Refinancing Debt With a Caveat Loan

By: Aaron Robbins0 comments

Refinancing Debt With a Caveat Loan

Caveat Loans are a fast, flexible and fantastic finance solution, that could be a viable option if you’re looking to refinance your existing debt.

Whether it’s one debt that you’re looking to pay off sooner, or multiple little debts that are becoming a pain to manage, refinancing with a Caveat Loan can breathe more life into your cash flow and provide a clearer path to repayment.

Below, we uncover how you can refinance your debt with a Caveat Loan through Diverse Funding Solutions.

What are short term caveat loans?

A short term caveat loan is a type of business loan that’s available to property owners, as it uses real estate property to secure the loan.

Caveat lending is a great way to access finance if you need funds quickly for a range of business purposes, as they’re generally approved and funded in only a matter of days.

Business owners find them an attractive option for this reason, unlike other short term loan solutions where the application process can drag out for weeks — particularly through traditional lenders.

Business loans are designed for specific purposes, but you can use a caveat loan for a wide range of business purposes such as:

  • Improving your cash flow or working capital
  • Expanding your business
  • Renovating a business premises or preparing it for sale
  • Performing a debt consolidation
  • Paying off tax debts or other large, one-off bills
  • Accessing bulk stock discounts or fulfilling a large order
  • Acquiring new assets for your business

Often when a business need arises, you need money fast, which is why fast caveat loans are such a terrific solution.

Other loans such as those from a bank can take weeks (and sometimes months!) to settle.

Many clients tell us that their business simply doesn’t have the time to wait, which is why they seek a fast finance solution — that’s a fundamental difference between accessing a private lender such Diverse Funding Solutions and relying on traditional lenders.

How does the security work on a caveat loan?

Caveat loans are secured using real property in Australia.

Overseas properties aren’t eligible to be used as security for caveat loans as the legal jurisdiction differs internationally.

When you access a caveat loan, the lender’s interest is registered on the property title of the security property via a legal caveat.

The registered caveat then stipulates that no other transactions (such as selling or transferring ownership) can occur on that real estate property until the caveat is removed.

How are fast caveat loans secured?

It’s a common misconception that you need to own your residential property or investment property outright before accessing it’s equity for a caveat loan.

Due to the legal caveat sitting on the property title, it sits behind any existing mortgage, including both a first mortgage or second mortgage.

What this means for you is that provided you have sufficient equity, you can proceed with a caveat loan application!

How much can I borrow with a caveat loan?

If you’re looking to refinance your existing debt with a caveat loan, you might be considering how much you can lend.

At DFS, we offer caveat loans for up to 75% of the equity value in the property you’re looking to use for security.

This means that regardless of your home loan, if 75% of your available equity is enough to cover your refinance needs, then you could look to refinance existing debt through a caveat loan, or even complete a debt consolidation!

Of course, if you own the property outright, then you could effectively seek to borrow 75% of your property value!

What does refinancing your business debt involve?

Refinancing a business debt simply means applying for a new loan to pay off the existing loan.

Many businesses do this in order to access better interest rates or better loan terms.

For example, you may have taken out a Startup Loan to get your business operational, but now you’re looking at refinancing the debt to get a better deal and pay it off sooner.

Perhaps you have business assets that you’re looking at selling, but need to clear the encumberment on them in order to sell – a caveat loan can help effectively pay off the loan to free up the vehicle ready for sale.

A possible exit strategy for your caveat loan in this scenario would be to use the sale proceeds from the business asset or vehicle to then repay the caveat loan.

If you’re a small business that has been impacted by Coronavirus, Government assistance for your lending needs is coming to an end, with the SME Recovery Loan Scheme finishing on June 30, 2022.

The benefits of refinancing debt with a DFS Caveat Loan

For a lot of businesses, the largest benefit to refinancing their debt is freeing up their cash flow.

Another major benefit is of course any cost savings that come with paying off the debt at more attractive interest rate, or sooner than the remaining loan term on your existing debt.

Caveat loans are assessed based on their being a suitable exit strategy to repay the loan.

Provided you have a suitable repayment strategy, you could refinance and potentially free up other assets, take them off encumberment, save interest or even free up your working capital

When you access a short term caveat loan through DFS, you can look forward to:

  • Minimal documentation or paperwork required

We don’t need to sift through your tax returns, revenue forecasts, or profit and loss statements – usually just your property value and a mortgage statement is sufficient to look at processing your caveat loan application.

  • Fast Approvals unlike other business loans

Diverse Funding Solutions can approve your caveat loan application in as little as 48 hours – sometimes on the same day as you apply!

  • Valuations required only in some instances

Formal property valuations can take time, but thankfully only in some instances do we need to look at obtaining a formal property valuation.

The hot property market at the moment can represent a fantastic opportunity to access the equity in your property.

  • No credit checks

The beauty of private lending is that we set a different lending criteria for our caveat loans than other lenders.

Often, bad credit is one of the barriers for business owners to proceed with a lending transaction – thankfully at DFS, we aren’t concerned with your personal circumstances or our credit file, but back our loans through setting a viable exit strategy and repayment schedules.

  • Competitive interest rates

A DFS Caveat Loan starts as low as 0.77% per month!

We proudly offer some of the most competitive interest rates against other lenders in the private market.

Naturally, your final interest rate will vary depending on your unique situation, however we are happy to work with terms relevant to your individual business needs.

Lending rates are on the rise, with the cash rate influencing the funding costs for banks, accessing finance through bank loans, including home loans or second mortgages is only set to become more expensive.

  • No hidden fees

No-one likes to find fees hiding in their loan contracts, which is why we are upfront an transparent about any and all fees that apply to our caveat loans.

How to start your refinancing journey using a caveat loan

Short term caveat loans could be the hassle free solution to refinancing your business debt.

Once you know your desired loan amount, simply fill in your details to obtain an express quote or call back request.

Our team can offer exceptional expertise and service, but we can’t offer legal advice, so make sure you get any legal or financial advice that you think you need, before proceeding.

Diverse Funding Solutions offices can be found in Sydney, Melbourne, Brisbane or Perth — so no matter where you’re located, we can help on your refinancing journey.

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