Top Business Loans for Brokers: Unlock Financing Opportunities for Your Clients 

Seeking financing for your business? Partnering with business loans brokers could be the key to unlocking a world of opportunities. In this blog post, we’ll explore the role of business loans brokers, the advantages of using one, and how to choose the right broker for your needs. Let’s dive in! 

Key Takeaways 

Understanding Business Loan Brokers 

A business loan broker serves as an intermediary, aiding companies in finding optimal financing options and navigating the application process. With their banking and finance experience, brokers can save businesses time and money by locating the most suitable business finance solutions for their requirements. In this role, a business finance broker can be an invaluable asset to companies seeking the best business loan options. Working with business finance brokers can further enhance the process by providing access to a wider network of lenders and financial products. 

The Broker's Role 

Commercial loan brokers bridge the gap between businesses and suitable lenders, easing the loan process. As a commercial loan broker, they possess the following: 

Evaluating factors such as a business’s financial history and trading experience, brokers determine the best lender for a company, ensuring their clients’ best interests are met. 

Additionally, brokers, like mortgage brokers, provide advice on loan terms and conditions, helping businesses fully understand the parameters of their loan offers. 

Advantages of Using a Broker 

Utilizing a broker brings multiple benefits such as access to diverse loan options, professional advice, and facilitation in securing favorable loan terms, including asset finance. Brokers can save businesses time and effort by doing all the legwork, researching various loan options, and negotiating with lenders on their clients’ behalf. 

Though brokers typically charge a fee of 5-17% of the total loan amount, the savings they offer from sourcing various business loan offers from multiple lenders could potentially offset their fees. 

Types of Business Loan Brokers 

Various kinds of business loan brokers are available, each with their own specialization in different financing options and industries, including commercial loan brokers and commercial finance broker. For example, equipment finance brokers are active in industries like construction, agriculture, healthcare, and manufacturing. 

Unsecured loan brokers, on the other hand, specialize in connecting businesses with lenders who offer loans without the requirement of collateral, making them an ideal choice for businesses lacking valuable assets to pledge. 

Choosing the Right Business Loan Broker 

Choosing a business loan broker entails evaluating their experience, reading reviews and testimonials, and understanding their fee structure and transparency. By considering these factors, businesses can ensure they are partnering with a broker who has their best interests at heart and can effectively assist in finding the right business loan. 

Evaluating Experience and Expertise 

While assessing a broker’s experience and proficiency, one should take into account their track record and knowledge specific to the industry. A successful track record includes: 

Brokers with industry-specific knowledge can better comprehend the unique requirements and challenges of various industries, helping businesses select the most appropriate loan options. 

Checking Reviews and Testimonials 

For a comprehensive review and understanding of testimonials concerning business loan brokers, collate information from sources such as: 

Assess the overall rating, read several reviews, note specific details, and seek out recommendations. This will give you a better understanding of the broker’s reputation and customer satisfaction. 

Assessing Broker Fees and Transparency 

One must ascertain that the broker offers a lucid and succinct explanation of their fees and charges. Broker fees can range from 1% to 6% of the loan amount, with additional fees and charges depending on the lender. 

By discussing the fee structure with the broker prior to engaging their services, you can avoid any hidden costs or unfavorable terms. 

Financing Options Offered by Business Loan Brokers 

Business loan brokers offer diverse financing options like commercial loans, equipment finance, unsecured loans, and business loans. Each financing option serves a different purpose, and understanding these options can help businesses make informed decisions about their funding needs and find the right business finance solution. 

Commercial Loans 

Commercial loans cater to a range of purposes like purchasing or refinancing commercial property, expanding business, or for working capital. These loans, often referred to as commercial finance, are typically secured by a lien on commercial property and require the borrower to provide financial documents like profit and loss statements, balance sheets, and cash flow forecasts. 

While commercial loans offer benefits like flexibility in repayment and competitive interest rates, they may not be suitable for all businesses due to factors like limited options for small businesses and long-term repayment obligations. 

Equipment Finance 

Equipment finance aids businesses in procuring essential equipment or vehicles without any upfront costs. This financing option, along with development finance, can be particularly beneficial for businesses in industries like: 

where specialized equipment is often required. 

By spreading the cost of equipment over time, businesses can maintain cash flow and invest in other areas of growth. 

Unsecured Loans 

Unsecured loans, which do not necessitate collateral, are typically utilized for short-term financing requirements. These loans are ideal for businesses that lack valuable assets to pledge or those with a strong credit history and steady cash flow. 

By working with an unsecured loan broker, businesses can find lenders willing to provide financing without the requirement of collateral. 

Navigating the Business Loan Process with a Broker 

Collaborating with a business loan broker includes preparing your application, negotiating the terms of the loan, and finalizing the loan agreement. Brokers can guide you through each step of the process, ensuring a smooth and successful loan application experience. 

Preparing Your Application 

Brokers can help businesses in the following ways: 

Negotiating Loan Terms 

A broker can help negotiate favorable loan terms, such as interest rates and repayment schedules. By leveraging their expertise and industry knowledge, brokers can advocate for the borrower and secure the best possible loan terms for their clients. 

Finalizing the Loan Agreement 

The broker will steer you through the concluding steps of the loan process, making sure all paperwork is finished and the loan agreement is endorsed. They can help identify and address potential issues that may arise during the finalization process, ensuring the loan agreement is completed smoothly and successfully. 

Alternatives to Business Loan Brokers 

Alternatives to business loan brokers encompass online lending platforms and direct bank applications. While these alternatives can offer some benefits, such as faster processing times and a more self-service experience, they may not provide the same level of personalized guidance and expertise as working with a broker. 

Online Lending Platforms 

Online lending platforms facilitate businesses in comparing loan offers from various lenders in a single place, providing increased control over the process. These platforms offer a convenient and efficient way for businesses to access financing, but lack the personalized guidance and negotiation skills of a broker. 

Direct Bank Applications 

Direct applications to a bank may suit businesses with an existing relationship or those seeking particular loan products. However, direct bank applications may not provide the same range of options and expertise as working with a broker, which could limit the chances of obtaining the most favorable loan terms. 

Summary 

In conclusion, working with a business loan broker can unlock financing opportunities for your company by providing access to a wide range of loan options, expert advice, and assistance in navigating the loan process. By understanding the role of brokers, evaluating their experience and expertise, and exploring alternative financing options, you can make informed decisions and secure the best possible loan terms for your business. Don’t leave your business’s future to chance – partner with a business loan broker and open the door to new possibilities. 

Frequently Asked Questions 

Can a broker help with a business loan? 

Yes, a broker can definitely help you with a business loan. They are well equipped with knowledge and expertise to source through a wide range of products to meet your specific financial requirements. 

What does a business finance broker do? 

A business finance broker can help you understand your finance needs and provide advice on the right financial solutions to suit your unique goals. They work with banks, credit unions and other lenders to source and apply for commercial loans and equipment and vehicle finance. 

How can a business loan broker assist in negotiating lower interest rates? 

Business loan brokers can help negotiate lower interest rates by researching loan options and negotiating with lenders on the borrower's behalf. 

What are the advantages of using a business loan broker? 

Using a business loan broker gives you access to a wider range of options, expert guidance, and assistance in securing beneficial loan terms, making the process easier. 

The Ultimate Guide to Business Financing: How to Secure Funding for Your Venture 

Are you an entrepreneur or business owner seeking funding for your venture? Navigating the world of business financing can be daunting. But worry not - this comprehensive guide will help you secure the funds you need to grow and succeed. We’ll cover a variety of financing solutions, tips for assessing your financial needs, and strategies for preparing a strong business plan. 

Key Takeaways 

Understanding Business Financing Options 

From traditional bank loans to emerging crowdfunding platforms, there are numerous financing options available for businesses. Each option has its own set of advantages, requirements, and potential drawbacks. Understanding the different types of financing can help you make an informed decision on which option best aligns with your business goals and financial situation. 

