Securing funding through traditional lenders such as banks can be a lengthy and rather complicated process. Strict lending guidelines require applicants to provide an extensive amount of financial information and the lengthy approval process can be frustrating.
Caveat loans are an alternate financing option which allow you to borrow money using the available equity in your property. They also have the added benefit of a streamline application process that ensures funds can be provided in less than 48 hours.
A caveat loan is a form of funding where finance is obtained by using real estate or property to secure the debt. One of the key characteristics of caveat loans is that the loan term is significantly shorter than traditional loans. Short term caveat loans are usually structured over a period of 1 month to 36 months with a large portion of loans paid off within the first year.
This makes caveat loans very popular with business owners who have a proprietary limited (Pty Ltd) company and a property that can be used as security. Fast caveat loans are popular among business owners looking to:
The versatility and fast approval process mean that borrowers can use caveat loans for a variety of purposes. A more relaxed lending criteria also makes them accessible for borrowers who are finding it difficult to deal with banks due to bad credit history or a lack of detailed financial statements.
Caveat loans are simple in nature and flexible in practice. They relate to finance obtained via a loan that is secured against the equity in a piece of real estate owned by the borrower. To properly understand how caveat loans work, it is essential to understand the following basic terms:
In the following example, a business owner has an unencumbered personal property valued at $1,000,000. The property is in a metropolitan area and with no money owing on the premises, Simply Funds can offer a LVR of 70%. Using the value of the property and LVR, we can calculate the amount that can be borrowed:
=Value of Property x LVR
=$1,000,000 x 0.70 (70%)
=$700,000
If there was an existing mortgage on the property, the business owner would have to apply for a second mortgage rather than a caveat loan.
For a caveat loan to be approved, the lender must be able to apply a caveat on the property being used as security. The loan is the money received by the borrower while the caveat is the document that is lodged on the title of ownership.
The caveat serves several purposes; It allows the lender to register a financial interest in the property and subsequently proceed with the lending transaction. In addition, the caveat prevents the owner from selling or transferring the property along with restricting them from using it as security to obtain further finance.
There are several key differences between a caveat and a mortgage. The most notable are the rights of the lender, lending criteria, and several factors relating to time.
Rights: Despite preventing the owner from undertaking certain actions with respect to the property (selling, transferring, use as security), it is in the right of the lender where the difference lies. Unlike mortgages, the lender (Simply Funds), does not have the right to sell the property if the borrower fails to make repayments and defaults.
Time: This applies to several different aspects of the loan including the application process, funding, and structure. A caveat loan application with Simply Funds can be made in a matter of minutes. Loan approval and subsequent funding can be achieved in less than 48 hours where required. In comparison, a mortgage application can take weeks, or even months. Furthermore, short term caveat loans are generally repaid within a 12-month period while home loan terms range from 10 years to 30 years.
Lending Criteria: Major financial institutions such as banks have made it increasingly difficult for business owners to obtain finance. Their strict lending criteria requires borrowers to provide in-depth financial records including bank statements, cash flow projections, tax returns, expenditure reports, and sales records. They also require an excellent credit history and formal property valuations. Alternatively, Simply Funds provides an obligation-freeapplication process that can be completed in minutes with no credit checks conducted for pre-approval. Our flexible lending criteria allows us to provide finance using basic personal and business details.
Although it is not common, there are circumstances where short term caveat loans are used to purchase property. Examples include where borrowers require cash flow in the form of a short term loan to complete the purchase of a house, commercial real estate, or other forms of property.
Similarly, we have helped clients take advantage of great financial opportunities by providing them with a fast caveat loan that has allowed them to secure the purchase of a property in a matter of days. Part of this strategy is to pay off the short term loan by selling following a rise in property value, or refinancing with a major lender.
Simply Funds also provide development loans that can be used for both residential and commercial dwellings. Contact us today for more information on our flexible lending options.
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August 12, 2022
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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.
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.
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.
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.
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.
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.
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.
Securing funding through traditional lenders such as banks can be a lengthy and rather complicated process.
A low credit score is not the end of the road
Throughout the course of running a business owners are faced with difficult decisions and constant challenges. Among those are decisions relating to cash flow management, and more specifically, business finance.
Caveat loans (https://simplyfunds.com.au/blog/fast-caveat-loans/) are a financial solution for businesses, particularly useful for start-ups and commercial property investors. A caveat loan is a fast funding loan that is secured against a property. I
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A Bizcap provides both Unsecured and Secured loans to Small Business Owners. When assessing a loan application Bizcap generally doesn't take into consideration if a prospective customer has specific assets to provide as security. However:
(a) if the loan amount is above $30,000 (or any other figure which Bizcap determines from time to time), Bizcap will, under the loan agreement take a charge. For a corporate borrower and any corporate guarantor, the charge is over all of that entity's present and after-acquired property (that is. the security is not over specific assets but any and all assets which the entity may have). For a sole trader borrower and any individual guarantor, the charge is over its current and future real property; and
(b) in certain instances, for example, where the loan relative to the cash flow of the borrower is of a size that warrants the provision of security over specific assets. Bizcap may require specific security to be granted over those assets. Bizcop may register its security interest(s) under relevant legislation, including the Personal Properties Securities Register and the register held under the Real Property Act 1900 (NSW) or Its equivalent.
I n addition. Bizcap may take personal guarantees from directors of corporate borrowers, directors of corporate guarantors and certain individuals. No registrations are made in respect of guarantees.
Simply Funds operates an online information service that seeks to introduce Australian businesses to potential funders. Simply Funds does not provide any credit, financial products, or financial advice – either to individuals or businesses.
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