There is a category of transaction that Spanish banks handle slowly and international banks do not handle at all: a borrower who is credible, an asset that is sound, and a timetable that does not fit a credit committee meeting six weeks away. Private debt secured on Spanish real estate exists to serve that gap. It is more expensive than bank debt and it is meant to be. What it buys is speed, flexibility on the borrower’s profile, and a lender who underwrites the asset rather than the tax residence of the person standing next to it.
This article sets out what actually gets funded in that market, what does not, and the terms a borrower should expect before spending time on a file.
What the lender is really lending against
Bank lending in Spain underwrites the borrower first and the asset second: income history, tax filings, existing leverage, sector. Private lending inverts that order. The first question is what the security is worth today, what it would fetch in a forced sale, and how quickly the lender could reach it. The borrower still matters, but as a question of execution risk rather than creditworthiness in the traditional sense.
That inversion is why the market exists. A Dutch holding company with two years of accounts, a Latin American entrepreneur with no Spanish credit history, a family that owns a building outright but shows little taxable income: none of these is a straightforward bank file, and all three can be a straightforward secured lending file.
Asset types that clear, and the ones that stall
Residential in a liquid location clears most easily. A finished flat or house in Madrid, Barcelona, Valencia, Málaga, Palma or the main coastal markets has a comparable sale every week, which means a valuation the lender can defend and an exit it can picture. Commercial premises in a city centre, small retail with a tenant in place, and urban plots with planning already granted are also familiar territory.
The difficulty rises with anything the lender cannot easily sell. Rural land without planning, single-use industrial buildings in secondary locations, half-finished developments with a paralysed licence, and assets in municipalities where two comparable sales a year would be a busy market. None of these is impossible, but they change the terms rather than the answer: lower loan to value, higher pricing, and a longer look at the exit.
Hotels and other operating assets sit in a category of their own, because the value is partly in the business rather than the bricks. We deal with that combination in our note on hospitality and hotel groups owning and financing European assets.
Loan to value, pricing and term
Private secured lending in Spain typically sits well below the loan to value a bank would offer on the same asset. The lender is pricing for a fast exit in a bad scenario, not for a long relationship in a good one. A first charge on liquid residential is the comfortable end of the range; second charges, mixed portfolios and unusual assets move the number down.
Terms are short, generally measured in months rather than the years of a mortgage, because this is transitional money. Pricing reflects that: it is expensive per year and often irrelevant per year, because the borrower does not intend to hold it for a year. What matters far more than the headline rate is the total cost of the money over the actual period it will be outstanding, including arrangement fees, valuation, notary, registry and, where applicable, stamp duty on the mortgage deed. A borrower who compares only interest rates will reach the wrong conclusion.
Private debt is not cheaper money. It is faster money, and the only sensible question is whether the speed is worth more than the spread.
The exit is the whole deal
Every secured lender is underwriting one thing above all others: how it gets repaid. Three exits are credible. The asset is sold, and the timetable is realistic for that market rather than optimistic. The facility is refinanced by a bank once something has been fixed, and the thing being fixed is identified and dated. Or a different, identified source of liquidity arrives, such as the completion of another sale.
An exit described as refinancing without saying who would refinance, or a sale at a price above anything the street has achieved, is not an exit. It is a hope, and experienced lenders read it as one. The single most common reason a good asset fails to attract funding is that the borrower has never written the exit down in a form a third party can test. Our note on bridge and transitional finance sets out when this structure earns its cost and when it does not.
How the charge is created, and how it is enforced
A Spanish mortgage exists only once it is on the register. Article 1875 of the Civil Code makes registration of the deed in the Property Registry indispensable for the mortgage to be validly constituted, in addition to the essential requirements of article 1857, which include that the mortgaged property belongs to whoever grants the mortgage. The same Code sets the logic of enforcement: article 1858 allows the property to be sold to pay the creditor once the secured obligation falls due, and article 1859 prevents the creditor from appropriating the property or disposing of it. Default gives the lender a route to a sale, not a right to appropriate the asset, although in court enforcement the lender may itself bid at the auction.