Bank Loans and Lines of Credit 

Bank loans and lines of credit are conventional financing options that typically require collateral and a good credit history. Securing a bank loan involves submitting an application to a financial institution. If approved, the bank will provide payment terms, including the applicable variable interest rate. Businesses that are well-established and can provide collateral, along with a proven history of creditworthiness, stability, and financial growth, are typically eligible for bank loans, which can be considered as borrowed money. 

Alternative financing options, such as equipment finance, invoice finance, and overdrafts, are also viable options for businesses seeking funding. These alternatives can be particularly helpful for businesses that may not meet the stricttough requirements of traditional bank loans or other business finance sources, including business loans. 

Grants and Government Programs 

Grants and government programs can be a valuable source of funding for small businesses. Offered by federal, state, and local governments, these programs often provide financing without the need for repayment. However, there are some important considerations to keep in mind: 

Researching grant opportunities from both national/federal government and local sources can provide entrepreneurs with a comprehensive understanding of available funding. Keep in mind that the application process for a small business grant can take between six weeks and several months to receive the final decision. 

Equity Financing and Venture Capital 

Equity financing involves raising capital by issuing shares in a company, also known as equity capital. Venture capital, a form of equity financing, is where a group of investors provides a significant sum of capital to a company in exchange for a portion of the company’s ownership. Venture capitalists typically invest in established businesses seeking to expand their operations. Companies can also secure capital from angel investors, high-net-worth individuals who provide capital for a single venture. 

Equity financing and venture capital, often provided by private investors and venture capital firms, can be attractive options for start up businesses with high growth potential and a strong business plan. However, entrepreneurs should be prepared to relinquish some control over their company, as investors will often expect a say in decision-making. 

Crowdfunding Platforms 

Crowdfunding platforms allow businesses to raise funds from a large number of people, often in exchange for rewards or equity. These platforms enable businesses to access a wide range of potential investors, possibly obtain more than the intended amount of funding, and evaluate the market for their product or service. Popular crowdfunding platforms for business financing include Kickstarter, Indiegogo, and StartSomeGood. 

However, there are some drawbacks to using crowdfunding for start-up financing. If the target funding is not reached, the money pledged by others is typically refunded, and your project can be overshadowed by the thousands of other crowdfunding ideas featured alongside it. 

Assessing Your Financial Needs 

A careful assessment of your financial needs is a critical first step before exploring the world of business financing. This involves analysing cash flow projections, growth potential, and available collateral to determine the best financing option for your venture. 

A clear understanding of your business’s financial needs aids in making informed decisions regarding the most suitable financing option for your goals and financial situation. 

Cash Flow Projections 

Cash flow projections are essential for determining the amount and type of financing needed for a business. To ensure accurate cash flow projections, you should: 

  1. Review historical financial statements 
  1. Explicitly outline plans and objectives 
  1. Establish effective communication channels 
  1. Periodically compare actual cash flow with projected cash flow 

A positive cash flow projection can increase borrowing capacity, while a weak or negative projection may limit it. 

Various tools and software are available to help businesses create cash flow projections, such as: 

Utilising these tools can enhance businesses’ understanding of their financial needs, thereby facilitating more informed decisions about financing options. 

Growth Potential and Expansion Plans 

When assessing growth potential, factors such as market size, the competitive environment, and the scope for expansion should be taken into consideration. The financing options should be tailored to the potential for growth and cash flow requirements of the business. Proper management of a business’s finances can eventually result in growth if executed correctly. 

Debt finance, equity finance, crowdfunding, and internal funds are commonly utilised for business expansion plans. For example, equity financing offers businesses the opportunity to access substantial capital without the need for repayment, providing extra working capital to fuel growth. 

Business Assets and Collateral 

Business assets can have a significant impact on a lender’s decision in a loan application. Here are some reasons why: 

Seeking professional appraisal from a qualified appraiser is recommended for accurately determining the value of business assets for loan collateral. This involves a professional evaluation of the worth of your asset or property. Another option is to consider the value of your inventory and accounts receivable, which can be perceived as collateral by lenders. 

Preparing a Strong Business Plan 

Securing financing requires a strong business plan. Lenders and investors need to see that you have a clear vision for your business idea, backed by thorough research and realistic financial projections. 

The following section explores the essential elements of a strong business plan, encompassing the executive summary, market analysis, and financial projections. 

Executive Summary and Company Description 

The executive summary and company description provide an overview of your business and its objectives. A well-crafted executive summary should include a mission statement, company information and management team, growth highlights, products/services, financial information, and market analysis. The company description in a business plan should generally include the Company Name, Business Structure, Ownership or Management Team, Location, Company History, and Mission Statement. 

Concisely presenting your business’s story and goals is critical to piquing the interest of potential lenders or investors. A compelling company description can demonstrate your passion and vision, as well as provide a solid foundation for the rest of your business plan. 

Market Analysis and Competitive Landscape 

Market analysis and competitive landscape play a vital role in demonstrating the viability and potential of your business. A thorough market analysis should include: 

A comprehensive competitive landscape analysis can help you understand your competitors, their strengths and weaknesses, and their market positioning. This information will allow you to identify opportunities for differentiation and create strategies to gain a competitive edge in the market. 

Financial Projections and Funding Request 

Financial projections and funding requests outline the financial needs and expected return on investment for potential lenders or investors. A detailed cash flow budget and profit and loss forecast should be included in your business plan, encompassing expected revenue, expenses, and profits. 

When formulating financial projections and funding requests, it’s crucial to: 

This information will help you demonstrate your business’s financial stability and growth potential to lenders and investors. 

Building and Maintaining Good Credit 

Securing financing necessitates good credit, encompassing both personal credit scores and business credit ratings. By building and maintaining good credit, you can improve your chances of obtaining favourable financing terms and conditions. The following section explores strategies for building and maintaining good credit and underscores the importance of personal credit scores and business credit ratings. 

Personal Credit Scores 

Personal credit scores can impact your ability to secure financing, especially for new businesses. Credit scores are determined by factors such as payment history, amounts owed, length of credit history, credit mix, and new credit. To build and maintain good credit, it’s essential to make payments on time, maintain a low credit utilisation rate, and diversify your credit mix. 

Entrepreneurs can access their credit score by utilising online platforms such as Dun & Bradstreet, Equifax, and Experian. By monitoring and improving your personal credit score, you can enhance your chances of securing financing for your business venture. 

Business Credit Ratings 

Business credit ratings help lenders assess the risk of lending to a business and can influence loan terms. These ratings are determined by analysing information from a business credit report, which includes factors such as: 

Maintaining a strong business credit rating involves making timely payments, responsibly managing debt, and periodically monitoring your business credit report for accuracy. A solid business credit rating can significantly improve your chances of securing favourable financing arrangements for your venture. 

Navigating Loan Application Processes 

The loan application process may pose complexity and challenges. However, with the right guidance and preparation, you can successfully secure funding for your business venture. The following section outlines the steps involved in navigating the loan application process, featuring the selection of the right lender, provision of required documentation, and negotiation of terms and conditions. 

Choosing the Right Lender 

Choosing the right lender for your business loan depends on factors such as the loan amount, interest rates, and repayment terms. Researching various lenders and comparing their interest rates and terms can help you identify the best financing option for your business. Keep in mind that it’s also essential to evaluate the overall cost of the loan, including any additional fees or charges, to gain a comprehensive understanding of the loan’s affordability. 

In addition to interest rates and fees, consider the lender’s reputation, customer service, and any additional services they may provide, such as financial advice and support. By carefully evaluating these factors, you can choose a lender that best aligns with your business’s financial needs and goals. 

Required Documentation 

Completing a loan application necessitates the provision of various documents, including financial statements, tax returns, and a business plan. Accurate financial statements, including an income statement, balance sheet, cash flow statement, bank statements, and tax returns, are essential for lenders to assess your business’s financial health and stability. 

Tax returns play a crucial role in the loan application process, as they provide detailed financial information about your business, such as income, expenses, and profitability. By preparing thorough documentation and seeking independent tax advice, you can improve your chances of securing favourable financing terms and conditions for your business. 

