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.