Using your property to raise capital is risky for both the financier and for the applicant.
A clear letter of offer outlining fees, conditions, loan terms, exit strategy will need to be signed by the company director/s and reviewed by an independent solicitor.
This type of finance is often referred to as ‘Bridging’ finance (short term funding, with a clear exit strategy).
Bridging Finance
In simple terms, a caveat loan is a ‘short term’ First or Second mortgage, where the loan is secured against a house or any real estate property owned by the borrower.
The borrower must have an ABN and the loan purpose must be business related. The Loan to Valuation (LVR) maximum on a preferred residential property in e.g Metropolitan, is typically up to 75%.
A caveat requires minimal paperwork, adverse credit is accepted as you are leveraging the strength of the proposed ‘security’. As a result of the lender risk, interest rates & Fees are priced accordingly.
The loan terms are short in length and may not allow early pay outs during the capitalised interest period. Where interest is ‘added’ to the loan amount.
Most funders will offer the borrower the choice of interest only repayments meaning you will receive a higher amount or interest capitalised.
Pricing & loan structures:
Loan Size: Minimum $75,000 – $5,000,000
1st Mortgage Rates From 7.95% pa
2nd Mortgage rates From 11.95%
Establishment Fees 1-3%
Valuation fee (determined by the funder)
Legal fees (determined by the funder/your solicitor)
- Turn around time 5-10 Days
- Maximum Loan Term – 24 months (please discuss with your Bloomfield Financial Representative)
- Short trading history
- Poor Credit File
- Don’t have BAS, Business Financials or Business Bank Statements to submit
- Construction Projects
- ATO Debt
- Commercial Property Purchase
- Stock Purchase
- Business opportunity
- Financing Growth
Preferred security & Loan Structure
- Preference for residential property in ‘urban’ areas e.g Sydney, Melbourne, Brisbane, Perth, Gold Coast, Sunshine Coast etc)
- Commercial property and Rural property accepted by some funders but at reduced LVR position
- Specialised property e.g. Winery (can include winery plant & equipment in the valuation) but at a reduced LVR position
- Sale of property (could be the loan security)
- Normal business cash flow
- Refinance to traditional bank funder
Minimum Docs:
- Latest Mortgage statements (from the proposed security)
- Council rates OR land title
- Applicant ID Docs
Bridging Finance
“At Bloomfield Financial we offer a boutique finance experience – with rapid decisioning through the aid of industry leading Technology.”
Harry Haydon — Founder & Director, Bloomfield Financial
Bridging Finance – Caveat, Second Mortgage & Private Lending