Negotiating Terms and Conditions 

Negotiating terms and conditions with your lender can help secure more favourable financing arrangements for your business. To negotiate a lower interest rate, research your current rate and compare it with the rates offered to new customers by your lender and competitor interest rates. Highlighting your strengths as a customer, such as a good credit score or a long-standing relationship with the lender, may also help you secure a better interest rate. 

If your lender does not offer a lower rate, considering refinancing to a better deal with another lender may be an option. Remember to evaluate the terms and conditions of the new loan in comparison to your existing loan to ensure that the new loan is more beneficial. 

Alternative Financing Options 

Businesses can also explore several alternative financing sources, such as invoice factoring, peer-to-peer lending, and equipment leasing, apart from traditional financing options. These alternatives can provide additional funding sources for businesses that may not qualify for conventional financing options or require more flexible financing solutions. 

Invoice Factoring and Financing 

Invoice factoring and financing allow businesses to access cash quickly by leveraging their unpaid invoices. By selling these invoices to a third-party factoring company at a discounted rate, businesses can improve their cash flow and effectively manage their working capital. Invoice factoring and financing can offer advantages such as reliable cash flow, prompt payment of invoices, and the capacity to undertake larger contracts. 

However, there are some drawbacks to using invoice factoring and financing, such as potentially expensive financing and associated risk. Businesses should carefully evaluate their financial needs and weigh the benefits and drawbacks of invoice factoring and financing before pursuing this alternative financing option. 

Peer-to-Peer Lending 

Peer-to-peer lending connects businesses with individual investors through online platforms, often offering lower interest rates and faster funding than traditional lenders. This alternative financing option is particularly suitable for newly established businesses or those with low credit ratings, as it provides easier approval than conventional loans. Popular peer-to-peer lending platforms include LendingClub, Funding Circle, and Prosper. 

By utilising peer-to-peer lending, businesses can access a diverse pool of investors, potentially secure more favourable interest rates, and obtain financing more quickly than with traditional lenders. However, it is essential to carefully research and compare various platforms to determine the best fit for your business’s financial needs. 

Equipment Leasing 

Equipment leasing enables businesses to use essential assets without purchasing them outright, preserving cash flow and reducing upfront costs. Businesses can lease equipment for a predetermined duration, usually at a fixed rate, and have the option to upgrade or replace equipment as needed. Equipment leasing offers benefits such as improved cash flow, flexibility and scalability, lower risk, predictable costs, and access to better equipment. 

However, there are some potential drawbacks to equipment leasing, such as higher total costs and unavailability of capital allowances for leases shorter than five years. When considering equipment leasing, businesses should carefully weigh the benefits and drawbacks to determine if this alternative financing option aligns with their financial needs and goals. 

Summary 

Securing funding for your business venture can be a complex and challenging process. By understanding the various financing options available, assessing your financial needs, and developing a strong business plan, you can improve your chances of securing the necessary funds to grow and succeed. Whether you choose traditional financing methods or explore alternative options, be sure to weigh the benefits and drawbacks of each option to make the best decision for your business. 

Frequently Asked Questions 

What is meant by business finance? 

Business finance is the process of obtaining funds and managing finances to support business expenses, investments, and growth. It encompasses budgeting, raising capital, managing cash flow, and making financial decisions for profitability. 

What is the best financing option for a business? 

For many business owners, the best financing option is tapping into family and friends or looking for bank funding and investors. Factoring is also an option for those unable to get traditional financing. 

Can you borrow money for a business? 

Yes, you can borrow money for a business, with the amount depending on factors like cash flow and eligibility criteria. Business loans involve borrowing a lump sum of money from a financial institution to be repaid over the loan term with interest and fees. 

What is a business financier? 

A business financier is an individual, company, or government who provides money for business projects or companies, often acting as an investor, banker, capitalist, or tycoon. 

How can I improve my chances of securing a business loan? 

To improve your chances of securing a business loan, build and maintain good credit, create a strong business plan, and provide all required documentation to lenders. 

Navigating the Myths and Differences of a Caveat, First and Second Mortgage

The process of obtaining a loan secured by property can be overwhelming, and it's no surprise that many people get confused about the different types of mortgages available. Three common terms that often get mixed up are caveat, first mortgage, and second mortgage. In this article, we'll explore the differences between these types of mortgages and dispel some common myths.

What is a caveat loan?

A caveat is a legal encumbrance that can be placed on a property's title to prevent any further dealings with it until a specific issue is resolved. A caveat can be lodged by anyone who has a claim on the property, such as a creditor who is owed money by the property owner or someone who is disputing ownership. Once a caveat has been lodged, it prevents the property owner from selling or refinancing the property until the issue has been resolved.

A caveat is not a mortgage (we will explain what that is below!), nor does it grant any interest in the property. It is simply a legal notice that there is a dispute or claim on the property.  In Australia however, it’s become somewhat common for a “caveat loan” to be used as a short-term solution to obtain a business loan, cash flow or quick funds for any purpose.  It’s usually found in circumstances when there are already existing charges, such as a mortgage, or indeed another caveat on the property title. 

Advantages are that a caveat does not need consent from any other creditor, does not require the borrower to refinance their existing debts, including what could be a very cheap first mortgage, and in the modern world of PEXA, can be lodged in a matter of minutes.  On the flip side, the risk is significantly higher to the lender as their claim would rank behind any other encumbrance on title, they would not have consent of prior secured creditors and may not even have a clear idea of what other creditors are owed. So, caveat loans tend to be very expensive to compensate the lender.

Discover more on caveat loans, here.

Understanding a first mortgage

Switching from Latin, the word "mortgage" comes from Old French, and its literal meaning is "dead pledge."In the early days of property ownership, a "mortgage" referred to a pledge or promise of property that was given to a lender as security for a loan. The property was said to be "dead" because it was forfeited to the lender if the borrower failed to repay the loan.

A property can in theory have unlimited mortgages on title, however each one ranks in priority – meaning that in the event of multiple “mortgagees” needing to recover their loans, the first lender gets paid first, anything left over goes to the second lender and so on until all debts are settled, or alarmingly, the proceeds of the property are exhausted. 

A first mortgage is often the primary loan taken out to purchase a property. It is secured against the property, which means that if the borrower defaults on the loan, the lender can take possession of the property and sell it to recover their money. The lender has the first priority claim on the property, hence the term "first mortgage."

First mortgages almost always have lower interest rates than second mortgages (or caveats), as they are considered less risky for lenders. The interest rate and other terms of a first mortgage will depend on the borrower's credit score, income, and the size of the deposit.

How does a second mortgage work?

A second mortgage is a loan taken out on a property that already has a first mortgage. The second mortgage is "subordinated" to the first mortgage, meaning that if the borrower defaults, the lender of the first mortgage gets paid back first, and any money left over goes towards paying off the second mortgage.

Second mortgages have higher interest rates than first mortgages, as they are considered riskier for lenders. They are also typically for smaller amounts than first mortgages and have shorter repayment terms. Second mortgages can be used for a variety of purposes, such as business or commercial loans, debt consolidation, cash-out (equity release) or any other purposes.  Advantages are usually that the borrower does not have to disturb their first mortgage, which would usually be cheap and offered by a mainstream bank.  The main disadvantage of a second mortgage is the need for the second lender to obtain consent from the first mortgagee, including the bank confirming the limit of their debt (ie – their maximum claim).   This is a slow process and can often be significantly slower than simply asking the first mortgage lender to provide a discharge of their debt entirely!  However, whilst more expensive than a first mortgage, a second mortgage would be cheaper than a caveat loan.

Learn more on why you would consider a second loan, here.

The differences between a caveat, first and second mortgage

Now that we've covered the basics of caveat, first mortgage, and second mortgage, let's dispel some common myths about these types of mortgages.

Myth #1: A caveat is the same as a mortgage.

As we discussed earlier, a caveat is a legal notice that there is a dispute or claim on a property. It is not a mortgage, nor does it grant any interest in the property.

Myth #2: A second mortgage is always a bad idea.

While second mortgages have higher interest rates and are considered riskier for lenders, they can be a good option for some borrowers. For example, if a borrower has built up significant equity in their property, a second mortgage can provide access to cash for any purpose so often a handy trick for small businesses wanting to use the equity in their home.  However, it's important to carefully consider the terms of the loan and ensure that the borrower can comfortably make the required payments.

