Financing in Poland

Do banks operate the same way as here in North America where you come up with a proposal, request an amount, prove a downpayment and off you go?

If only! But that's why our financial markets aren't in meltdown like yours.

Speak for the US, there's no problems here in Canada ;)

If there is a problem in

if there is a problem in the US there is a problem in Canada...

Zoogle, thanks for the laugh. I don't believe there is any process in Poland for which the expression "and off you go?" applies.

Certainly it is far more difficult to obtain a Small Business loan in Poland than in NA, but not impossible. Right now is not the best time to be looking for such a loan, due to the global credit crunch and the acceleration in interest rate rises on PLN. (don't believe anyone who tells you that Poland is not indirectly affected by the credit issues in the US)

Additionally, it is very difficult for a self-employed non-Pole to receive any credit in Poland regardless of how good your credit history is, or how good your business plan is. You may actually find it easier to obtain a loan in USD from NA, with better terms, for setting up a business in Poland. With a depreciating USD, this could be your best bet.

There used to be a saying:

When the US Gets a Cold, Canada gets the Flu.

Not sure if it is as applicable in the old days.

I'm glad I could be of some amusement nierozumiem :) I should have been more specific that any of my proposals would involve property in one way or another, would the property being the collateral make it more feasible?

I don't believe that applies to the extent it used to Shawn_H, a little bit but definitely not as bad as it used to be.

the banks are not interested in collateral. I tried to use property that I own in Poland to secure a loan. You can secure a loan in 2 minutes over the phone in the UK if you own property. However in Poland the banks want to know how you plan to repay the loan and the existance of collateral does not seem to be an issue.

if you are serious about entering the real estate business in Poland and are looking for funding then send me a personal email. We should be able to sort you something out.

If you're looking to mortgage a property you're buying/renting/developing then this is possible, but when we did this as a company, we found that for anything over a 50% LTV they wanted personal guarantees from all the directors. The process took about 4 months and required an improbable amount of paperwork.

For example, here's something I would be interested in taking on:

gratka.pl/dom/tresc/7-945114-lubuskie-zagan-tomaszowo-lesna.html?w=69b 573eeb3bb386f&s=1

Buying this and turning it into apartments.

Property development is always about creative financing, but I suggest 2 basic ways of financing such a project:

1.) Find a partner with equity prior to purchasing the property, somebody with a big enough bankroll to finance the purchase and development and willing to part with their cash for 2-3 years while the project is realized. You would need to give up a significant stake in ownership and control. I don't think you would be able to find a bank in Poland to finance this way, just private equity.

2.) Buy the property yourself, get planning permission, put together plans with an architect and then sell the apartments "off-plan". Use the staged deposit money from the buyers of the apartments to fund the development.

My thoughts on this particular property:

The price/sqm seems amazing, and I can see why that may make it look tempting at first glance. But what would you do with the property? Factory / Manufacturing? - No, it is 1940s architecture w/ infrastructure unsuitable for modern production. Warehouse / Distribution? - No, it is in the middle of the sticks with no major road infrastructure. Hotel? - No!

Okay, so 3000sqm of apartments like the Advert suggests? Purchase + Project/Planning + Renovation/Building + Sales/Marketing = a minimum 1500zl/sqm. So what would an apartment sell for in Żagań? About 1500zl/sqm. Would the local market be able to absorb 60 new apartments? Probably not. Profit = 0 zloty and you are stuck with 50 unsold apartments.

Bear in mind that many regions of Poland are deeply impoverished and rapidly de-populating. If Germany is any lesson, these regions are unlikely to change soon. Read this article from the weekend about German poverty:

news.yahoo/s/afp/20080310/lf_afp/germanyeconomydemographysocial_080310032444

I think that even if you were given the building for free you would be unable to make a profit turning it into apartments. There may be something creative things you could do with the property without investing any more cash in it? Film production? Artist studios? If you could rent the entire building out for 5000zl/month you would have a very comfortable 10% yield after covering costs.

Sorry for being so negative, but right now the property market in Poland is just a story of cash chasing cash. There are certainly deals out there, but you may be best waiting on the sidelines for a few years.

I greatly appreciate your insight nierozumiem. Right now I'm just speculating and crunching numbers from my comfy chair on the other side of the world. Won't know what local markets are until I get there. My specialty is planning and managing construction projects so i can minimize costs in that category. What do you see as a hot up and coming market right now?