Caveat loans for business: fast funding secured on property equity

Caveat loans are one of the fastest tools in alternative business lending. When a business owner has equity in a property and an urgent need for money, a caveat loan can often get funds moving faster than almost anything else, and with less attention to credit history. They’re not cheap and they’re not meant to last, but used for the right job they can solve problems that nothing else can solve in time.

How a caveat loan works

1. You own property with equity. It might be your home, an investment property or a commercial building, in your name or a related entity’s.
2. A private lender approves the loan based mainly on the property’s value, what’s owed on it, and your exit plan.
3. The lender lodges a caveat on the property’s title. This notifies anyone dealing with the property that the lender claims an interest in it.
4. Funds are released, sometimes to you, and often straight to whoever you need to pay, such as the ATO or a supplier.
5. You repay at the end of the term, often from a sale, a refinance or business income. When the loan is repaid, the caveat is removed.

Because a caveat doesn’t need the full process of registering a mortgage, settlement can be much quicker. For straightforward files, funding is possible in as little as 24 hours once approved.

When caveat loans make sense

Situation	Why a caveat loan fits
ATO garnishee or tax deadline	Speed, and the debt can be paid directly
Settlement on a business or property purchase	A fixed date that can’t move
Short-term cash gap before a sale or refinance	A clear exit within months
A one-off opportunity	Stock, equipment or a deal that needs a deposit now
Credit too damaged for other options	The property does the heavy lifting

When they don’t

Caveat loans are short-term money. They’re usually a poor choice for funding ongoing losses, for long-term needs, or when there’s no realistic exit. If you need money for two or three years, a private second mortgage or a longer facility is likely to suit better. If the problem is regular cash flow swings, a line of credit is usually cheaper.

What lenders look at

• Equity. The property’s value, less what’s owed to existing lenders. Lenders lend a portion of that equity, not all of it.
• The property itself. Location, type, condition and how easily it could be sold. Metropolitan houses are generally easiest; regional or specialised property is assessed case by case.
• Existing mortgage terms. Whether your current lender’s mortgage restricts further dealings with the property.
• Exit. How the loan will be repaid at the end: a sale, a refinance, a contract payment or business income.
• Purpose. Business use only. The lender will want to know what the money is for.

Caveat loan or second mortgage?

	Caveat loan	Registered second mortgage
Security	Caveat on title	Mortgage registered on title
Speed	Often faster	Can take a little longer
First lender’s consent	Not always needed	Often needed
Typical term	Weeks to 12 months	Months to a few years
Cost	Usually higher	Often somewhat lower

Many lenders will tell you which is the better fit once they see your title and existing mortgage. See our page on second mortgage business loans.

Costs to understand

Caveat loans are priced for speed and risk, so they cost more than bank finance. We don’t publish rates because each loan is priced on its own file. Before you sign, get in writing:

• The establishment or approval fee
• Legal and valuation fees
• How interest is charged, and whether it’s prepaid or capitalised
• Any monthly fees
• What happens, and what it costs, if you repay early or need more time

Add it all up in dollars and compare it with the cost of the problem you’re solving.

An illustrative example

A Penrith electrical contractor (illustrative only) needed $140,000 within days to settle the purchase of a competitor’s business, after a bank pre-approval fell through at the last minute. The owner had a home in the Blue Mountains with plenty of equity behind a standard mortgage. A private lender approved a six-month caveat loan, lodged its caveat, and settled in time for the business purchase. The owner then refinanced into a longer-term facility once the combined business’s statements were on record.

Use your equity to solve the urgent problem

If you own property and need funds fast, tell us what you need. There’s no credit check when you first enquire, we won’t spread your details across a crowd of lenders, and a real person will tell you quickly whether a caveat loan fits. Please be accurate about the property’s value and any existing mortgage on the form; it’s what lets us move fast. See if you qualify.