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Entrepreneurs and builders in the real estate market must overcome the ongoing challenge of securing funding to bring conceptual projects to fruition.
Traditional funding methods like bank loans, real estate project financing, and private investments have frequently been inadequate to address the sector’s expanding requirements.
An important tool that has emerged to improve credit access and reduce risks in the process is Credit Risk Management, also known as GERIC. This article will discuss the meaning of GERIC and its significance in real estate credit.
What does GERIC stand for?
The GERIC is a procedure carried out by the Federal Economic Box, which is the main financial entity in the My House, My Life initiative. It involves thoroughly assessing businesses applying for loans for real estate ventures, examining financial, managerial, and technical aspects to decide on the viability of funding.
GERIC is crucial as it provides access to funding for incorporators and builders, enabling them to undertake projects that may otherwise struggle with financial issues. Additionally, receiving the certificate not only signifies approval by the Cashier but also enhances companies’ market position.
GERIC serves as a protection for the Cashier, lowering the chances of default. This is crucial for upholding market stability and safeguarding the interests of clients looking for financing for their property purchases.
The GERIC certificate acquisition process includes a thorough evaluation of the financial, managerial, and technical aspects of the businesses. The certification confirms the company’s capability to manage the enterprise by meeting legal, technical, and financial standards.
GERIC not only guarantees project financing security but also establishes customer trust by enabling builders to ensure project delivery and facilitate funding through the Federal Economic Box.
What is the purpose of the GERIC?
GERIC functions as an audit for companies looking to secure credit for real estate development projects.
It is crucial for the credibility of real estate development, as it provides companies with opportunities to secure funding.
The term “managing” is typically used when a company obtains approval from Caixa, giving the company an advantage in increasing profitability through real estate sector investments.
GERIC offers several tangible advantages to developers and builders who opt to undergo this thorough evaluation.
Financing made more accessible
The approval in the GERIC process indicates to financial institutions like the Federal Economic Box that the company has undergone a thorough risk analysis and meets strict criteria. This streamlines and reduces the costs of the credit acquisition process, enabling developers to access the necessary financial resources for their projects.
Attracting investors
The GERIC certificate serves as a trustworthy signal that a project is financially stable and effectively run, providing confidence to financial institutions and appealing to investors seeking secure investment options.
Enhancing trustworthiness
Achieving the GERIC certificate shows the dedication of developers and builders to transparency, adherence to regulations, and effective financial management.
This enhances the company’s reputation in the market and can serve as a unique advantage, showcasing the company’s skill in handling risks and meeting financial responsibilities.
Risk minimization
Developers and contractors submit their projects to a thorough analysis during the GERIC process to identify risks and vulnerabilities. Addressing these issues beforehand helps the company mitigate risks and make projects more resilient to future challenges.
Sustainable expansion
Developers and builders can achieve sustainable growth by receiving approval in the GERIC process and securing reliable funding. With sufficient resources, they can enhance project quality, reduce timelines, and expand their reach, ultimately benefiting the market.
How can I obtain the certificate from GERIC through the Federal Economic Box?
The Box carefully considers the requirements that the company must fulfill in order to remove the GERIC from a construction project.
The complete project’s financing risk is greatly reduced, enabling better control and protection of investments.
The Federal Economic Box oversees companies in civil construction by assessing their capacity to manage processes and ensuring they meet legal, technical, and financial requirements.
The GERIC seeks to guarantee that those involved in the project are financially responsible, avoiding defaults and debts. This is crucial for both the market and potential customers looking to invest in properties.
GERIC registration enables the construction firm to directly sell real estate within the development through CAIXA, providing customers with dual assurance.
- The builder’s delivery.
- The Caixa Econômica Federal finances the purchase and building of the property.
To obtain the GERIC certificate, a risk analysis must be conducted. Refer to the following section to gain a deeper understanding of the process.
What does GERIC credit risk evaluation involve?
Financial institutions are responsible for evaluating credit risks, each with its own risk management policy aligned with regulatory guidelines and Central Bank of Brazil rules.
The Federal Economic Box uses models to assess the reliable capability of construction sector entrepreneurs, for instance.
Builders and partners at Geric must not encounter any issues with various entities such as CEF, INSS, Serasa, IRS, lawyers, and legal matters in order to be approved. Failure to comply with this requirement will result in rejection.
Risk Analysis in GERIC
The assessment of a borrower’s financial strength is important for a bank when considering a loan application. The bank examines the developer’s assets and financial track record to determine solvency and assess the risk of potential loan repayment issues.
The architectural layout, technical needs, and commercial appeal of the project are crucial for its financial success. Having previous similar projects can improve the likelihood of securing an investment loan.
The Federal Economic Box uses three primary criteria for conducting risk analysis and granting access to GERIC.
Financial/bookkeeping examination
The accounting and fiscal standard evaluates the company’s overall situation by analyzing the most recent three financial statements.
This accounting and financial analysis also aims to assess the company’s financial well-being, with each assessment typically covering a 12-month period.
Analysis of managerial capabilities
The evaluation of management capacity is essential in assessing the viability of real estate projects within the Credit Risk Management process at the Federal Savings Bank. It involves looking at the company’s administrative management capabilities in addition to financial and technical considerations.
In this situation, the analysis covers various components involved in managing an entrepreneur or builder.
The assessment of financial management includes analyzing a company’s accounting and financial practices, such as reviewing balance sheets, income statements, and cash flows. CEF aims to assess how well a company handles its finances, meets financial obligations, and navigates economic changes.
The efficiency of operations, quality of internal processes, and strength of control systems are evaluated to determine the company’s administrative capability in handling operational challenges in the real estate market.
The assessment also includes reviewing past compliance performance, such as meeting project deadlines, payment history to suppliers, and consistency in fulfilling obligations. A strong compliance track record enhances CEF’s confidence in the company’s project execution capabilities.
Analysis of technical capabilities
This standard assesses the competent engineer and previous projects completed, which indicates the professionals’ technical expertise. It is important to mention that each managed business will receive a specific credit limit based on the analysis by CEF, resulting in varying amounts of released funds.
Only a well-organized company can achieve GERIC based on this information.
Discover how to finance your real estate ventures using INCO.
Banks used to compete by reducing margins due to lower credit risk, but now they are more cautious, making it challenging for entrepreneurs and builders to secure substantial loans.
The key aspect of securing an investment loan in real estate is ensuring the financing structure can be adjusted to match the project’s needs, as banks prefer to finance projects with low risk.
Financial institutions are more inclined to provide loans to construction projects led by established developers, making it challenging for smaller businesses to enter the construction industry.
INCO provides group financing to acquire investments from individual investors, making the funding process quick, efficient, and cost-effective.
In summary
The Credit Risk Management (GERIC) process illustrates concrete shifts in the real estate market, showing that it goes beyond a simple procedure.
GERIC plays a significant role in streamlining financing for real estate projects by acting as a bridge to expedite credit approval.
The process guarantees that companies are ready to fulfill the financial demands of the market by using criteria like accounting analysis and technical evaluation to assess management capacity.
The advantages of GERIC are extensive and result in practical benefits. Those who go through the process, such as developers and builders, gain access to financing opportunities, enabling projects to succeed. Moreover, the GERIC approval stamp appeals to investors, enhancing partnerships and bolstering business growth.
The GERIC contributes to a healthy real estate market by ensuring projects are well managed and financially sound, which strengthens stability and mitigates risks in the market.
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