Myth #3: A first mortgage is always the best option.

While a first mortgage is often the most common way to finance a property purchase, it's not always the best option. For example, if a borrower has a low credit score or is self-employed, they may have difficulty qualifying for a first mortgage

Get in contact with our team today to discover which loan can grow your business.


The Australian Economy: What can we expect

What will 2023 bring for the Australian Economy? Interest rates are expected to rise further, home prices are predicted to continue falling, and the demand for refinancing is projected to increase, especially with the looming cliff of fixed-rate mortgages ending. But what does this mean for brokers, borrowers, businesses and property owners? Here's a look at what you can expect in the coming year.

More interest rises on the way

This time last year, the RBA governor was still claiming that interest rates may not rise until 2024.  Fast forward to the end of the year, the economy saw a total of eight interest rate increases as the central bank aimed to combat rising inflation. Despite these efforts, inflation remained high, and still rising.  The December Consumer Price Index (CPI) showed a further increase, reaching 7.8% and woefully above target, indicating that more rate hikes could be on the horizon in 2023.  According to Phil O'Donaghoe, the Chief Economist of Deutsche Bank, there could be four more interest rate increases before the central bank tapers, though the increases could be at longer intervals than the monthly hikes of 2022.

The end of ultra-cheap fixed rates

As the end of fixed interest rates approaches for many mortgage holders, there is a growing concern that a financial cliff is on the horizon.  Many homeowners and purchasers during the pandemic took advantage of stimulus lead ultra-cheap fixed rates with the vast majority fixed around the 2% mark. The RBA estimates that by the end of 2023, around 23% of all Australian home loans, worth nearly $500 billion, will switch from fixed to variable interest rates.  Repeat:  23% of borrowers could see an overnight increase in their mortgage payments of at least 40% sometime this year.

Property listings expected to rise

There will be consequences.  In a well-functioning property market, there is an equilibrium between buyers and sellers, with prices set by supply, demand and critically – cost of debt.  More than half of all owner-occupiers, 3.3 million households, currently have a mortgage.  In a typical year, approximately 5% of the entire Australian residential dwelling market transacts.   When the debt burden increases sufficiently, this tips the market off balance on both sides of the equilibrium – more sellers coming to market to offload too high debt servicing costs, onto fewer buyers who similarly cannot carry the debt burden.  This inevitably leads to downward pressure on prices.

The RBA themselves confirm the theory on the assumption of the cash rate moving to 3.6%.  According to their data on residential mortgage-backed securities, over 50% of all borrowers are projected to experience a significant decline in their "spare cash" – incomeless mortgage payments and essential living costs.  Worryingly, 15% of these borrowers will see mortgage payments and essential living expenses grow to be more than their incomes. 

Wage increased to the rescue?

Sadly not.  Though rarely implicitly explained, central banks increase interest rates to reduce inflation.  When inflation is high, it erodes the purchasing power of consumers, making it more difficult for them to afford the things they need, fuelling increased wage demands, and further exacerbating the problem of higher costs of goods and services.   A spiral that is hard to control other than increasing interest rates.  This addresses high inflation, alas, by also eroding the purchasing power of consumers - their “spare cash” is reallocated to debt servicing rather than consumption.

Not good news for businesses as demand slows for goods and services, corresponding with the fact that higher interest rates also apply to business loans.  As business cash flows evaporate, unemployment appears to be more likely than wholesale wage growth.

Reasons to cheer

The Australian immigration rate is expected to return to normal levels in 2023 after being heavily impacted by the COVID-19 pandemic.  In fact, treasury forecast show a record year of 300,000 net warm bodies arriving on Australian shores by years end, a healthy increase on the 33,000 arriving in 2020.  

Increased immigration brings a variety of benefits to the economy, including increased spending, increased demand for housing, and the addition of new talent and skills. This can result in higher economic growth and job creation, as well as a more diverse and dynamic economy. Additionally, regional immigration drives can help to offset declining populations in some areas, which can help to prop up the balance of economic activity across the country as Australia navigates the tricky year ahead.

Resources

After decades of mostly negative trade balances, Australia is experiencing an increasing trade surplus, with recent further increases due in part to the ongoing conflict in Russia and Ukraine. The conflict has driven demand for natural resources in Australia's direction, as countries seek to secure reliable sources of energy and raw materials. As a result, Australia's exports have been surging, a positive indicator of the strength of the Australian economy, and suggests that the country is becoming increasingly competitive on the global stage.

Increased demand in the year ahead for natural resources, such as coal and iron ore, should have a positive impact on the country's mining sector, creating jobs and boosting economic activity. The trade surplus is also expected to provide a boost to the Australian dollar, which should make imports cheaper, which in turn, does not hurt inflation busting measures discussed above.

Relativity

Regardless of headwinds being faced as 2023 progresses, when comparing the net wealth of Australians to other countries, Australia consistently ranks high globally. According to the Credit Suisse Global Wealth Report, Australia was ranked as the eighth wealthiest country in the world in 2021, with a median wealth per adult of US$219,505. This places Australia ahead of many other developed countries, including the United Kingdom, France, and Canada.

Factors contributing to the high net wealth of Australians include its rich natural resources, strong financial sector, and consistent net immigration.   Another factor contributing to the high net wealth of Australians is the country's property market, which has been characterized by rising prices and strong demand in recent years up until rate hikes mid-way through 2022.

4 Types of loans you should know about

Running a business means there’s lots on your plate. Everyday is a new obstacle, task or problem that you need to source a solution for. When it comes to funding your business and sourcing finance, we’ve made finding a solution easy for you. This article outlines the four types of loans you should know about.

We have been sourcing financial solutions for business owners for numerous years. In that time, we have determined the four most important types of loans, caveat loans, second mortgages, development loans and small short-term loans.

Caveat loans

A caveat loan is a great option for a business owner who needs to source funds quickly. Caveat loans are a great short-term funding solution for a time sensitive opportunity. Obtaining a loan from a traditional lender is often difficult and time consuming. The advantage of a caveat loan is that you can obtain the funds within a matter of days from submitting your application.

How does a caveat loan work?

A caveat loan works by placing a caveat on the title of your property. This secures the real estate and the lender is registered like a mortgagee. The caveat loan is lodged on the title behind your existing mortgage, which means you are prevented from selling the property without permission from the caveat loan provider. The caveat is released once you either refinance, repay or of date from settlement of the property’s sale.

Many opt for a caveat loan as a short-term financial solution for the business. When you’re at a crossroad and weighing up your options, finance is often a critical part in the decision-making process. With a caveat loan, you can make decisions based on opportunity as opposed to your financial position. Meaning, if there is a time sensitive opportunity where the business will benefit immensely from, you can continue to grow and profit from it by obtaining a caveat loan instead of missing out on the opportunity.

Learn howcaveat loanscan help your financial situation.

Second mortgages

A second mortgage is a type of loan that allows you to borrow funds based on the equity of your property, this is placed over your first mortgage. When comparing types of loans for your business, the interest rate is often analysed when selecting which is best for you and your financial situation. With a second mortgage loan, the interest rate is far lower compared to alternative loans, which makes it enticing for when you need extra funds for your business.

What are the benefits of a second mortgage loan?

Securing a second mortgage loan has many benefits for a business owner, we have listed some of the benefits below:

Discover how second mortgages can be beneficial to you and your business through our article ‘Reasons to consider a 2nd mortgage’.

If you have equity on your property and you find yourself unable to extend or refinance your first mortgage, securing a second mortgage for your business may be your best option.

Asecond mortgagecan help your business, learn more about how today.

Development loans

When you are in the process of property development, unexpected costs can occur. Recently we’ve seen the construction industry under pressure, struggling to source materials with inflated costs involved. Sourcing funds for your development idea can be incredibly difficult as banks often have an extreme risk adverse when it comes to developing property.

We know developing property is tough, there are lots of things you need to think about, and finance shouldn’t be one of them. Our team at Simply Funds are here to alleviate your financial stress, so you can continue to develop that way you want.