Article 129 of the Mortgage Law offers two routes. The first is the direct action against the mortgaged property under the Civil Procedure Act, with the special rules of its chapter on enforcement against mortgaged and pledged assets. The second is an out-of-court sale before a notary under article 1858 of the Civil Code, available only where the mortgage deed provides for it, and then only for non-payment of the principal or the interest of the secured amount; it takes place as a single electronic auction on the portal of the Boletín Oficial del Estado and is subject to the further requirements that article sets out. Under article 130, the direct procedure can only enforce a registered mortgage, and only on the basis of the terms of the title that were recorded in the registry entry.
The deed therefore has to be drafted with enforcement in mind. Article 682 of the Civil Procedure Act makes the special mortgage procedure available only where enforcement is directed exclusively against the mortgaged assets and the deed states two things: the value at which the parties appraise the property to serve as the reference for the auction, which may in no case be below 75 per cent of the valuation carried out under article 18 of Royal Decree-law 24/2021 where there is one, and an address fixed by the debtor for demands and notices. The registrar records both in the registry entry. Without them, that procedure is not available.
Where the international dimension changes things
Many of the borrowers in this market are not Spanish, and the asset is often not held personally. A property owned by a Dutch, Luxembourg or other foreign company raises questions a purely domestic file never reaches: who signs, what powers are needed, whether the lender takes security over the property, the shares of the company holding it, or both, and how enforcement would work in practice against a foreign shareholder.
These are solvable, but they are solved before the file goes to a lender, not after. Structures assembled for tax reasons some years ago frequently turn out to complicate financing today, which is a cost nobody priced at the time. Where a foreign holding company is involved, the interaction with substance requirements and with intragroup lending terms also has to be coherent, since a lender will read the group’s own internal arrangements as evidence of how it behaves.
When an individual borrows or guarantees
The borrowers in this market are companies and individuals, and the difference is not only commercial. Article 2 of Law 5/2019 on real estate credit contracts applies that Law to loans granted by natural or legal persons who carry on that activity professionally, where the borrower, the surety or the guarantor is a natural person and the loan either is secured by a mortgage or other real security over residential property, which for this purpose includes storage rooms, garages and other elements with a domestic function, or is intended to acquire or keep property rights over land or buildings, built or to be built, in which case the borrower, surety or guarantor must be a consumer. The same article treats as professional a lender that operates in the financial services market on a business or professional basis or, even occasionally, with an exclusively investment purpose, and its paragraph 4 excludes certain loans from the Law.
For a file inside the Law, speed has a statutory floor. Article 14(1) requires the lender to hand over the pre-contractual documentation, including the European Standardised Information Sheet, at least ten calendar days before signing, and article 15 requires the borrower, or a representative for this purpose, to appear before a notary of the borrower’s choosing no later than the day before the deed is authorised, an obligation that article 15(4) extends to any natural person who is a surety or guarantor of the loan. If compliance with article 14(1) is not proven, or the required appearance does not take place in time, the loan deed cannot be authorised. Where the loan is concluded by a natural person and is secured by a mortgage on a dwelling or intended to acquire residential property, article 693 of the Civil Procedure Act sends early termination for default to article 24 of Law 5/2019 and, where relevant, to article 129 bis of the Mortgage Law, and article 24, whose paragraph 1 can also reach loans where the natural person is a surety or guarantor rather than the borrower, does not allow its rules to be varied by agreement.
What a borrower should have ready
The files that move fastest arrive complete. That means the asset identified with an up to date registry extract, a valuation or at least a defensible view of value, clarity on existing charges and any embargoes, the ownership chain documented up to the ultimate owner, the amount requested with the use of funds broken down over time, and the exit written down with dates. Where there is construction, a works budget and a schedule.
None of that is exotic. What is surprising is how rarely it arrives together, and how much of the delay that borrowers attribute to lenders is in fact the time spent assembling documents that should have existed before the first conversation. We set out that list in full in our note on what lenders require from a foreign borrower, which applies with very little modification on either side of the Pyrenees.
Montclare structures and arranges financing secured on European assets, and prepares the corporate and tax structure that sits behind it. Our services are set out on our services page.
This article is informational and does not constitute tax, legal or financial advice. Lending and credit intermediation are regulated activities and the treatment of any transaction depends on its facts. Each engagement is subject to scope and applicable regulation.