Using a Caveat Loan to Recover After Flooding

By: Aaron Robbins0 comments

There’s no denying that the recent flood disaster in Queensland and New South Wales has devasted many homes and small businesses alike, with the damage bill estimated to be over $2billion!

Small business owners know that for every day their business is out of action, so is their cash flow and livelihood; a caveat loan may be able to help.

The costs of recovering from a flood can rise almost as quickly as the flood water itself. If you’re a business owner who also owns property, then read on to find out how a short term caveat loan may help you pick back up after the flood and get your business buoyant again.

What are short term caveat loans?

Caveat loans are short term business loans that allow you to use the equity you hold in an existing real estate property to borrow funds for a range of purposes.

Caveat loans settle faster than most other loans, particularly small business loans and traditional bank loans.

This makes a caveat loan a fast finance solution for property owners looking for funds in a hurry for a range of reasons, including recovering from a major business interruption such as a natural disaster.

How do caveat loans work?

A caveat loan is essentially using the existing equity you hold in a property as security to borrow further money.

Once Diverse Funding Solutions has lodged the caveat on your security property, we release the funds out to you — you may even think of this as being able to release equity that’s tied up in your property.

Unfortunately, overseas properties aren’t able to be used for security. We cannot accept overseas properties as these fall under different legal jurisdictions to Australian properties.

It’s important to note that caveat lending is only designed to be a short term loan, so your loan term will probably be around 12 months — however, this can be extended in certain circumstances.

We can look to extend the loan term if required, and can work on terms relevant to your individual situation.

Fast caveat loans have helped many Australians overcome issues with cash flow, proving to be more efficient than other loan products on the market.

How are caveat loans secured?

A caveat loan is secured using the equity in your property, by placing a legal caveat over the title of your property.

Unlike other forms of finance that use your property as security, caveat lenders aren’t able to initiate the sale of your property to compensate themselves in the event you default on your loan.

The caveat is lifted as soon as your loan is repaid, and can be done quickly and without complicated paperwork.

Please note: You are not able to sell your property while a legal caveat is active on its title deed without first consulting your lender. If you’re unsure how this affects you, it could pay to access legal or financial advice before submitting your caveat loan application.

Can I get a caveat loan if there’s an existing mortgage on my property?

Many people don’t realise that you can apply for a caveat loan on a property, even if it’s still under a first mortgage.

To provide sufficient funding, there needs to be enough equity in your property.

If you are mortgage-free and own your property outright, then you may be able to access up to 80% of the property value as your loan amount!

Is a caveat loan the same as a second mortgage?

There is a fundamental difference between a 2nd mortgage and a caveat loan — that is, the loan term and how the loan is secured.

A second mortgage is considered to be a short term loan, but not as short as caveat loans, meaning you may save interest, depending on the interest rates at the time.

In addition, a second mortgage means that the lender has the right to access compensation from the sale of a property in the event you default on the loan and therefore requires the approval from the lender of the first mortgage.

The loan terms therefore differ between second mortgages and caveat loans.

Caveat loan lenders do not need to access any approval from the first mortgage lender as the legal caveat sits behind any existing mortgage.

Are caveat loans just for business purposes?

Caveat loans can actually be used for a range of different needs that extend past purely business purposes. Other loans may restrict use of the funds, but caveat lending is much more flexible.

While caveat loans are considered to be a business loan, many people who run businesses use them to help get into an investment property, renovate/prepare a home for sale or simply to help improve cash flow.

Of course, you can absolutely use caveat loans to help with your business, including

  • Paying a one-off tax debt,
  • Obtaining working capital to expand your business,
  • Providing initial funding for human resources,
  • Purchasing bulk stock orders or equipment.

How can a short term caveat loan help my business after the floods?

Caveat loans can be extremely helpful if your business’s financial situation has been impacted by the recent flooding disaster and you need funds quickly.

At DFS, we understand that the last thing you have time for when recovering from a serious business interruption such as major flooding, is to attend to a mountain of administration.

The benefit of being backed by private funding is that we don’t need to run you through a convoluted application process and can get funds to you in as little as 48 hours!

You can use a caveat loan to help your business:

  • Repurchase stock damaged or lost in the floods,
  • Renovate, repair or re-fit your shop or business premises,
  • Replace machinery or assets that have been written off due to flooding,
  • Access an immediate injection of cash to pay for labour, or to cover the cost of wages while the business operation gets back up and running.

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Can I get a caveat loan?

Your business’s financial situation can take a massive hit after a serious business interruption. This might lead you to worry about your chances of being approved for a caveat loan.

Thankfully, when you access a caveat loan through a private lender such as Diverse Funding Solutions, we do not look at your credit history, your revenue forecasts or tax returns.

Private lenders are able to offer much more flexible lending criteria compared to other lenders operating under an Australian credit licence.

This is great news for business owners with fluctuating income or who have bad credit, as there is no need for us to perform a credit check during our loan process.

Instead, DFS will look at your security property value, to make sure that you hold sufficient equity, and work out an appropriate exit strategy for how you will repay the loan.

Repayment schedules are the main way we do this — so provided we can devise a suitable repayment schedule, your business can access funds in as little as 2 days.

Good to know: you won’t need to wait around for a professional property valuation before we can assess your application!

Who offers fast caveat loans in Australia?

Diverse Funding Solutions is proud to be one of Australia’s leading caveat loan lenders.

Our application process is completely hassle-free, which is why we pride ourselves on offering fast and easy approvals for caveat loans and excellent customer service.

If you’ve got equity in a property and want to apply for a caveat loan, then simply fill out a one minute express quote now.

Otherwise, we invite you to experience the best customer service via one of our offices, or by contacting us on 1300942233.

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