Unlike conventional loans that are available to consumers and commercial business through banks or lending institutions, the caveat loan, also known as a bridge loan or swing loan is primarily made available for commercial use only. One definition offered says, "A very fast loan, which allows the borrower to receive money by using their real estate or fixed assets as the securities for the loan; real estate and fixed assetts can include housing, units, flats, office or land."
What are Caveat Loans and who uses then?
Caveat loans are an amazing tool to help with your financial investments, here's what they are.
Lack Of Funds
Generally, it is agreed that a cash crisis experienced by a business will generate the need for a caveat loan. This can be set in motion usually within one day upon application being filed for the loan. Again, the loan security is backed with assets such as tangible real estate.
It is noted by Investopedia that caveat is a Latin term defined as let the buyer beware. Furthermore, caveat auditor warns the listener to what he may hear; whilst caveat lector warns the reader to beware of what is written. This is an agreement with specified terms to be met by the lender and the borrower.
Caveat Loan Recipients
Typically, recipients of a caveat loan include business owners, investors and property developers. These three socioeconomic sectors sporadically experience cash flow crises and the need for cash flow is urgent. The caveat loan provide the following:
- Needed working capital
- Assurances of commitment
- Funds for project plans be they construction or development
- Cash for meeting outstanding expenses such as payroll and bills
- Discontinue efforts to foreclose or repossess property
- Demonstrate consistency in accounts receivable
The National Consumer Credit Protection Act, (NCCP) may be depicted as the line of demarcation that a caveat loan may not cross. In other words, the NCCP Act is concerned with consumer loans for private use. Hence, the caveat loan is for business or commercial use.
Benefits Of Caveat Loan:
- For commercial purposes only
- Approval is timely, (normally one business day) granting urgent funds
- Loan terms may extend up to three years, 36 months
- Loan interest rates to borrowers are low
- Cost to set-up is generally low
- Security for loan is in the form of real estate
- Loan is repaid at the end of the term
The applicant seeking a caveat loan needs to show some sort of tangible equity. Is that equity a business or a personal residence? Moreover, once the term concludes, how will the loan be repaid? Will the residence be sold and the profit used in part to settle the loan? Will profit from the business be used to settle the loan?
Welcomed news may be that caveat loans do not require credit checks even in cases including discharged bankruptcy, bad credit rating, court judgment or part-9 debt agreement has been a part of one's credit history. Taking the time to research, and ask for recommendations to a reputable brokerage firm can be a good means to ensure financial protection for the present and the future. The broker will assist in finding the most suitable lenders and loan options that fit your situation.