Taking out a loan is often the smartest and fastest way to expand your business and put your plans into action. If your company already owns real estate or has a real estate development project, you can take out a loan against real estate collateral. Loans against real estate collateral are flexible, readily available, and suitable for financing different business needs.
The following article details the typical loan application process. What needs to be done, what information must be reviewed, and how to ensure legal compliance.
1. Applying for a loan: how to get started
The first step in applying for any type of loan is to submit an application. You can conveniently do this online or in person at an office at most financial institutions, including Nordic Hypo.
The process is fastest when you start it online.
- Apply online – fill in the form with your company details, the loan amount requested, the loan period and collateral details.
- Attach the necessary documents – you will often be asked to provide a business plan, financial intelligence, the address of the real estate and other relevant information.
Nordic Hypo will reply to your application within a few business days.
Keep in mind that asking an offer isn’t a commitment in and of itself. Rather, it provides an overview of your options, potential interest costs, and the terms and conditions of the financial institution.
2. Collateral appraisal and eligibility check
Once you’ve submitted your application, the process moves on to the next stage: collateral appraisal and business assessment.
The lender will arrange for an appraisal to determine how much your property is worth under market conditions. The appraisal result decides how much money the company can borrow.
We usually finance up to 70–75% of the value of the real estate (depending on additional collateral, this may reach up to 100% in some cases).
Why is this important?
The higher the value of the collateral compared to the loan request, the more money you can borrow. This helps to mitigate the lender’s risk and allows you to get better terms.
3. Making an offer and negotiating
Once we know the value of the collateral, we will prepare a tailored loan offer for you. The offer will state:
- Amount of the loan: the amount you can get.
- Interest rate and charges: what interest and charges are related to the loan.
- Refund conditions: how and when you have to return the loan.
- Loan period: usually from a few months to several years.
Your company can then discuss the terms and conditions of the offer and ask for clarifications. As your partner, we’ll always try to accommodate you and be as flexible as possible.
4. Entry into contract and notarisation
Once both parties are satisfied with the terms, the process proceeds with signing the contract. In the case of a loan against real estate collateral, additional costs and activities must also be taken into account.
- The mortgage is entered in the land register – a notary executes the mortgage that ties the loan to the real estate.
- The necessary fees (notary fees and mortgage execution fees) are paid at the notary’s office.
- Contract fee – usually 1% of the loan amount, charged when the loan is paid out.
Once the contract is signed and the mortgage is registered, the loan payment will be credited to your company’s account.
How much can I borrow against real estate?
This largely depends on two factors:
- Collateral value: lenders typically finance up to 70–75% of the market value of the property, and in some cases more if additional collateral is provided.
- The company’s financial position and risk profile – a strong financial position and low risk to the lender increase the potential loan amount.
Nordic Hypo offers loans ranging from tens of thousands of euros to up to 1.5 million or several million euros, depending on the company’s standing and business plan.
Is a business loan against real estate collateral more flexible than a loan from a bank?
Yes, a business loan backed by real estate can be far more flexible than a traditional bank loan.
We offer several advantages over large banks.
- Faster processes. A loan decision can be made in a matter of hours or days, not weeks.
- A more personalised approach: alternative financiers consider your business plan and the overall picture.
- Flexible loan repayment option
- Banks may (and often must) conduct more thorough background checks on their clients and, as a result, often request more documentation.
What costs are associated with a loan?
Interest is usually accompanied by:
- Appraisal report or expert opinion fee – fee for assessing the market value of real estate.
- Notary fees and registration of mortgage – standard statutory and notary fees.
- Contract fee – for example, 1% of the loan amount.
- Insurance – insurance is often required for collateral.
What are the risks of taking out a loan?
Any type of lending always involves risks that must be carefully considered.
- Risk of losing collateral. If the company is unable to meet its obligations, the lender may liquidate the mortgage.
- Interest cost and commitments. Even if the project doesn’t bring in immediate revenue, the loan still has to be repaid.
- Fluctuations in market value. Property depreciation can affect sustainability.
You should be realistic in your assessment of your repayment ability and consult a financial advisor if necessary.
Lending against real estate collateral is a useful option for businesses in need of quick and flexible capital. The process is transparent – from application to contract – and is well suited to both real estate and business development.
Before making a decision, consider your financial options and risks to ensure that you choose the loan solution that is best for your company’s growth.