Caveat loan requirements: the six things a lender needs to see

The requirements for a caveat loan come down to six things: property you or your entity own, enough equity behind what’s already owing, a business purpose, a believable way out, identification for everyone who signs, and a current payout figure from your first lender. Get those in order and most files move in days. Miss one and even a strong deal stalls.

This page is the checklist, plus the parts people usually get wrong.

Who qualifies for a caveat loan?

A business owner with equity in property and a clear plan to repay. That’s the short version. The longer version is this checklist:

Requirement	What it means	What we’ll ask for
Property	Residential or commercial property owned by you, your company, your trust or a related party	The address and the names of every registered owner
Equity	Enough value left after existing debts to carry the new loan	Your best estimate of value, then a valuation
Business purpose	The money funds the business, not personal spending	A sentence on what it’s for, plus an invoice or ATO statement if relevant
Exit	A specific event that repays the loan within months	The sale contract, refinance plan or payment you’re relying on
Identity	Every owner, director and guarantor is verified	Photo ID such as a driver licence or passport
First lender’s figure	What’s owing on the loans already secured over the property	A recent statement or payout letter

On Victorian property, a file that ticks those boxes becomes a caveat loan. For property in any other state or territory, the same file becomes a short-term registered second mortgage, which sits behind your bank in the same way and is usually arranged just as quickly.

How much equity do you need for a caveat loan?

Enough that the property comfortably covers everything secured over it, with room to spare. Lenders look at this through the loan-to-value ratio, or LVR. Moneysmart defines it as the loan amount as a percentage of the asset’s value, worked out by dividing one by the other. For a loan behind a bank, the figure that counts is the combined LVR: the bank debt plus the new loan, divided by the property’s value.

There’s no single magic number. How far a lender will go depends on the property type, its location, how saleable it is, the title position and the strength of the exit. A suburban home in a big city supports more than a remote rural block, for example. Try your own numbers in the LVR calculator, and see how equity is calculated for the full arithmetic.

An illustrative example

Round numbers and invented details. The LVR shown is just the result of this example’s arithmetic, not a limit.

A joinery business owner in Geelong wants $60,000 to cover wages and timber while a large fit-out invoice is outstanding. Her townhouse is worth about $650,000 and she owes $380,000 on it.

• Equity before the loan: $650,000 − $380,000 = $270,000.
• Debt after the loan: $380,000 + $60,000 = $440,000.
• Combined LVR: $440,000 ÷ $650,000 ≈ 68%.
• Exit: the fit-out invoice, which the builder has approved and scheduled for payment within about six weeks.

Plenty of equity remains, the purpose is clearly business, and the exit is documented. That’s what a straightforward file looks like.

If your own numbers are similar, check your eligibility now. It’s quicker than reading the rest.

Do you need to show income or financials?

Often not in the way a bank would want. A caveat loan is repaid from one event, such as a sale, a refinance or a big payment, rather than from years of monthly instalments. So the assessment leans on equity and the exit rather than on two years of tax returns.

That doesn’t mean no paperwork. We may ask for recent business bank statements or a BAS to confirm the business is trading and the purpose is genuine. Bigger loans, or exits that rely on a refinance to a bank, may need more, because the next lender will want it too. If your lodgements are behind, the low doc business loans page explains how that’s handled.

What documents does a caveat lender ask for?

The government’s business.gov.au guidance notes that documentation “varies between loans” and lists items such as proof of identification and financial reports. For a short-term property-secured loan, the list is shorter and more targeted:

• To enquire: nothing but accurate answers on the form.
• To assess: the property details, your current lender’s statement, a note on purpose and exit, and any contract or letter that proves the exit.
• To approve: photo ID for each signer, ABN details, and company or trust documents if an entity is involved.
• To settle: signed loan documents and the payee details, such as an ATO payment reference or a supplier’s account.

Our documents checklist sets out each stage in more detail.

Can a company or trust apply?

Yes. Companies, trusts, partnerships and sole traders all borrow from us. A few extra steps apply to entities:

• Companies: a current company search, the directors’ details and, usually, director guarantees. ASIC requires every company director to have a director ID, so keep it handy.
• Trusts: the trust deed and any variations, so we can confirm the trustee can borrow and give security.
• Mixed ownership: a trading company can borrow against property owned by a director or a family trust, as long as the owner signs as security provider.

Property in a trust or company covers the trickier structures.

What gets a caveat loan application declined?

Rarely a credit score on its own. The common reasons are more practical:

1. No real exit. “Something will come up” isn’t a plan. A dated sale, refinance or payment is.
2. Not enough equity. The existing debt plus the new loan leaves too little room.
3. A personal purpose. We lend for business purposes only.
4. An owner who won’t sign. Every registered owner must agree.
5. Title problems. Disputes, unexplained caveats or property that’s hard to value or sell.
6. Information that doesn’t match. Debts or arrears that surface later than they should.

Bad credit and ATO debt are considered case by case, and our bad credit caveat loans page explains how a damaged file is weighed.

Tick most of the boxes? Let’s check the rest together

If you’ve got the property, the equity and a plan to repay, you’re most of the way there. The quickest way to find out about the rest is to ask.

The enquiry takes about 60 seconds and involves no credit check when you first enquire. We’re the lender, so your details don’t get passed along a chain of other financiers. A member of our credit team reads your answers and phones you. Please complete the form carefully, especially the property, the state it’s in, what’s owing and when you need the funds, so we can test it against this checklist on the first call.

See if I qualify →