When it comes to business, cashflow is critical to success. This means having access to cash when you need it to buy stock, pay employees and cover regular bills and expenses. That’s why a small business experiencing cashflow issues – no matter how temporary – can quickly become a big problem. But what if you have the cash, it’s just tied up in your home? That’s an easy fix – you can apply for a short term loan secured against a property.
In other words, you can take out a second mortgage on your home.
Can you take out a second mortgage to cover a temporary cashflow problem?
The short answer is yes – and we’re always surprised by how many people don’t know this. Yes, you can take out a second mortgage on your home to help support your business. While it’s possible to take out a longer-term loan, experience tells us most small business owners only want a business bridging loan – also known as fast finance – to keep the proverbial wolves from the door when cash flow is a little tight.
What is a second mortgage?
A second mortgage is a loan taken out against the equity you already hold in your home. Equity is the difference between the current value of your home and what’s still owing on your mortgage. This means, if you have substantial equity in a property you own, it’s likely you’ll be able to borrow more via a second mortgage. However, you won’t be allowed to borrow the entire amount, you’ll be limited to somewhere around 80 percent. How much you can actually borrow will be determined by the property’s current market value less your outstanding Home loan balance. This is known as the Loan to Value Ratio, or LVR.
How do I know how much equity I have?
As all our loans are secured, Our team will be able to do a desktop valuation on your property. Chances are your property is worth much more than you think it is. At the very least, it’ll be worth more than it was just a few years ago, before the pandemic did strange things to the Australian property market. Once we have all the relevant numbers, we can use the LVR to calculate how much you can borrow.
What are the benefits of a second mortgage?
Perhaps the most important benefit is you can access your money quickly, especially when you use a specialist fast lender like Strive Financial. With our commitment to ultra-fast lending, once you’ve given us all the necessary paperwork, we can have those funds into your bank account within 24 hours. Yes, that’s right. The funds will usually be available to you on the same or next business day.
And you can’t get any faster than that!
What about the interest rate?
Don’t be scared away by an annual interest rate. Especially if you intend repaying the loan with six or eight months. Or even less! Even more importantly, weigh up the opportunities a bridging business loan will afford you as opposed to doing nothing and watching your business really start to struggle.
If your business is starting to feel the pinch and you need a fast cash injection to keep things moving, Strive Financial are here to help you save the day or seize the moment. So call us today!