There may be instances in life when you as a businessman would need cash urgently. The reasons could be any of the following:
- You need the money for expansion of your business
- You have to settle a debt that has become overdue
- You require a bridge loan for the interim period
It is also possible that you may not want to approach any of the financial institutions to take a traditional loan. These typically take a longer time for processing and you may not have that luxury. The best option in such cases is to go for the urgent caveat loan.
So what is the caveat loan?
It is a loan that is given to you by creditors against a real estate asset you have. The creditor after doing a valuation of your asset decides that it is safe to give you the loan. Typically, a LVR of 70-75% is acceptable for creditors and they would give the loan to you as quickly as within 24 hours.
Now, the advantage with this loan is that you can repay the same even after a month or within the year. These are fast settlement loans that are given fast and the exit strategy is also a short one. You have the option of settling it within a year or even rollover if you are unable to make the repayment.
This caveat loan can indeed be a life line for businessmen wanting urgent cash. They can resurrect their business or aspire for greater heights through expansion using the caveat loan.
Having said the above, it should not be considered as a requirement of people who are desperate for money. Some of the borrowers deliberately take such caveat loans after working out the cost benefit analysis of taking the loan. They take the opportunity to monetize their real estate by taking this loan at probably lower rates of interest and are able to show a better ROI on their books. Since any piece of real estate asset with a LVR of 70-75% is suitable for such loans, there are borrowers who take caveat loans against their otherwise dead real estate assets and deploy those funds in activities that generate them higher returns. They then repay the caveat loan whenever they wish.
The caveat loan is definitely a worthwhile option for anybody owning real estate assets.
Any piece of real estate security with suitable equity is acceptable. However, LVR’s may vary depending on the type and location. For example, we can lend to 75% on established residential security, 70% on commercial security, and 50% on rural security. Some specialized security may not be acceptable, such as contaminated sites (e.g.: petrol stations, etc.)