Caveat loans are generally offered to businesses that require some short-term funding, and this type of loan is typically secured against property owned by the business or the shareholders. Although the rates of interest are normally slightly higher than a traditional business loan, the caveat loan can be processed very quickly, which is often necessary when a business wishes to borrow money.
The amount of money you can borrow with caveat loans would very much depend on the value of the property used to secure the loan. The higher the value of the security asset, the higher the amount you can borrow, and as a caveat loan is secured, should the borrower default on the repayments, the lender can take possession of the security, as would be in the written terms and conditions of the loan agreement. The only thing to be sure of is that the asset you are planning to use as security must be of higher value than the amount you wish to borrow, with most lenders only willing to lend 70-80% of the security value.
Cost of a Caveat Loan
The cost of a caveat loan would be determined by the amount of the loan, the rate of interest and the term of the loan. There may also be additional fees such as:
- Application Fees
- Property Valuation Fees
- Legal Fees
- Line Fees
It is very important that you confirm with the lender all the details of any costs incurred when taking out a caveat loan, otherwise you might be in for a nasty surprise at some time in the future.
The Main Benefits of a Caveat Loan
For many companies, the caveat loan would be the last resort, as interest rates can be high, yet it can be very difficult for a small business to obtain a short-term loan and if the company has property that they can use as security, a caveat loan can be approved within only a few hours. Another benefit is the minimal amount of paperwork required by the lender, as the loan is secured by property, therefore the lender is not really interested in seeing the company accounts.
Caveat loans can be costly when compared to other forms of business loans, and as it is a secured loan, you risk losing your asset if you fail to repay the loan. Caveat loans are normally only considered for short-term loans, which could range from 1-12 months, and if you would like to apply for a caveat loan, search online for a specialist caveat loan provider who can probably arrange the loan within a single working day.
If you do own property and your business desperately needs an injection of cash, you can search online for a business loan specialist who can help you to obtain a short-term caveat business loan to help your company survive. Talk to an online loan specialist today and see what they can do for your business.