Attracting investors: methods to secure funding

Do you wish to attract investors to expand your real estate business? We understand that real estate projects typically require substantial financial resources.

If you have numerous future plans, you might require extra funding to expand your business.

Regardless of your experience level, careful planning is necessary to scale your operations effectively and ensure you have the necessary resources to handle increased work.

It could be easy or difficult based on the approach you take to attract investors for your business.

There are various methods to obtain the required funding, each with its advantages and disadvantages, regardless of your objectives.

Here are the primary methods for attracting investors to your real estate project.

What is fundraising and why is it significant?

Fundraising is typically the most effective method for obtaining financial assistance and backing for your business or projects. It is common for individuals to pursue fundraising opportunities when they have a project that requires resources for implementation. Yet, beyond monetary aspects, it is also crucial to raise awareness about the issues, features, requirements, and aspirations of the company.

How can I attract investors for my real estate business?

Securing funding is often a daunting aspect of launching a new real estate venture. The balance between risks and potential gains in investing in startups can make investors hesitant. Therefore, it is crucial for developers to present a compelling business concept to capture investors’ interest.

There are various ways to finance your real estate venture, such as using your savings, getting a bank loan, borrowing from loved ones, seeking funding, asking for subsidies from major banks, or seeking investors and crowdfunding options to back your business plan.

Some methods may be more practical and advantageous for your new business than others, based on your goals and current stage – whether you are still in the ideation phase or prepared for launch.

Getting the correct investor is crucial for the success of new real estate projects. To launch or grow, you must attract investors and encourage them to explore your company further.

What are the primary sources of funding for the real estate industry?

There are various methods to secure funding for your business, with the most suitable option depending on factors like company size, funding requirements, growth strategies, and desired level of control.

Your potential loan choices may consist of:

• Bank loans are financial products offered by financial institutions.
• Loved ones;
• Government assistance
• Real estate crowdfunding, among other things.

Traditional banks and lenders offer loans.

Banking loans are a commonly chosen method to finance construction projects, but they have strict deadlines, high interest rates, and may not be suitable for all individuals and businesses.

Years ago, there were limited credit options mainly used for financing construction projects. Real estate companies would purchase land using their own funds and then seek financing for the construction. Additionally, tasks like development, paperwork, and initial project phases that were not covered by bank loans were often funded by the company’s own resources or investors, who sometimes became project partners. This posed a challenge for real estate entrepreneurs.

Today, the situation is different, but it relies on the credit history and the kind of security provided by the builder and developer. In the conventional sense, traditional banks are seen as a way to secure financial funds for businesses.

Loans from conventional banks operate similarly to personal loans. Securing a construction loan, for instance, necessitates builders to complete multiple time-consuming steps that may delay the project’s advancement.

• Credit assessment;
• Contract subscription.
• Financial proposal consists of the elevated interest rates and the maximum amount the entrepreneur can borrow.

Obtaining a business credit card can be challenging due to strict personal and commercial credit criteria. Additionally, if your company faces closure or financial challenges, you may be required to personally cover a portion of the loan.

2. Loved ones and acquaintances

In Brazil, this option is not widely used yet. It is for individuals who lack their own funds to finance a portion of a real estate project with contributions from friends and family, known as “Family and friends.”

This method is commonly preferred by smaller and more familiar contractors, which can have drawbacks such as informal agreements and insufficient planning for project execution.

Government assistance

Some real estate companies may find it beneficial to seek government assistance, which is provided through public banks like Caixa Econômica Federal, BNDES, or Banco do Brasil.

The federal government typically provides specialized credit programs for certain sectors of the economy to make it easier to raise funds for its projects.

Collective funding: Investments in construction

Real estate financing platforms, also called real estate crowdfunding, are fast-growing financing options. They aim to support banking services by offering credit to companies for real estate projects and by presenting new investment prospects to individuals interested in the real estate industry.

Crowdfunding allows entrepreneurs to raise funds by reaching out to a diverse group of investors who each contribute a small amount of money, instead of seeking a large investment from a single investor. An essential distinction between crowdfunding and traditional fundraising methods is the use of online platforms for crowdfunding campaigns.

In Brazil, alternative financing models are regulated by two separate statutes: CMN Resolution 4.656/2018 and CVM Instruction 588/2017, overseen by the National Monetary Council and the Securities Committee.

Collective real estate financing is a non-traditional loan alternative that enables:

1. Collective property financing provides a cost-effective option for real estate companies amid high interest rates and expensive banking loans.
2. Collective funding options offer a cost-effective and achievable way to raise funds, with quick access to credit at favorable interest rates.
3. Collective financing platforms offer cost efficiency compared to traditional banks because they do not require a physical presence in a specific location, unlike banks.
4. Reducing overall expenses decreases the loan cost for the entrepreneur and boosts investor returns by lowering administrative costs.
5. Boosts rivalry in a sector that has typically been controlled by banks.
6. It provides motivation for established organizations to be more innovative, lower expenses, and enhance productivity. This benefits borrowers by providing timely access to credit and reducing loan costs. Moreover, the competition between traditional and online investments can lead to greater investor returns and lower costs for businesses and borrowers.

How can you select the top company to attract investors?

When looking for funding for your business, it’s important to think about more than just cost and convenience. Evaluate how each option aligns with your long-term objectives and analyze the associated risks.

Discover different ways to strategically grow your construction business by attracting investors through INCO for quick and convenient credit access.

Summary

Real estate developers, builders, and entrepreneurs face a significant challenge in obtaining financing, as there is no assurance that banks will approve construction credit for projects of any size.

There are many credit choices available for individuals seeking to attract investors for real estate projects, with loans being a crucial option due to their fewer restrictions, shorter repayment terms, and sometimes lower interest rates.

Investors play a crucial role in supporting companies by offering vital financial backing for projects like real estate.

Real estate crowdfunding, also called collective real estate financing, is a rising trend in the investment market with the potential to benefit both investors and fund seekers when utilized effectively.

Be sure to research real estate crowdfunding platforms and practice due diligence when investing, as this is a newer trend.