Securing a short term property loan for your business could help you to survive the challenging economic times that we’re facing in Australia. It could also help to capitalise on any business investment opportunities after the removal of the strict coronavirus restrictions.
Australia’s business sector is highly competitive. If you need a short term property loan, you’ll need it to be approved on the best possible terms and for your finance to be provided fast.
At DFS, we are private lending specialists who can arrange this finance for you. Key features of the short term property finance that we arrange for our clients include the following.
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Fast-tracked approvals and settlements Australia-wide (within days, not weeks).
- Low documentation requirements. They are ideal for those who are self-employed or investors who don’t earn regular PAYG income.
- No credit checks (so having a bad credit history isn’t an issue).
- Terms and repayment schedules being tailored to your individual needs.
All of the private loans that we arrange are contractual arrangements between our panel of lenders and our clients. Our loan contracts are prepared by Summer Lawyers in Sydney.
What are the Benefits of Short Term Loans Secured Against Property?
The major benefits of a short term loan secured against property are the following.
- You will be debt-free sooner than you would if you took out a longer-term loan.
- You will pay less interest than you would if you took out a longer-term loan on the same terms and conditions.
- A short term property loan allows you to get your finance approved at a better interest rate than you would if you couldn’t provide property as security to your lender. It’s important to understand that even a small difference in loan terms and conditions (for example, interest rates and fees) can make a BIG difference to your repayments.
In addition, when you arrange a private lender short term loan, you can also access the following benefits.
- Less strict lending criteria than the major banks (which enables a quicker application and approval process, even if you have a bad credit history).
- More flexible terms and conditions that can be tailored to your specific situation.
What Can You Use Short Term Property Finance For?
You can use short term property finance for a range of business purposes, including the following.
- Working capital. These are funds that you use for the day-to-day operation of your business. Below are examples of how these funds could be used to help your business to survive or grow.
- Buying stock or equipment that you can use to generate income.
- Paying builders or contractors on one of your development projects.
- Paying creditors.
- Cash flow. Did you know that cash flow issues are one of the leading causes of business failure in Australia? Many businesses are profitable, but cash flow timing issues can see them get into temporary financial difficulty at different times of the year. Short term property finance can help you to trade your way out of cash flow issues that your business may have.
- Capitalising on urgent opportunities. For example, getting you the finance you need to buy larger business premises while you’re waiting for your current business premises to sell (a bridging loan).
- Short term property loans can be a good way of refinancing high-interest short term debt like credit cards or personal loans.
How Do Short Term Property Loans Work?
Short term property loans are usually secured by the borrower providing a caveat on the title of a property to the lender. This caveat protects the lender from the borrower selling the property while the caveat is in place. The caveat is registered with the land titles office in the State or Territory where the property is located and it is released once the short term loan is repaid.
What do I need to get a loan approval?
Private lenders for short term loans tend to quickly evaluate a short term property loan application on three key criteria.
- The suitability and current valuation of the property security offered by the borrower. At DFS, we can arrange an independent valuation of your property quickly.
- Your business purpose of the loan (in other words, what the loan funds will be used for).
- the exit strategy. In other words, how the loan will be repaid. It’s important for short term property finance borrowers to have a clear exit strategy that gives the private lender confidence that their funds will be fully repaid. Below are three common refinancing strategies.
- a) Refinancing the loan at the end of the term.
- b) Selling a business asset that was bought using the funds.
- c) A verified current or future income stream.
What type of properties can be used as security for short term property loans?
Any type of real estate can potentially be used as the security for short term property finance for business purposes, including the following types of residential and commercial properties.
- Land (including subdivided land for future development).
- Office premises.
- Retail shops or shopping centres.
- Warehouses.
- Factories.
- Multi-residential unit/apartment or townhouse complexes.
- Individual residential accommodation (free-standing homes, individual units/apartments or townhouses).
How much can you borrow for a short term property loan?
Depending on your situation, some private lenders may be prepared to lend up to 100% of the independent valuation of your property for a short term loan. Others may lend up to a certain percentage of your property’s value. For example, 80 or 90%. This is known as the loan-to-value (LVR) ratio.
What is a typical short term property loan term?
As the name suggests, short term property loans are typically for periods of months rather than years. You should use them for short term financing needs accordingly.
If you have longer-term funding requirements, other DFS private lending options that have may be suitable. For example, property development finance for large projects.
Case Study – Short Term Mortgage for Property Development
One of our DFS Sydney property developer clients had an exclusive option agreement in place with a landowner to develop a parcel of land. The option agreement was for the sale of the land to be settled within 24 months.
However, there were delays in the developer gaining the necessary development approval from the local council. This delay also resulted in the developer also having trouble securing some bank finance necessary to complete the land purchase prior to the option expiry date.
Determined not to miss out on the potentially lucrative opportunity, the developer turned to us at DFS. We understood the urgency of the situation and had an independent valuation of the land done. We matched the developer with a private lender who could see the potential of the development plans for the site. The private lender approved the finance necessary for the developer to buy the land prior to the option expiry date.
The developer eventually got his development approval and was able to proceed with the project. He paid back the loan within a year from the sale of another development project.
Case Study – Private Lender Short Term Business Property Loans
One of our DFS Melbourne clients is a self-employed plumber. He’s been a sole trader for 3 years and owns a property worth $1.6 million. He needed a loan of $550,000 to finance a major plumbing project quickly. Unfortunately, due to some prior issues, he couldn’t satisfy the strict lending criteria of the banks, so he approached us at DFS instead.
We discussed his needs and had his property independently evaluated. We then matched him with a suitable private lender who was happy to make him an offer for the funds he needed.
Our client accepted the offer, we took care of all the paperwork and he had the $550,000 in his business account within days. He was able to get the equipment and staff that he needed to complete the major project and it has taken his business to another level.
How DFS Can Help With Your Loan Needs
At DFS, we’ll take the time to understand your specific short term property loan needs before matching you with a suitable lender from our panel of over 200 private lenders. These lenders include private companies and individuals who are interested in providing short term business loans.
We can save you the time and hassle of trying to arrange this type of finance yourself. We specialise in arranging these types of loans for clients who don’t meet the strict lending criteria of major banks or other financial institutions. We work for our clients, not for lenders.
If you’d like to find out more about how we can help you with a short term property loan, contact us online or call us today on 1300 94 22 33 for an obligation-free chat!
