Purchasing Equipment With a Caveat Loan

By: Aaron Robbins0 comments

Equipment is, quite literally, what keeps Aussie businesses moving.

Purchasing equipment can be a necessary exercise, but can come with a hefty price tag.

For businesses that are searching for their next piece of equipment, they may also be searching for the best way to finance the purchase.

Supply chain disruption, cash flow woes, and the inability to access equipment finance when purchasing gear from overseas could mean that you’re finding it tricky to get your hands on what you need.

A short-term caveat loan could offer the flexibility and fast funding required to keep your business moving with equipment.

Keep reading to find out more about using caveat loans to fund your next equipment purchase.

What does business equipment refer to?

Equipment will mean different things for different businesses.

Usually, equipment is used to produce services, or goods and are long-term assets that will benefit your business over many years of use.

Mostly, business equipment is tangible: think trucks, computers and other forms of machinery.

Other intangible assets such as copyrights, trademarks and patents aren’t typically financed through equipment finance.

What is equipment finance?

Equipment finance is a type of business finance that uses the specific piece of equipment as collateral to secure the loan.

Most established businesses in Australia will have heard about equipment finance, or used it in the past.

There are several different ways to use equipment finance.

For example, you may lease a vehicle or access a secured business loan.

Regardless of which option you choose, you may find it difficult to access equipment finance in the current lending climate, and here’s why:

Supply Chain Disruption

Australia’s ongoing supply chain disruptions have had countless flow-on effects to the Aussie business industry.

For companies or businesses looking to acquire new equipment, or upgrade their capital assets, they’ve undoubtedly found it difficult to get equipment and devices.

Much like the consumer vehicle market, heavy vehicles, manufacturing equipment and even commercial coffee machines, all have hefty delays before they arrive at your workshop door.

Bad credit or poor cash flow

It’s no secret that recent times have proven challenging for many businesses financially.

On top of the supply chain shortage, many businesses are still finding their ‘new normal’ in a post-COVID world.

Unfortunately, the mark that tough times leave on businesses and their hard-working owners is bad credit, or disjointed cash flow.

When accessing bank loans, many lenders rely on the cash flow, revenue and credit file of businesses to be able to authorise the lending transaction.

What this means for cash strapped, but reliable businesses, is that they can miss out on crucial finance to access new equipment; equipment that is necessary to continue operations and recover their business further.

Bad credit or poor cash flow

The benefits of using short term caveat loans to purchase equipment

Caveat loans are used by businesses of all sizes and scales to fund a range of business purposes.

Many property developers use caveat loans, however, you don’t need to be in property to use a caveat loan — you just need to own one!

There are many benefits of using short-term caveat loans to purchase equipment.

How is a short-term caveat loan different to other business loans?

Caveat lending differs from traditional finance options for businesses due to its flexibility and fast funding; giving caveat loans the apt nickname of fast caveat loans!

A caveat loan uses the equity in a real estate property to secure a loan for business purposes.

This means that you don’t need to offer up equipment as the collateral for the loan.

Instead, private lenders can release equity in your property value for you to use in your business how you see fit!

A DFS caveat loan can be funded in as little as 48 hours — meaning you don’t need to wait weeks or months that other lenders may make you wait, before accessing funding for your equipment.

What you need to know about using caveat loans

Caveat loans are usually offered through private lending.

Private lending comes with benefits in itself, such as no need to perform a credit check!

At DFS, we have access to some of Australia’s top private lenders of caveat loans, meaning that we can help find you a lender to get you funds quickly.

Forget the hidden fees, lengthy applications and convoluted application process that come with home loans and other business loans, caveat loans are a game-changer.

The speed in which a caveat loan can be accessed is one of the main reasons business owners are turning to caveat loans with they need fast funds.

Caveat loans can also be used by business owners to repay tax debt.

You can access a caveat loan with an existing mortgage

Even if you still have a first mortgage, home loan or second mortgage on your property, you can still apply for a caveat loan.

We offer caveat loans of up to 70% of the available equity in your property.

This means that provided you have sufficient equity, you can still use your home or investment property to secure business funding for equipment.

How are caveat loans secured?

As we mentioned, a caveat loan is secured via a security property.

The lender’s interest is registered on the property title (on the title deed) and therefore sits behind any existing mortgages.

There’s no legal or financial advice that you are obligated to access before applying, which makes the application process even more straight-forward.

It’s important to note though, that overseas properties can’t be used to secure a caveat loan, and that a property sale or transfer of ownership cannot occur while the legal caveat is in place.

Being only a short-term business loan though, the caveat is only in force until the loan is repaid.

Loan Terms

Speaking of being a short-term loan, caveat loans are generally offered over terms ranging from one month up to 12 months.

We, at Diverse Funding Solutions are keen to work to your personal circumstances and will happily extend out the loan term of your caveat loan, if required.

Interest Rates

Traditional lenders may use the recent interest rate hikes to justify charging exorbitant equipment finance rates; you don’t need to worry about that with a caveat loan.

You can access interest rates as low as 0.77%pm through Diverse Funding Solutions.

Diverse Funding Solutions

Hassle-free applications

The benefit of accessing private funding for your caveat loan is that you experience a pain-free application process!

The minimal documentation approach that we take is a fundamental difference between us and other lenders.

The lending criteria for caveat loans suit property owners who also run an Australian business or company.

After receiving an express quote to determine your approximate loan amount, your caveat loan lender will look for a viable exit strategy for the loan to be repaid.

From there, repayment schedules are developed and your loan can be funded in a timely manner.

Other loans simply cannot compare when it comes to the documentation required, especially if they’re for a business purpose.

Your caveat loan application can generally be assessed with simply identification, a mortgage statement if there’s a registered mortgage on the property, and a council rate’s notice.

There is no need for multiple years of tax returns or profit and loss statements; better still, there are no credit checks!

How to start the caveat loan process

If you have a commercial or residential property that you want to use to back a caveat loan or would like caveat loans explained in further detail, contact the team at Diverse Funding Solutions.

As an authorised credit representative of an Australian credit licence, you can trust Diverse Funding Solutions as the private lending specialist to help get you the equipment you need to keep operations moving.

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