Whether you are sourcing funds for either a residential or commercial property, we can obtain quick funds for you up to $100m.

Discover how we can help finance your propertydevelopmenttoday.

Short-Term Business Loans

Securing a loan can often feel daunting, with a short-term business loan we work to source what is suitable for you. A short-term business loan often entails a 12-month repayment period that helps business owners on day-to-day matters. We source the funds you need for your business, that is affordable to you, with a highly competitive interest rate.

Why would I consider a short-term business loan?

Sourcing a short-term business loan can help secure the growth and profitability in your business.

  1. Overcome financial distress
  2. Increase cash flow and business operations
  3. Improve or expand the business

Each business is unique and has their own financial needs and requirements. We design short-term business loans to overcome difficulties, capitalise growth and increase output.

Learn how ashort-term business loancan benefit your business.

Being a business owner is hard, especially when it comes to the ever-changing financial needs of business. We offer a variety of loans and determine which loan is best applicable to your unique business and situation. We act quick, as time is of the essence and seize opportunities at hand to grow your business. We provide a quick and easy 6-step application to obtain finance for your business,applytoday.

Understanding Loan To Value Ratio (LVR)

When seeking funding in the form of a loan, it is important to understand a range of key concepts that apply to lender assessed financial products. This includes terms such as loan repayments, credit rating, equity, interest rates, valuation, stamp duty, and more. Another term that you should become familiar with is Loan To Value Ratio (LVR). Understanding LVR will allow you to quickly assess your financial position and calculate your borrowing capacity.

What Is Loan To Value Ratio?

Loan To Value Ratio (LVR) is a frequently used term in the world of finance, especially with respect to lending and loan applications. LVR is displayed as a percentage and is used to describe the amount being borrowed with respect to the value of the asset being used as collateral. The ratio allows lenders to determine the risk associated with a loan and set a limit depending on a wide range of circumstances.

What Is The Maximum LVR Allowed With Business Loans?

Many business owners use the equity available in personal assets such as real estate to get funding for business purposes. Using a personal home as collateral provides borrowers access to secured business loan products. Some of the major attractions of secured loans is that they have lower interest rates than other alternative forms of financing such as personal loans and credit cards.

When it comes to business loans, several factors are considered by the lender when determining the maximum LVR allowed. Simply Funds allows a maximum LVR up to 75% for business loans secured using residential or commercial property located in metropolitan areas. The maximum LVR is lower for real estate located in regional or rural areas, and the same applies to vacant land.

LVR and Buying Your First Home

For many people, the first encounter with LVR comes when buying your first home and making a home loan application. To determine your borrowing capacity when applying for a home loan, a lender conducts a valuation of the property being purchased. This is not necessarily the purchase price but rather the market value of the real estate in question. As a result, you must be careful when buying a property and trying to calculate what your LVR will be.

There are several other factors that also need to be noted. Any loans above an LVR of 80% are subject to Lenders Mortgage Insurance (LMI). In general, upfront costs such as bank valuations and Lenders Mortgage Insurance are not included in the loan amount when calculating LVR. It is not enough for a borrower to know what their loan repayments will be. You should be aware of the terms and conditions, the potential impact of a high LVR, and any risks associated with interest rate fluctuations.

Calculating LVR

Loan value ratio (LVR) is calculated by dividing the loan amount by the value of the asset. the application of LVR will vary depending on the purpose of the loan application. Examples of this are buying a property and using the equity in a property to borrow funds.

Buying A Property

Most lenders determine the value of the asset by conducting a formal valuation rather than simply using the purchase price.

For instance, the property is valued at $2,000,000 and the borrower has $475,000 in savings. Stamp Duty and associated cost total $75,000 leaving a deposit of $400,000. In this case:

Amount to be borrowed
=Value of Property – Deposit
=2,000,000 – 400,000
=$1,600,000

Loan to Value Ratio (LVR)
=Loan Amount/Value of Property
=1,600,000/2,000,000
=80%

Using Equity To Access Funding

This is slightly different to buying a property as in many instances a lender will use the LVR to indicate its risk appetite. When it comes to business loans, Simply Funds has a maximum LVR of 75%. Using this as a guide, a potential applicant is then able to gauge how much they can borrow using the equity in their personal property.

Using a business owner with a property valued at $750,000 we can calculate the following:

Amount that can be borrowed
=Value of Property x (75/100)
=$750,000 x 0.75 (75%)
=$562,500

LVR Business Loan Examples

The following examples display the role of LVR when it comes to business loans. You will see that the borrowing capacity relies heavily on the value of the asset and the underlying equity in it.

Caveat Loan

A caveat loan is a short-term business loan in which finance is obtained and secured by a piece of real estate. They can be taken out on properties that are unencumbered (clear title of ownership) or those which have an existing mortgage attached to them.

In the following example, the owner of a proprietary company requires funding to expand their business operations. They have an unencumbered (clear ownership) regional commercial property valued at $500,000. Due to the location and type of the property, the lender is happy to offer a maximum LVR of 70%. Using the value of the property and LVR, we can calculate the amount that can be borrowed:

Amount that can be borrowed
=(Value of Property x (70/100)
=500,000 x 0.70 (70%)
=$350,000

Caveat loans are a fast and easy financing option. They can be settled and funded in a matter of days. If you require funds within a 24 hour period, Simply Funds offer a number of fast business loan options.

Second Mortgage

A second mortgage is a loan secured by a property in addition to the primary mortgage. There must be an existing mortgage on the property to be able to access this product, and it is different to refinancing. Major financial institutions such as banks have strict lending guidelines and a limited risk appetite. As a result, many business owners look to obtain additional funding from alternative lenders such as Simply Funds. The additional funds granted in this scenario are referred to as a second mortgage.

For this example, the real estate being used is a commercial property in a metropolitan area. It is valued at $1,000,000 and has an existing mortgage of $300,000. Due to the location, Simply Funds is happy to allow a maximum LVR of 75%.

Amount that can be borrowed
=(Value of Property – Existing Mortgage) x (75/100)
= ($1,000,000 – 300,000) x 0.75
=700,000 x 0.75
=$525,000

If you are a business owner that has equity in personal property, Contact Us today to find out more about our small business loans.

Reasons To Consider An Unsecured Business Loan

Challenges are a daily occurrence in the world of business. More often than not, business owners mistakenly view these challenges as an obstacle rather than an opportunity. Obtaining business finance is one of the most effective ways to overcome financial distress, increase output, or expand operations. Instead of accumulating excessive business credit card debt, you can get access to funding using a range of affordable alternative methods.

An unsecured loan is a fast and effective way to get business finance. Before detailing some of the most common reasons to consider an unsecured loan, we will first look at some basic facts, features, and frequently asked questions.

What Is An Unsecured Business Loan?

An unsecured loan allows you to obtain finance for your business without providing an asset as collateral. Unsecured business loans are not guaranteed and are generally short-term in nature. Instead of using collateral to assess a business loan application, lenders take into account other factors such as business cash flow and creditworthiness including credit score.

What is the Difference Between a Secured and Unsecured Loan?

The main difference between the two is that a secured loan involves the use some form of collateral to obtain finance. Real estate is the most common asset utilised with equipment, motor vehicles, and accounts receivable among other options. Caveat loans and second mortgages are examples of secured loans. In contrast, an unsecured loan does not require the use of physical assets as a form of security. Instead, factors such as cash flow are taken into consideration as part of the lending criteria.

Do I need an Unsecured Business Loan?

This is a question you should ask yourself before considering any business loan. There is not a person out there, including a potential lender, that knows your business better than you do. That includes your business goals, financial position, and ability to repay any additional debt. In situations where there is sufficient collateral, a secured business loanshould be preferred. If you need funds quickly and have the capacity to pay off a loan with a higher interest rate, exploring an unsecured business loan is a viable option. Factors that should be given careful thought include the loan amount, fees and charges, along with the terms and conditions.

