Specialist finance
Caveat loans and bridging finance for business: how they work
Short-term property-secured loans can settle in days when timing matters. The key is a clear, realistic exit.
- Reviewed by
- Kama Atcheson, Business lending specialist
- Published
- Last reviewed
- Reading time
- 6 min read
Key takeaways
- Caveat loans are secured by a caveat on a property title and can settle quickly.
- Second mortgages sit behind an existing first mortgage; first mortgages are the strongest security.
- Bridging loans cover a gap until a sale, refinance or payment arrives.
- Short-term private finance costs more than bank lending, so plan the exit before you settle.
Sometimes the right loan is the one that settles in time. A tax deadline, a supplier opportunity, a property settlement or a contract payment that is running late can all create a short, sharp funding need that mainstream lenders cannot meet quickly enough.
Caveat loans
A caveat loan is a short-term loan where the lender lodges a caveat on the title of a property you own. The caveat stops the property being sold or refinanced without the lender’s knowledge. Because documentation is light, caveat loans can settle quickly.
Second and first mortgages
A second mortgage is registered behind an existing first mortgage, so the second lender is repaid after the first if the property is sold. A first mortgage is the strongest position and usually carries lower pricing than a caveat or second mortgage.
Bridging loans
Bridging finance covers a gap until money arrives, most often the sale of a property or settlement of longer-term finance. It is priced and structured around that exit.
What drives cost and approval
- Equity. How much the property is worth compared with what is owed on it.
- Security position. First mortgage, second mortgage or caveat.
- Exit strategy. Sale, refinance or incoming funds, and how certain the timing is.
- Purpose. Business-purpose lending is assessed differently from personal lending.
Using short-term finance well
- Plan the exit first. Know exactly how and when the loan will be repaid.
- Read the fees. Establishment, legal, valuation and exit fees can add up on a short loan.
- Check default terms. Short-term loans often carry higher default rates if the term is exceeded.
- Use it as a bridge. Short-term private finance works best as a step to longer-term, lower-cost finance.
Compare specialist and private finance or non-cashflow finance, or tell us your timeline.
Questions about this topic
How fast can a caveat loan settle?
Specialist lenders can often settle much faster than banks because they focus on the security and exit rather than full financials. Timing depends on valuation, documents and the lender.
Do I need financials for a caveat loan?
Often not in full. Private lenders focus on the equity in the property and how the loan will be repaid, although they still check identity, purpose and credit.
