A refusal from a bank is information, but it is rarely the information the borrower thinks it is. Banks decline transactions for reasons that often have nothing to do with whether the transaction is sound: a sector currently out of appetite, a borrower profile that does not fit an automated scoring model, a jurisdiction the committee does not want to explain, a file that arrived incomplete and was never resubmitted, or simply a lending target already met for the quarter.
Separating those reasons is the first useful step, because some of them mean the deal needs a different lender and others mean the deal needs to be rethought.
Reasons that mean look elsewhere
The borrower has no local credit history. This is the most common reason an international client is declined in Spain, and it says nothing about the risk. A lender that underwrites the asset rather than the scoring model will look at the same file differently.
The timetable does not fit. A bank process measured in months is incompatible with an auction deadline, an option expiring, or a seller who has another buyer. Speed has a price and sometimes the price is worth paying.
The asset is unusual. A building with mixed uses, a plot mid way through a planning process, an operating asset where value depends on the business. Committees prefer categories, and an asset that does not fit one is declined without the underlying economics ever being examined.
The structure is foreign. A property owned through a Dutch, Luxembourg or offshore company can be entirely orthodox and still exceed what a regional bank branch is equipped to process. Our note on cross-border financing for Spanish assets deals with that situation directly.
Reasons that mean stop
The exit does not exist. If repayment depends on a sale at a price the market has not paid, or on a refinancing nobody has indicated appetite for, a more expensive lender does not solve the problem. It converts a difficulty into a crisis with a shorter fuse.
The equity is not there. Leverage cannot substitute for capital that was never contributed. A borrower seeking to finance the deposit as well as the purchase is asking a lender to take equity risk at debt pricing, and the answer will be no from everyone who understands the request.
The numbers do not work at any cost of money. Some projects are viable at bank pricing and not at private debt pricing. That is a legitimate finding, and discovering it before signing is a good outcome rather than a failure. A serious adviser will say so.
Alternative finance solves a timing problem or an underwriting problem. It does not solve an arithmetic problem, and it is at its most dangerous when used to postpone one.
What the alternative actually is
Non-bank lending in Spain covers a spectrum. At one end, specialist lenders funding transitional situations against real estate security, in weeks rather than months, at a cost that reflects the speed. In the middle, private credit funds taking larger positions on income producing assets. At the other end, family offices and private investors lending against collateral they understand, often in their own region.
What they share is that the asset carries the underwriting and the exit carries the decision. What differs is ticket size, appetite for construction risk, tolerance for foreign borrowers, and how much of the process is genuinely their own money rather than a syndication that has yet to be assembled. That last question is worth asking directly, because a lender that has to raise the money after issuing the term sheet is a lender whose timetable is not its own.
Reading the offer properly
Compare total cost over the real period, not the annual rate. Arrangement fee, exit fee, interest, valuation, monitor, notary, registry, and the cost of any guarantee facility. Then check the terms that decide what happens when something slips: default interest, the extension mechanism and its price, whether extension is a right or a request, and what triggers an event of default. A facility that is cheap while everything goes to plan and punitive the moment it does not is not a cheap facility.
Check the security package against what is actually being asked. A first charge over the asset is normal. A personal guarantee on top of full asset cover is a negotiating position rather than a requirement, and it should be treated as one. We deal with that balance in our note on private debt secured on Spanish real estate.
The honest sequence
Establish why the bank declined, in writing if possible. Fix what is fixable, which is usually the file rather than the transaction. Test the exit against a pessimistic case before approaching anyone. Then take a complete file to lenders whose appetite actually matches the asset, rather than to whoever answers first.
Borrowers who follow that sequence generally find that the market is wider than the refusal suggested. Borrowers who skip it generally find the same lender who declined them, wearing a different name and charging more.
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.