Top Reasons to Consider an Unsecured Business Loan

Now that you understand the key concepts, here are some of the advantages and most common reasons to consider an unsecured business loan:

No Need For collateral

This is a distinguishing feature of unsecured loans and one of the main attractions associated with them. Unlike other small business loans, unsecured loans do not require any collateral to obtain finance. As a result, you do not have to be worried about losing personal assets such as your home or motor vehicle. This reduces the risk for the borrower and allows you to maintain full flexibility by having separate investment loans.

Fast and Easy Access to Funding

Small businesses can get easy access to funding through an unsecured business loan. Unlike major banks, alternative lenders such as Simply Funds make it easier to qualify for a loan. Relaxed lending criteria, a streamlined application process, and the absence of collateral simplify the lending process. There is no need to conduct a valuation on real estate as no collateral is being used, with an answer and estimated loan summary provided in a matter of hours.

Simple Application Process

A streamlined application process allows small business to obtain funding in as little as 24 hours. This is not possible with most major financial institutions such as banks as they have stringent lending criteria and a range of minimum requirements. A distinct feature of Simply Funds fast business loans is an application process that can be completed in minutes. It is an obligation-free process with no credit check conducted for pre-approval. In many instances, there is no need to provide detailed financial documents such as tax returns. Simply Funds flexible lending criteria allows you to obtain finance using basic personal and business details.

Flexibility

As we are not bound by strict lending guidelines, Simply Funds can tailor an unsecured business loan that suits your business purposes and requirements. Our team of experts specialise in dealing with businesses that require instant funding. We will advise you on the most appropriate loan option and design a repayment plan that is aligned with your cash flow. This may include making no repayments for a certain period and subsequently allowing you to make full use of the funds.

Capitalise on Opportunities

Taking one step at a time and slowly expanding sounds like a sound business plan. It generally means minimal debt which translates to lower levels of risk. What the ‘slow and steady’ mentality does not consider is that it could mean missing out on opportunities that can provide significant financial benefit. A simple example can be the removal of a key competitor from the marketplace. In such instance, an opportunity presents itself to acquire new clients and take a bigger piece of the market share. Winning new contracts may require you to quickly expand your operation. This may include new equipment, additional inventory, and the requirement for more staff. Obtaining finance using an unsecured business loan will allow you to capitalise on opportunities and catapult your business into a better financial position.

Bad Credit

Short-term business loans are a viable option for those with a bad credit history and no collateral. This includes established businesses or start-ups with a low credit score or previous defaults. Almost all major financial institutions instantly reject applications from businesses with previous defaults (no matter how small). Unsecured loans such as bad credit loans can also be an effective way to improve your credit rating. Most unsecured loans are for a small amount that is to be repaid within 12 months or less. This allows businesses to improve their credit health which can create additional lending options in the near future.

For more information regarding unsecured business loans, Contact Us today.

What Is A Caveat Loan?

When it comes to short term business finance, one of the most difficult tasks faced by business owners is finding the product that will best suit their needs. A basic lack of understanding is a common issue, and we are here to solve it. An injection of cash flow can help you capitalise on business opportunities or deal with any unexpected hurdles.

If you have equity in your property, a caveat loan is one financing option that may be available to you. A caveat loan is a secured loan in which finance is obtained by using a piece of real estate as collateral. For a loan to be approved, a caveat is lodged on the title of ownership of the property. The caveat acts as a warning to inform other parties that someone has an interest in the nominated real estate.

Knowledge of the features, application process, and impact of having a caveat will allow you to determine if it is an appropriate financing alternative.

Caveat Loan Features

What Is The Purpose Of A Caveat?

A caveat is a notice that informs the wider public that there is an interest in the nominated land or property. With respect to caveat loans, a caveat is placed on the real estate being used to obtain finance to prevent the owner from selling, transferring, or dealing with the property without the consent of the caveator. When a loan is secured and a caveat is active, the real estate in question cannot be used as collateral for any additional loans.

What Is the Difference Between A Caveat and A Mortgage?

A caveat is not a mortgage or second mortgage. The main difference lies in the rights of the party who is taking an interest in real estate. A caveat prevents the owner of the property from undertaking certain actions with respect to the property including selling or transferring ownership. In contrast, a mortgage gives the lender the right to sell the property if the borrower fails to make repayments on time and subsequently defaults.

The loan terms, in particular the loan amount and time, are also noticeably different. With short terms caveat loans, you are generally required to repay the loan in 6 to 12 months. Unlike mortgages which required a minimum repayment on a fortnightly or monthly basis, caveat loans are more flexible. At Simply Funds we can tailor your repayments so that they are aligned with the cash flow of your business.

Caveat Loan Application Process

What Types of Real Estate Can Be Used?

Prior to applying for a caveat loan, it is essential to be aware of the types of real estate that can be used. At Simply Funds, we accept residential and commercial property, along with vacant land. This includes real estate located in metropolitan, regional, and rural areas. Applicants should be aware that the location of the real estate has an impact on the access to funding and the amount that can be borrowed.

How Much Can I Borrow With A Caveat Loan?

The amount that you can borrow with a caveat loan will depend on a variety of factors including the value of the real estate, the type of property, its location, and the equity currently available. Those with equity in a residential or commercial property in a metropolitan area can get up to 75% LVR (loan to value ratio). As mentioned above, rural property and vacant land can be used but with a decreased LVR. The loan to value ratiois used to express the ratio of the loan to the asset being used as collateral.

How Long Does It Take For A Caveat Loan To Be Processed?

As caveat loans are secured, the entire process including funding can be complete in a matter of days. We conduct desktop property valuations which helps speed up the process. Our streamlined application process takes minutes to complete with no credit checks required for pre-approval. Once your caveat loan application is approved, we will apply for a caveat on the property being used. The process of lodging a caveat may take 2-3 business days. If you require funds within a 24 hour period, Simply Funds offer a number of fast business loan options.

What Documentation Is Required?

At Simply Funds we understand the value of time. Thanks to our flexible lending criteria we can provide business finance with minimal documentation. Many financial institutions require proof of income and expenses along with multiple tax returns to gain a loan approval. This is not the case at Simply Funds. As they involve the use of real estate to secure the loan, we can provide business finance with basic personal and business details.

Low Interest Rates

One of the major benefits of caveat loans is that they have significantly lower interest rates attached to them. Other business loan types, personal loans, unsecured loans, and the use of credit cards can place unnecessary financial stress on business owners. Caveat loan interest rates offer a more affordable option because of the added security that is provided by using your property as collateral.

Impact of a Caveat

Can A Property Be Sold If It Has A Caveat?

If there is a caveat on a property, the owner cannot sell or use it to obtain another loan. The same applies to the caveator (lender) who does not have the right to take possession of or sell the property in the event of a default. If you have multiple properties with caveats on them, you should look to free one of them up if there is enough equity available. This would allow you to explore other business loan options.

Can A Caveat Be Challenged or Removed?

There are situations where a caveat can be challenged or removed. The first is by requesting the caveator to do so by lodging a form to the relevant registry. Other methods include the use of a lapsing notice or applying to the supreme court. Only parties with a valid interest described as a ‘caveatable interest’ can lodge a caveat.

When Is A Caveat Released?

In relation to short term caveat loans, the caveat attached to the real estate is released one the loan has been fully repaid.

For more information regarding small business loans including caveat loans, Contact Us today and speak to one of our lending specialists.

Reasons To Consider a 2nd Mortgage Loan

If you require additional cash flow for your business or other personal reasons, using the equity in your property may be a viable option. Contrary to the thoughts of many, you can use personal real estate which has an existing mortgage as security for a loan provided there is equity available. A flexible lending criteria and fast loan settlement make second mortgages an effective alternative to mainstream lending.

What is a 2nd mortgage loan?

A second mortgage is a loan taken out whereby the property being used as security already has an existing mortgage. Multiple mortgages can use the same property as security with priority determined by the order that they are lodged. As they are classified as a secured loan, second mortgages offer significantly lower interest rates than unsecured loans such as personal loans and credit cards.

How do 2nd mortgages work?

Prior to taking an in-depth look at second mortgage loans, it is essential to understand the concept of home equity and how it applies. To get a second mortgage loan, you must have some level of equity available. To calculate the amount that you can borrow, you must know the following:

Second Mortgage Loan Example

The applicant owns a residential property that is valued at $2,000,000 and has an existing mortgage of $1,000,000. The lender specifies a maximum LVR of 70%.

