All you need to know about a Business or Caveat Loan

Finance for businesses can often be hard to secure if you are a fairly new operation or you don’t have a perfect credit history.

There is a solution however and it’s known as a caveat loan. If you’re a business owner or even an investor and need a quick injection of funds, read on.

What is a caveat loan?

Caveat loans are short term lending solutions. They are designed for those who need fast finance for a period of 1-6 months. From application to the money being available, it’s usually around 24 hours and lenders often don’t see a poor credit past as an obstacle.

The way a caveat loan works is that it’s classed as an asset lend. The loan is secured against real estate such as:

  • Commercial property
  • House
  • Land

Once the finance has been released, the borrower simply pays back a set amount of money as agreed with the lender until it’s repaid in full.

A caveat loan is regarded as a second security on the chosen property or land and the caveat is incorporate into the title until it’s repaid. At that point, the details are removed from the title. The primary mortgagee will not object as it’s a separate issue and it doesn’t affect your finance payments with them.

Reasons a caveat loan may be required

Companies such as Gateway Equity have created borrowing for many reasons over the years. It’s such a flexible way to finance a business that the possibilities really are endless; injection of cash flow, payment of taxes, unique investment opportunity or a cash advance to secure a property sale are just a few of the reasons a caveat loan has been utilised.

Benefits of a caveat loan

The major benefit to a caveat loan is the speed of approval and release of funds. Mainstream banks can take days or even weeks to arrange a loan and this can mean that plans are hindered and opportunities lost.

Traditional loans aren’t usually available short term. There’s often a minimum 12 month lending period and if you want to repay before that then there could be exit fees. Caveat loans are tailored to those who need fast funds for a small length of time and to then move forward with their business plans.

The documentation required often consists of items such as a recent mortgage statement or a rates notice. Once they have been received, the lending contract can be drawn up and finalised.

Costs involved

Caveat loans aren’t as expensive as some may feel. Whilst seeing and hearing the interest figures usually involved may feel high, the reality is that it’s often cheaper to have a caveat loan over a couple of months than a second mortgage spread over a year.

Other costs can include an acceptance fee as well as establishment fees and legal fees but everything is clearly detailed in a transparent way so you know exactly what you’ll be paying – and when.

Whilst the application for a caveat loan should always be carefully considered because of the security required, if the repayments can be made on time then they are an ideal way to develop a business when funds are not immediately available.

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