Most financing requests are declined for a reason that has nothing to do with the merits of the transaction. They are declined because nobody could tell, from what was sent, whether the merits were there at all. A lender reading twenty files a week does not reconstruct a case from fragments. The file either answers the questions or it goes to the bottom of the pile.
What follows is the information a private lender needs before it will spend real time on a request. It is not a wish list. It is the minimum from which a credit decision can be built, and a borrower who assembles it before the first conversation typically saves three to four weeks.
One. Who is asking, and what they have done before
Not a curriculum vitae. A short, factual account of the borrower’s track record: what has been built, bought, sold or operated, over what period, and with what outcome. If there have been difficulties, they belong in the file rather than in a later discovery. Lenders in this market are not surprised by a restructuring in 2012 or a project that ran long; they are surprised by finding out about it themselves.
Where the borrower is a company, the same applies to the group behind it, and the ownership chain should be documented up to the individuals at the top. This is not curiosity. Anti money laundering obligations require the lender to identify the ultimate beneficial owner, and a chain that cannot be evidenced stops the file regardless of how good the asset is.
In Spain those duties are set by Law 10/2010 on the prevention of money laundering, and they are not confined to banks: letter k of Article 2(1) also brings in persons who professionally carry out the lending and other financing activities it describes, by reference to Law 5/2015 and Law 5/2019, without being authorised as a financial credit establishment. Among the persons Article 4 treats as beneficial owners are the natural persons who ultimately own or control, directly or indirectly, more than 25 per cent of the capital or voting rights of a legal person, or who control it by other means, with an exception for companies listed on a regulated market that are subject to disclosure requirements consistent with European Union law or to equivalent international standards ensuring adequate transparency of ownership information. Where no natural person meets that test, the article treats the director or directors as exercising control or, where a director is itself a legal person, the natural person that director has appointed. The same article forbids establishing or maintaining a business relationship with a legal person whose ownership and control structure could not be determined, which is why the chain has to be in the file from the start.
Two. How much, precisely
An amount, not a range. A request for “between five and ten million” tells the lender that the borrower has not finished the analysis, and it is impossible to price. If the amount genuinely depends on a variable, name the variable and give the two scenarios.
Precision matters for a second reason. The amount has to reconcile with everything else in the file: the value of the security, the use of funds and the repayment plan. A figure that does not tie to all three is the first thing a credit analyst will query. A borrower who has built the amount from the bottom up, cost by cost, can defend it line by line; one who started from the largest number the asset might support usually cannot.
Three. What the money is for, over time
Use of funds broken down, with dates. Acquisition on completion, works drawn in stages, fees and taxes at the front, contingency held back. A single line saying “project financing” is not a use of funds. This matters because the lender is not funding a number, it is funding a sequence, and the sequence determines how the facility is drawn and what it costs.
The sequence also tells the lender where its money sits at each moment. Funds released on completion are matched by an asset that already exists; funds released for works are matched only by what the works have added, which is why staged facilities are commonly drawn against certified progress. A use of funds that separates the two, and shows when each is needed, lets the lender match its security to its exposure instead of guessing.
Four. The works budget, where there is construction
For any development or refurbishment, a costed budget by chapter, prepared or reviewed by someone who signs it. Alongside it, the status of licences. A budget without licence status is unreadable, because the risk sits in the permission rather than the price of concrete. Our note on development and construction finance sets out how staged drawdown against certified progress actually works.
Licence status also decides what can be registered. Under Article 28 of the consolidated Land and Urban Rehabilitation Act, a notary authorising a deed that declares a new building under construction must require the administrative act of conformity, approval or authorisation that the works need under planning law, together with a certificate from a competent technician that the description of the works matches the project covered by that act. The land registrar requires the same before registering the deed, and a finished building carries further requirements of its own under the same article. Until the act the works need is in place, the building the plan depends on cannot be declared as a building under construction, and the lender is being asked to carry the timing of the permission as well as the cost of the works. The Spanish side of this is set out in our note on development and construction finance in Spain.
Five. A business plan that shows repayment
The plan does not need to be long. It needs to show a timetable, the point at which the facility is repaid, and what has to be true for that to happen. Sales at a stated price with a stated absorption rate, a refinancing at a stated loan to value, a disposal on a stated date. Then the same plan under stress: slower sales, a lower price, a delay in licensing. A borrower who has already run the downside is a different counterparty from one who has not.
A credit committee does not reward optimism. It rewards a plan whose downside has been thought about before the lender has to think about it.
The repayment route also decides what the lender will ask for next. A plan that repays from sales will be tested against pricing evidence and the pace of comparable sales; one that repays through a refinancing will be tested against the value and income a second lender is likely to accept on that date; one that repays from a disposal will be tested against who could plausibly buy. The refinancing route is the subject of our note on how a bridge ends well.
Six. The security on offer
What is being pledged, and what is already pledged against it. First charge or second, over the asset itself or over the shares of the company that owns it, with or without a personal guarantee. If there are existing charges, their balances and their holders. If there are several assets, which are in and which are out.
This is the section where files most often mislead by omission. An asset described as unencumbered that carries an old embargo, an inheritance not yet formalized, or a charge that was repaid but never cancelled at the registry will be found, and the discovery costs credibility as well as time.
The registry mechanics explain why. Under Article 145 of the Mortgage Law, a voluntary mortgage is validly created only when it has been granted in a public deed and that deed has been registered, so registration is part of the security itself. The registry does not update itself when a loan is repaid: the charge stays on the register until a cancellation is entered, and for an entry made by public deed Article 82 sets out the titles that can support that cancellation, among them a deed or other authentic document in which the person in whose favour the entry was made, or that person’s successors or lawful representatives, consents to it. A creditor holding an attachment order enforced against the debtor’s real property can apply to have it recorded as a preventive annotation under Article 42, and Article 86 makes such annotations lapse four years after their date unless the law sets a shorter term, although they can be extended for four years at a time if the order extending them is presented before the entry lapses. The lapse itself is entered in the registry at the request of the owner of the property or right affected.
Seven. The registry position, current
An up to date extract from the Spanish Land Registry for every asset offered as security. Not one from two years ago, and not the deed of purchase. The extract is the document that tells the lender who owns the asset today, what charges sit on it, in what order, and whether anything is pending registration. We explain what a lender reads in it, and what commonly goes wrong, in our note on the documents that decide a Spanish deal.
The usual extract is the nota simple, and its limits are set by statute. Article 222 of the Mortgage Law provides that the registrar discloses the content of the registry entries by nota simple or by certification, and that the nota simple is purely informative and does not attest to the content of the entries. Article 225 adds that the freedom or encumbrance of real property or real rights can be proved to the prejudice of third parties only by a certification of the Registry. A lender reads the nota simple to decide whether the file is worth pursuing, and turns to a certification where the state of the charges has to hold against third parties.
What this looks like when it is done properly
A complete file is rarely more than twenty pages plus annexes. It states who is asking, how much, for what, secured on what, repaid how and when, with the documents that evidence each of those. It reads the same way to the borrower and to the lender, which is the point: a file that only makes sense when its author is in the room is a file that will be misread whenever its author is not.
Assembling that document is the part of the process where an adviser earns the fee, and it is also the part that is easiest to skip when a transaction feels urgent. Almost every borrower who skips it pays for the omission twice, once in weeks and once in terms. Where the borrower is foreign or the asset sits inside a corporate structure, the same file has to work in two legal systems at once, which is the subject of our note on cross-border financing for Spanish assets.
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.