Second mortgage loan amount that can be borrowed:
= (Value of Property – Existing Mortgage) x (70%)
= ($2,000,000 – 1,000,000) x 0.7
= 1,000,000 x 0.7
= $700,000

In this example, the applicant would be able to borrow up to $700,000 with a second mortgage loan. Prospective applicants should be aware that they may have equity available in their property even if they are yet to repay a significant amount of the principal debt. Beneficial fluctuations in real estate prices can create equity in your property that you never knew you had.

What are the characteristics and features of 2nd mortgages?

The characteristics and features of second mortgage loans are highlighted by two key aspects, namely the lending criteria and application process.

Lending Criteria

A significantly more flexible lending criteria than traditional lenders such as banks is one of the key reasons for the increase in use of second mortgage loans. Unlike mainstream lending institutions, Simply Funds is open to lending to applicants with bad credit or a low credit score. As a low-doc loan, applicants are not required to submit an exhaustive amount of detailed financial documents. A loan-to-value ratio (LVR) up to 70% ensures wide lending parameters while the line of credit type facility, similar to a home equity loan, provides an interest only option on repayments.

Application Process

At Simply Funds we pride ourselves on being able to provide an obligation-freeapplication process that can be completed in minutes. No credit score checks are conducted for pre-approval and desktop property valuations prevent any unnecessary delays. These characteristics place us in a position where we can approve a second mortgage application and provide funds within 48 hours.

What can 2nd mortgages be used for?

Knowledge of common uses and potential benefits will allow those looking to get a second mortgage to make an informed decision. Second mortgage loans are often used for the following purposes:

  1. Cash Flow: With no restriction on usage, many business owners utilise second mortgages to obtain money that can be used for business purposes. Just like other business loans, funds can be used to improve key business areas including finance, inventory, equipment, and marketing.
  2. Alternative to Refinancing: Although refinancing with the lender of your first mortgage makes the most sense, it is not always possible. Many applicants are required to seek alternative methods if their application for refinancing has been rejected, or when they need funds in a timely manner. In addition, alternative financing such as a second mortgage may be more cost-effective. Persons with fixed rate home loans may face significant break costs before being able to refinance.
  3. Debt Consolidation: The competitive interest rates associated with second mortgages make them a viable option for those looking to pay off existing debts such as credit cards which are incurring significantly higher interest rates.

What are the benefits of 2nd mortgage loans?

Second mortgages provide numerous benefits when compared to other loan products. They include:

  1. No Restriction on Usage: There is no restriction with respect to the manner which funds can be used.
  2. Fast: Second mortgages are considered fast loans as they can be approved, settled, and funded in less than 48 hours.
  3. Lower Interest Rates: Other lending products such as credit cards, personal loans, and other unsecured loans have significantly higher interest rates than those provided by second mortgages.
  4. Application Process: As already mentioned, the application process takes minutes with minimal documentation requirements and desktop valuations ensuring a seamless process.
  5. High LVR of 70%: Applicants to borrow up to 70% LVR with Simply Funds. This figure may decrease depending on the type of property being used as security and its location.

How do I get a 2nd mortgage loan with Simply Funds?

Getting a second mortgage loan with Simply Funds is easy. As is the case with all our loan products, the online application process can be completed and submitted in just minutes. It takes a handful of steps to get the finance you need and best of all, we do not require formal valuations or detailed financial documentation.

Once you have submitted an online application, one of our lending specialists will contact you to obtain some basic information. They will help determine your requirements and ask some basic questions regarding your assets and liabilities. They will then conduct a desktop valuation of the property being used as security and prepare the loan documents. Once signed, the loan is processed, and the funds made available to you. Submit an online application today and find out if you are eligible to get a second mortgage loan with Simply Funds.

A Comprehensive Guide to Secured Loans

The world of business continues to evolve, and the lending space is no exception. There is an increasing demand for secured loans which has brought about changes in many areas. New loan types, faster settlement, and a shift to alternative sources of funding are just the tip of the iceberg. We take an in-depth look at secured business loans and how they can be utilised to build a strong financial future.

What is a secured loan?

Secured loans are a popular and convenient financial solution where a form of collateral is used to obtain finance. Secured loans allow you to leverage existing assets to obtain funds which can help turn weaknesses into strengths and threats into opportunities. Whether you are looking to consolidate debt, acquire new equipment, or expand your business operations, a secured loan with Simply Funds can help elevate your business.

How do I apply for a secured loan?

It has never been easier to apply for a secured business loan. Simply Funds has created a fast application process that can be completed in minutes. As holders of an Australian Credit Licence, our expert team can effectively assess your financial situation and recommend a loan product which is most suitable for your needs. Once approved, a lending specialist will prepare the loan documents for signing and the funds made available shortly after.

What information do I need to apply for a loan?

There is a growing demand for alternative financing with major lending institutions becoming increasingly risk averse. Mainstream lenders such as banks require an excellent credit history and a substantial amount of financial statements. As a result, the approval process can be both lengthy and strenuous.

This is not the case with Simply Funds as many of our loan products do not require substantial financial records such as tax returns, bank statements, expenditure reports, sales records, and cash flow projections. Depending on the type of loan you are applying for, basic information with respect to your assets and liabilities will often suffice. Desktop real estate valuations help save time and when necessary, we can make the funds available to you within 48 hours.

What is the difference between unsecured and secured loans?

The main difference between unsecured and secured loans is that the latter requires the use of collateral to obtain finance. A lien gives the lender a claim to the asset being used to secure the loan until the debt is paid off. If the borrower fails to make repayments as outlined in the terms of the loan and subsequently defaults, the lender has the right to sell the asset to recover any money owed.

What are the different types of secured loans?

There are many different types of secured loans. Home loans are the most recognisable with secured personal loans such as car loans also extremely popular. In relation to secured business loans, the most common are:

What are the benefits of secured loans?

The use of an asset as security significantly decreases the risk associated with loan for the lender. This creates a more comfortable lending environment that borrowers can benefit from. Some of the advantages associated with secured business loans include:

  1. Larger Loan Amount: As the lender has collateral available in the event of a default, the risk of lending is diminished allowing for significantly larger loan amounts. The amount that can be borrowed will depend on the value of the asset and the equity available in it.
  2. Lower Interest Rates: Like above, lenders can offer significantly lower interest rates with secured loans when compared to unsecured loans such as credit cards, personal loans, and other lending products. This is critical as it keeps the cost of the loan to a minimum.
  3. Easier To Obtain Finance: The presence of a secured asset makes the approval process both faster and easier. This is particularly the case for established businesses. Simply Funds have start up business loans which are suitable for new ventures and businesses in their infancy.
  4. Loan Terms: Flexible repayment terms mean that borrowers can benefit from fees and cost savings. Lenders are also more likely to allow loan extensions with secured loans.
  5. Improve Credit Rating: Repaying a personal secured loan on time is an effective way to enhance your credit rating. This will make it easier to borrow money in the future with a wider range of loan products available to those who have a good credit rating.

What can be used as security for a secured loan?

There is a wide range of assets that can be used as collateral for a secured loan including real estate, other tangible assets, inventory, and business invoices where applicable.

Real Estate: Is the most common form of security and the one which provides the best prospects of getting a loan approval. Residential, commercial, and vacant land are all acceptable. The type of property and its location will impact the maximum loan-to-value ratio (LVR) allowed.

Other Assets: Motor vehicles, equipment, machinery, and savings which you may wish to preserve for other reasons are among other acceptable forms of security. Factors which will be considered include the value, condition, and liquidity of the asset. Assets such as motor vehicles which can be easily liquidated are more likely to obtain their full value while specialist machinery may not attract its full value due to lower levels of liquidity.

Inventory: It is not uncommon for businesses to have a substantial amount of stock and high value products that may be used to obtain finance. Much of this is liquid and stock valuation can be achieved in a timely manner.

