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When to Consider a Caveat Loan

By Edited Jul 27, 2016 1 0

As a business owner or home owner, there are various times when you wish you had some funds to get you through a rough patch. A solution to these situations is a caveat loan. A caveat loan typically has a loan term less than 6 months and has a very quick approval and settlement timeframe. With caveat loans being secured against real estate property, the main concern for the lenders is your exit strategy or your plan for repaying the loan in full.

The following are some situations where a caveat loan will be a beneficial option and may assist you in discovering what you are looking for exactly.

  • Need Business Cash Flow

Small businesses that are hired on contract based jobs, such as painters or builders, may find at times the cash flow is tight because usually payment occurs when the job is complete. If you are working on a long project and cash runs out for supplies or for wages, the project would spiral downward without the proper equipment, supplies or workers. If this situation starts to occur, a great option is to take out a caveat loan to cover the wages or supplies and when you receive the lump sum payment at the end of the job you will pay out the loan. This will assist you in sticking to your proposed timeline which saves your company and its reputation.

  • Advance funds pending a property sale

If you're in the process of selling your current home and trying to buy a new home – you will notice there is a gap in time that you need to be able to make a down payment but you're yet to receive the funds from the settlement of your current property. This financial gap can be covered with a caveat loan by providing the funds to make the down payment on your next property purchase and then your exit strategy for the caveat loan comes from the settlement of your current home. This option is very common as many Australians find themselves at a tight crossroads financially and know they are able to pay off the loan quickly, this method is also widely known as a bridging loan.

  • Pay off tax debt

Occasionally, tax debts creep up on people and they didn't realise they were unpaid or owing additional funds for various reasons. It is important these tax debts are taken care of immediately in order to keep yourself clear of criminal charges and defaults. A caveat loans can assist you in providing the funds to pay off the debt quickly and then pay back the loan over a few months.



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