Pre-financing
In banking, pre-financing is the term used to describe a type of financing that is mostly short-term and that takes place at a time when the final financing has not yet been secured.
General
Pre-financing is required in particular if final financing has not yet been possible due to time constraints or formal reasons. The pre-financing bank takes on a higher credit risk because the follow-up financing and thus the repayment of the pre-financing loan has not yet been determined. Accordingly, there is a high financing risk on the borrower's side . The term of pre-financing loans is usually 1 to 2 years and is therefore subject to short-term interest rates. The pre-financing can be taken into account as part of a planned consolidation and then becomes a long-term liability through the consolidation .
Types of pre-financing
The pre-financing can have two repayment options. Either the repayment can be made with long-term loans that are still to be committed, or the borrower receives expected cash flows , which he uses for repayment. This is often the case with export pre-financing, which is repaid by subsequent export proceeds.
- A typical case is bridge financing when buying a company , which has to be processed in a tight timeframe and for which “solid” financial planning could therefore not take place. The purchase price is paid from the pre-financing loan, so that the company acquirer has sufficient opportunity to ensure the final financing during the term of the pre-financing loan.
- Long-term investment loans are often pre-financed by banks with overdrafts . Interest rate expectations can also play a role here in order to benefit from lower-interest final financing when interest rates fall .
- As part of the mortgage to be mortgage lenders pre-financing not allowed, so that other credit institutions with a so-called Vorschaltdarlehen ( bank advance loan can provide for the payment of construction costs are available) during construction loans. This is used to pre-finance equity or long-term mortgage loans.
- In the case of the home loan and savings contract , the pre-financing is granted to bridge the gap until the home loan sum is paid out upon allocation, as long as the home loan and loan contract has not yet reached the required minimum savings.
- In the case of securities lombard loans , the pre-financing enables the purchase of securities at low prices at a point in time at which the final financing (e.g. through the sale of other securities) is not yet secured.
Legal issues
Pre-financing loans are loans within the meaning of § 488 para. 1 BGB and are subject to banking law the credit term of § 19 para. 1 KWG .
Demarcation
Colloquially, pre-financing is often used when it is actually a bridging loan. If, for example, tax reimbursement claims are to be "pre-financed" by a credit institution, then, strictly speaking, there is bridging financing because the repayment of the bank loan by the tax reimbursement of the tax office was guaranteed at the time the loan was granted.
Individual evidence
- ^ Karl-Heinz Müssig / Josef Löffelholz, Bank-Lexikon , 2013, p. 2170.
- ↑ Jürgen Krumnow / Ludwig Gramlich / Thomas A. Lange / Thomas M. Dewner, Gabler Bank-Lexikon , 2013, p. 491.
- ^ Karl-Heinz Müssig / Josef Löffelholz, Bank-Lexikon , 2013, p. 1343.
- ↑ Michaela Hellerfort, Real Estate Investment and Financing Compact , 2008, p. 69.
- ↑ Jörg Lemberg / Katharina May, Bausparen , 2014, p. 92.