Invoices: Unpaid invoices are one of the main reasons for businesses facing financial difficulties. Accounts receivable is recognised as an asset on the balance sheet and can be used as collateral for specific types of small business loans. Financial statements will need to be provided.

Secured loans with Simply Funds

At Simply Funds we pride ourselves on being able to help individuals and businesses achieve their goals. Our flexible lending criteria has seen us help countless people that have been turned down by major lending institutions such as banks. Our online application process is completely hassle-free, and no credit checks are conducted when providing pre-approvals. Submit an online application today to find out if you are eligible for a secure loan.

Second Mortgage Loans - A Fast Financial Solution To Benefit Your Business Quickly

Sometimes businesses need funds fast, and traditional loans often have long approval times and onerous requirements to meet. Whether to invest in working capital, upgrade premises or facilities, purchase equipment or buy property, a second mortgage loan (or Caveat Loan) can provide money in less than a week from application to released funds.

Is it easier to get a second mortgage loan?

A second mortgage loan is quick and easy to apply for and only requires the borrower to be a Pty Ltd Company and own property (residential, commercial, vacant land and located anywhere in Australia). Unlike traditional loans or mortgages, there are no credit checks, in most cases, or financials required, making them a preferable option to banks if you need money for your business quickly. They are ideal for companies trying to meet unexpected growth demands or which require a financial boost to close an investment opportunity.

Businesses can borrow up 70 (or up to 80% in some cases) of the value of a property (between $50,000-$50m) and have 1-24 months to repay the loan, at a manageable interest rate, which makes them an attractive solution for companies looking to invest in their business without delay.

For the term of the loan, there is a caveat on the borrower’s property, but it is immediately lifted on the settlement of the loan, with no ongoing restrictions on the borrower utilising the property as collateral again (straight away if required). Many borrowers find that by using their property as collateral, they can borrow more money through a second mortgage loan than via traditional channels because lenders are more confident with the added security of property.

What are the financial solutions for a second mortgage loan?

Once the loan is secured, borrowers can get on with the business improvements or investments they had planned (and specified on applying for the loan). With no repayments due until the loan term is finalised, it provides much-needed cash flow to realise their ambitions.

However, businesses must have a clear repayment plan or exit strategy because once the loan term expires, they need to pay the total amount plus interest back in a single lump sum. Loan terms can be from 1-24 months, and before considering a second mortgage loan, businesses need to go in with their eyes wide open and a watertight strategy to ensure they can settle the loan in full at the conclusion of the agreed term.

Some exit strategies businesses might employ are to refinance existing mortgages, secure alternative finance, or sell property to release funds.

In some instances, businesses may require the loan to purchase stock or goods, with the sale of those goods being used to pay back the second mortgage loan. A business may be awaiting funds from the partial sale of the company or be awaiting the bank to release funds, however in each scenario given, there’s an obvious expectation of a lump sum large enough to cover the repayment of the second mortgage loan.

The exit strategy is critical to reducing risk to the borrower, making second mortgages a viable quick way to invest in, or grow, your business. What’s more, given there is no credit check to impact your credit rating, you can get another second mortgage loan as soon as another business investment opportunity arises (after you have paid back the first of course.)

Many mortgage brokers and accountants are not aware of second mortgage loans as short term solutions to offer business customers, especially for significant amounts of money. When borrowers have a clear business plan and exit strategy, second mortgage loans can be an excellent way to grow a business.

How Fast Loans Work For Business

Getting a business loan with major financial institutions such as banks can take weeks, or even months. Simply Funds has this problem by providing fast loans for business. The combination of flexible lending criteria and a simple application process allow our lending specialists to create tailor-made loans for business owners. They will identify the loan type required, establish a suitable loan term, and determine the optimal repayment structure.

What is a fast business loan?

As suggested by its name, the main feature of fast business loans is that they can be approved and funded in less than 48 hours. We have designed a streamline application process that can be completed in minutes. Applications are often processed on the same business day allowing business owners to access the funds they require in a timely manner.

What are fast business loans used for?

There is no limit or boundary when it comes to the use of fast business loans. Stable cash flow is one of the keys to longevity with respect to small business and additional funding can be the catalyst for long term success. The financial needs of a business are constantly changing, and a business loan can help in numerous ways including the following:

Types of fast business loans?

Simply Funds offer a wide range of fast business loans that cater for the various needs of small businesses. Our lending products include:

Small Business Loans:Funds obtained from a loan can help improve the prospects of success for any small business. A large portion of small businesses fail in the first 12-24 months due to an unwillingness to make difficult decisions – one of which is taking out a loan which would provide the cash flow required to effectively execute a business plan.

Caveat Loans:If you have a proprietary limited (Pty Ltd) company and a property that can be used as security, a caveat loan could be the best option. They allow you to access the equity in your property to borrow funds that can be used for business purposes. Loan terms range from 1 month to 36 months and no formal property valuations are required.

Second Mortgages:Comparable to caveat loans as borrowers can use equity in personal property with an existing mortgage. The main difference is that unlike a caveat, a mortgage gives the lender the right to sell the property in the event of a default.

Bad Credit Business Loans:Major financial institutions such as banks see bad credit scores and are quick to turn their backs on applicants. Our flexible lending criteria provide us with the ability to service clients with previous defaults or bad credit scores.

Property Development Loans:Financing options available for both residential and commercial projects. Key features include interest capitalisation and staged payments.

Start-Up Business Loans: Specifically designed to assist businesses in their infancy who are finding it difficult to obtain the finance required to turn their dreams into a reality. Limited cash flow or a lack of financial statements may not prevent you from getting the funds needed to kickstart your business.

Am I eligible for a fast business loan?

During our time as a premier lending institution, we have found that people are unaware of their eligibility when it comes to borrowing funds. A major contributing factor to this is a reluctance to apply for a loan due to a fear that it will have an adverse impact on credit scores.

As a result, we have designed a transparent application process where applicants can find out if they are eligible for a loan within minutes. Furthermore, Simply Funds can provide applicants with a pre-approval without having any impact on your credit history. Once your application is received, a lending specialist will contact you and ask some basic questions regarding your assets and liabilities.

The use of desktop valuations rather than formal property valuations means that we can prepare loan documents in a timely manner before settling the loan and making the funds available to you. Learn more about how it works.

How much can I borrow?

The amount which you will be able to borrow depends on several factors including the type of loan and your financial situation. Consider the following three categories and how they may apply to your needs.

Secured Loans: Refer to lending products where a form of collateral is used to secure funding. Borrowers can leverage existing assets such as a residential home or commercial property. The amount that can be borrowed ranges from $50k to $5 million. The value of the real estate being used as security, its location, and the equity available are all considered when determining the amount that can be borrowed. A loan to value ratio (LVR) of up to 70% is available but this may be limited for real estate located in rural areas or vacant land.

Unsecured Business Loans: The flexible lending criteria of alternating funding institutions allows them to provide finance to borrowers who do not have an asset that can be used as security. Unsecured business loan amounts range from $5k to $50k and may require additional financial information depending on the amount being borrowed. Business owners with a history of success and consistent cash flow will find it easier to access unsecured business loans.

Development Loans: Simply Funds can provide financing up to $50 million across both residential and commercial projects. Projects with 5 or more dwellings will be classified as commercial and require a minimum loan amount of $1 million. Our lending specialists will consider factors such as reputation and prior success when determining the maximum amount that can be borrowed.

What are the loan terms and repayment structure?

Flexibility is a key characteristic of all Simply Funds business loans. Our lending specialists will take into account the nature of your business, financial situation, and cash flow to design a repayment plan that suits you. The most common loan terms range from 1 month to 12 months with the availability of long-term extensions.

Depending on your cash flow, you can set periodic repayments, elect to make a lump sum payment, or a combination of the two. Specific loan products such as our property developments loans also offer interest capitalisation and staged payments.

For a fast business loan that offers flexibility and funding within a 48-hour period, complete an online application form today.

Many mortgage brokers and accountants are not aware of second mortgage loans as short term solutions to offer business customers, especially for significant amounts of money. When borrowers have a clear business plan and exit strategy, second mortgage loans can be an excellent way to grow a business.