Are Caveat Loans the Best Loans for Business Owners With Bad Credit?

By: Aaron Robbins0 comments

Lousy credit can strike the best of us, especially in the business world; caveat loans are a flexible finance solution available to business owners, even if they hold bad credit!

The course of business ownership is not always smooth sailing.

Many business owners lay everything on the line to get their business off the ground, including their own personal finances or assets.

While they can reap the rewards down the track, the journey can leave its mark on their credit file.

Don’t let your plans to access finance take a back seat as a business owner with bad credit; a Diverse Funding Solutions caveat loan is still firmly on the table — we explain more below.

How does bad credit affect business finance?

Historically, business owners have sought after business loans from traditional lenders, such as banks and credit unions.

These types of financial institutions operate under strict lending criteria, which are underpinned by the strength of the applicant’s credit history.

The rigidity of the criteria means that there’s very little wiggle room when assessing applications that may not fit the mould perfectly.

Despite having full capacity to meet the monthly repayments or repay the loan, many business loan applicants are declined for business loans through traditional financiers.

The fundamental difference between bank loans and caveat loans

Those who’ve been down the mortgage route, either to get a home loan or other loan from a bank, know how long the mortgage process can take.

Caveat loans are the opposite of home loans and other bank loans in that they are one of the fastest funded loans available in Australia — this is the fundamental difference between caveat loans and traditional loans.

Caveat loans are mostly offered through private lenders, who operate differently from traditional financial institutions.

Fast approvals, minimal documentation, no credit checks, and consideration of your personal circumstances are what make caveat loans such an attractive option for business owners with bad credit.

Keep reading to explore more.

Using caveat loans in your business

Caveat loans are one of the many business finance solutions available on the market; however, their flexibility satisfies a broader range of business purposes than most other loans.

What can caveat lending be used for?

Caveat lending can be used to access funds to:

  • Improve your business cash flow.
  • Temporarily boost working capital.
  • Fund significant, one-off expenses such as outstanding debt to the ATO.
  • Renovate your business premises.
  • Prepare your business for sale.
  • Cover wage increases.
  • Bridge a property sale.
  • Recovering after serious disruptions to your business.

Many developers utilise the ease and flexibility of caveat loans to fund their building projects.

You don’t need to be a property developer to use a real estate property to back a caveat loan.

If you own a business and a property and need to borrow money for a short period, consider whether a caveat loan could be the right option.

How are caveat loans secured?

A caveat is secured by using the equity in real property, whether a residential or investment property.

In the case of property developers, they use commercial property to back the lending transaction.

Caveat loans are created when the lender’s interest is registered on the property title.

Due to the legal caveat being over the title deed, it effectively sits behind any registered mortgage.

This means that regardless of whether there is an existing first mortgage or second mortgage on the property, provided there is sufficient equity in the property value, you can use the property as security for a caveat loan!

Regarding your caveat loan application, we generally only ask for a mortgage statement, and council rates notice.

Once the legal caveat is registered on your property title, no further transactions can occur on the security property, such as a property sale or transfer of ownership.

Good to know: overseas properties aren’t eligible to be used as security for a caveat loan.

More on short-term caveat loans

If you’ve been researching caveat loans, it doesn’t take much reading to come across the term ‘short term caveat loan’.

Also known as ‘fast caveat loans’, short-term caveat loans are aptly named, as they’re a short-term business loan offered between 1 month – 24 months.

Importantly, this means that once the loan is repaid, the legal caveat on the security property is lifted!

Interest Rates on a caveat loan

The interest rate hike of recent months has caused much chatter in the business community. Coupled with the rising cost of doing business, it’s little wonder that business owners are concerned with

At Diverse Funding Solutions, we proudly offer Australia’s lowest private lender rates on caveat loans!

Starting at 0.77% per month and with further discounts for new clients, other lenders cannot compare when it comes to affordable interest rates on fast caveat loans.

The benefits of using private lending to access a caveat loan

Whatever the finance need, getting funds quickly is understandably at the top of many businesses priorities.

Caveat loans through private lending provide funds in a timely manner and are some of the fastest-funded business loans in the market.

At Diverse Funding Solutions, we have access to over 200 of Australia’s leading private lenders — the benefits of using us to fund your caveat loan include:

Hassle-free applications

When we process your caveat loan application, we don’t ask for tax returns, revenue forecasts, or years and years of bank statements.

An express quote only takes one minute and won’t affect your credit score further.

From here, our team will be in touch, and, if approved, you could be funded in as little as 24 hours! 

No credit checks (unlike other business loans)

Likely to be what’s brought you here, private lending doesn’t rely on the results of a credit check to determine your credibility to repay the loan.

Instead, caveat loans are assessed by devising appropriate exit strategies and working out repayment schedules thereafter.

Suitable exit strategies include the sale proceeds of assets or property, the profit from an upcoming peak season, or expected funds (such as an insurance payout).

Flexible loan terms

Unlike many lenders, who lock you down for years and years when you borrow money, private lending offers the flexibility of loan repayments.

Private lenders are happy to work on terms relevant to your personal circumstances and financial needs.

No valuations required

In most instances, no valuations are required to release equity within your security property!

Large loan amounts

A DFS caveat loan allows you to access up to 75% of the equity within your property.

If you own the property you intend to use as security, you can access up to 75% of the total property value as your loan amount!

Other loans, especially another form of short-term loan, simply can’t offer that range of loan amount.

No hidden fees

Private lenders do like to make things as hassle-free as possible, which means uncomplicated applications and loan documents.

This includes full transparency over the fees and interest rate.

Backed by an Australian credit licence

Despite being non-traditional, the private lending market in Australia is regulated by ASIC.

Diverse Funding Solutions is an authorised credit representative, meaning you can confidently apply for a caveat loan.

It pays to know: we offer incredible service but cannot provide legal or financial advice to your business.

How to apply online for a caveat loan

Applying for loans online when you have poor credit can feel nerve-wracking.

For property owners in business, who are looking to immediately improve their cash flow to take on whatever business challenge is facing them, a caveat loan can be a fast, fitting finance solution.

Access a lender who’s prepared with you, not against you, and keeps your credit past in the past.

Contact Diverse Funding Solutions to find out more about how a caveat loan could help you!

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