Caveat loans for businesses

By   |   Verified by David Boyd   |   Updated 1st October 2021

Caveat business loans

Getting a business loan can be a challenge for some small businesses and startups. Meeting a lender’s criteria can be particularly tough if your business is new and you don’t have tax documents to prove you can pay off the loan.

When cash flow is tight and you need money in a hurry, a caveat loan is a viable option if you own a property that you can use as security. You can access a caveat loan even with a bad credit score. And unlike with most business loans there are no limitations on what you can use the money for.

This is how they work.

What is a caveat?

In casual terms, think of a caveat as another term for security or collateral for your loan.

Caveat is a term used in property law. In Latin, caveat means "let him beware". A caveat, therefore, is a warning for anyone who has an interest in a property that the person lodging the caveat, known as the Caveator, also has an interest in it.

When you take a caveat loan, securing it against property, your lender lodges a caveat on your property title. When a property has a caveat on it, you cannot transfer, sell or otherwise deal with it. The caveat is removed once you pay off the loan.

What is a caveat loan?

Caveat loans are short term loans that are secured on a property, or a mortgage with equity. Because they are secured loans, they are approved quickly, often far more quickly than most business loans.

A bridging loan (or bridging finance) is a common example of a short-term caveat loan. It may be referred to as ‘interim capital’ or ‘interim finance’.

How do caveat loans work?

Begin by applying for a caveat loan online. You’ll need the following:

  • Proof of identity;
  • Proof of property ownership;
  • A realistic payment plan;
  • A demonstration of your ability to make repayments; and
  • Details of the equity in your property.

The lender will assess your loan application, considering your eligibility in terms of your business, credit history and property value, verifying your ownership title, and determining your ability to pay.

Once approved, the lender will lodge a caveat on your property title and release the loan funds, typically within a day or two.

Once you pay off the loan, either in instalments or as a lump sum, the lender will remove the caveat on your property.

Who can apply?

Only businesses can apply for caveat loans. You can think of it as the pay-day loan equivalent for businesses.

You are only eligible if you have ownership of a property you can use as security.

Generally required types of assets

Lenders accept a whole range of properties, including residential, commercial and industrial properties. Land and farms are also acceptable.

Lenders do not generally accept overseas properties.

What can you use a caveat loan for?

Unlike most business loans, there are no restrictions on what your caveat loan funds can be used for. Business people use caveat loan funds for a variety of purposes including:

  • Improving cash flow
  • Buying inventory
  • Buying equipment
  • Business renovations and improvements
  • Rebranding a business
  • Advertising
  • Business expansion
  • Meeting unexpected business costs
  • Refinancing and debt consolidation
  • Bridging loans
  • Paying taxes
  • To help the business survive a downturn
  • To access funds to capitalise on business opportunities
  • Or for any number of other purposes

How much can I borrow?

Depending on your needs and the value of the property you offer as security, you may borrow anything from $1,000 to $50 million as a caveat loan.

Exactly how much you may get also depends upon the lender, your credit history, and the business information you provide.

How much does it cost?

The overall cost of your loan depends on the interest payable and on various fees, both initial and ongoing. Typically expect to pay application fees, property valuation fees, legal fees, and line fees.


  • The property you want to use may need to be valued.
  • Consider both interest costs and various fees when calculating the total cost of the caveat loan.
  • Bank lenders may take longer to approve an application than non-bank lenders.
  • The amount you can borrow may depend on property, type of lender, and your credit score.
  • Bank lenders generally offer a higher percentage of LVR compared to non-bank lenders, some of whom may lend up to 100% LVR if you qualify.
  • You might need to be a Pty Ltd company. Some lenders consider sole traders.
  • An exit fee may be charged if you want to repay in full early.
  • Before taking a caveat loan, make sure you have a realistic payment plan you have confidence in.
  • Interest expenses that are incurred for income-producing purposes are tax deductible in Australia. Check with your tax professional for details.


  • Non-bank lenders. Non-bank lenders offer various loan alternatives to caveat loans that may offer quick access to funds. But the interest rates may be high compared to a caveat loan or regular business loan.
  • Invoice factoring helps you improve business cash flow by selling your accounts receivable (invoices on which you await payment) to a third party (factor). The factoring company will verify the validity of your invoices and pay you up to 80%-90% of invoice face value immediately. Once it collects the payment directly from your customers, the factoring company deducts its fee and pays you the balance amount of the invoice. Factoring is also referred to as debtor finance, debt factoring, or invoice discounting.
  • Equipment financing is a way to buy new vehicles, electronics, machinery and equipment, or for getting replacements and upgrades for business use. The lender offers a loan to cover the full cost of your equipment purchase, using existing business assets as loan security. You do not usually need an upfront deposit for equipment financing. Both the depreciation of the new asset (a cost) and the interest you pay on financing are tax deductible for your business.
  • A loan for the full cost of the goods (no upfront deposit) with the new asset itself serving as security for the loan. Generally, the interest you pay plus the depreciation of the asset is tax deductible to the extent the asset is used in your business.
  • A chattel mortgage (for vehicles and other equipment) is structured in a similar way to a secured loan, but in this case the repayments may be varied to suit a possibly seasonal cash flow, and there is often a higher balloon or residual final payment, lowering the amount of the regular standard payments.