav spokesman František Polák. Another big construction company, Hochtief CZ, claims that a supplier loan is too much of a risk. “I have come across it, but as a supplier I wouldn’t be interested in this type of investment,” said Petr Smékal, director of the company’s property development department. According to the Association of Building Entrepreneurs, supplier loans are not rare, but only companies with good liquidity can afford to take them on. The companies can provide a more advantageous loan to the developer than a bank might. But only if it is to finance a high-quality project. “Generally, it’s not very advantageous for a construction company, and the firm will thing very hard about whether it’s worth it to help finance the project,” said Association president Václav Matyáš. “We assume that this alternative method of financing projects will not take off in a big way even if bank loans are harder to obtain now. Skanska is not planning to take this route,” said Lucie Nováková from Skanska.
Some builders are saying that this is mainly about improving the position of the developer when the company goes to negotiate a loan with a bank. “Financing guarantees is a dubious practice,” said a construction company representative, who wished to remain anonymous. The developer can mainly use the supplier loan to be able to convince the bank that he has enough finances. At the moment, it’s about a third of the total investment. “But I wouldn’t say that a transparently done supplier loan is cheating. The bank knows how to check the conditions of such a loan,” said Matyáš.