When traditional lenders shut their doors, finding a funding solution can feel like searching for a needle in a haystack. But that’s where Innovate Funding steps in, providing tailored, fast, and reliable financial solutions. In this case study, we’ll explore how we helped a client in Maroubra secure a $300,000 second mortgage at a rate of 15% p.a. on their $2.5 million residential property. This critical funding gave them the working capital to grow their business, seize new opportunities, and navigate a challenging financial landscape.
The Client’s Challenge: Finding Working Capital Without Traditional Support
Our client, a small business owner in Maroubra, faced a familiar challenge. Their business was thriving, with growth opportunities on the horizon, but they needed immediate working capital to fund operations, invest in new stock, and meet ongoing obligations.
Unfortunately, their financial situation presented obstacles to securing funds through traditional lending channels. Despite owning a high-value residential property worth $2.5 million, they already had a first mortgage of $1.6 million with a major bank. This left them with limited equity to draw on through conventional refinancing. Additionally, the time-consuming processes and stringent requirements of traditional banks were not aligned with the urgency of their financial needs.
A Common Scenario for Australian Business Owners
This scenario is not unique. Many small and medium-sized Australian businesses find themselves in similar positions. Banks often avoid providing additional business funding, even when borrowers have valuable assets and a strong track record. The gap between what banks offer and what business owners need is where private lenders like Innovate Funding play a crucial role.
The Solution: A $300K Second Mortgage Secured by Innovate Funding
At Innovate Funding, we’re committed to providing practical solutions that address real-world financial challenges. After a detailed consultation with the client, we determined that a second mortgage would be the best option to unlock the equity in their Maroubra property. Here’s how we approached the situation:
Quick Property Assessment: The client’s residential property was appraised at $2.5 million, with $1.6 million already tied up in a first mortgage. This left $900,000 in remaining equity. After considering the property’s location in Maroubra—a high-demand suburb in Sydney’s Eastern Beaches—and its overall value, we determined that lending $300,000 against the remaining equity was both feasible and low-risk.
Customised Loan Terms: We structured a second mortgage with a rate of 15% p.a., reflecting the short-term nature of the loan. The client appreciated the clarity and simplicity of the terms. Unlike traditional lenders, we didn’t drown them in complex requirements or hidden fees.
Fast Approval Process: Speed was of the essence. The client needed the funds urgently to capitalise on business opportunities and manage cash flow. From the initial inquiry to the final approval, we ensured the process was seamless and swift. Within days, the $300,000 was ready for disbursement.
Flexible Loan Purpose: Unlike traditional banks that impose rigid restrictions on loan usage, Innovate Funding offers complete flexibility. Without the red tape, the client was free to use the funds for various business needs, from purchasing inventory to covering operational expenses.
The Outcome: Business Growth and Financial Stability
The $300,000 second mortgage gave the client the liquidity to address immediate challenges and plan for long-term growth. Here’s what the funding allowed them to achieve:
Meeting Growing Customer Demand: The client could use the funds to purchase additional stock, meeting increased customer orders and avoiding potential losses from delayed shipments or stock shortages.
Investing in Marketing and Growth: A portion of the funds was allocated to marketing initiatives, including digital advertising and branding. These efforts directly boosted the business’s visibility and attracted new customers.
Smoothing Out Cash Flow Issues: Like many small businesses, our client occasionally faced delays in customer payments. The working capital allowed them to maintain operations without disruption, ensuring staff and suppliers were paid on time.
Retaining Business Control: Perhaps most importantly, the client retained complete business control without diluting equity or bringing in outside investors.
Why Second Mortgages Are a Game-Changer for Businesses
This case highlights the power of second mortgages as a financing tool. Second mortgages can provide a reliable solution for business owners who need quick access to cash. Here’s why they’re so effective:
Unlocking Property Equity
A second mortgage allows you to tap into the unused equity in your property. For many Australian business owners, their residential or investment property is their most valuable asset. By leveraging this asset, they can secure funding that would otherwise remain out of reach.
Flexibility in Loan Terms
Unlike traditional loans with rigid repayment schedules and restrictive conditions, second mortgages from private lenders are tailored to your needs. This flexibility can make a significant difference when you’re navigating fluctuating cash flow or seasonal demands.
Speed and Simplicity
In the world of business, time is often of the essence. Private lenders like Innovate Funding excel in delivering funds quickly, with streamlined processes that eliminate the bureaucratic delays of traditional banks. For our Maroubra client, this quick turnaround was a game-changer.
Short-Term Nature
Second mortgages are typically designed for short-term needs. This makes them ideal for business owners who require immediate funds but plan to refinance or repay relatively quickly.
Innovate Funding’s Approach to Tailored Lending
At Innovate Funding, we understand that every client’s situation is unique. That’s why we don’t take a cookie-cutter approach to lending. Instead, we work closely with our clients to understand their goals, challenges, and timelines, offering solutions that meet their needs.
Why Clients Choose Innovate Funding
Personalised Service: We treat every client as an individual, not just another application. Our tailored approach ensures we deliver the right solution for your circumstances.
Deep Expertise: With years of experience in the Australian lending market, we know how to navigate complex scenarios and find creative solutions.
Speed and Efficiency: Time is critical for many of our clients, and we pride ourselves on fast turnarounds without compromising on quality or due diligence.
Transparency: We prioritise clear communication, ensuring our clients understand every aspect of their loan. No hidden fees, no surprises—just straightforward lending.
Key Takeaways for Borrowers
This case study demonstrates how a second mortgage can be the perfect solution for business owners facing cash flow challenges or seeking growth capital. Here are some important lessons for anyone considering this option:
Know Your Property Value: Understanding the market value of your property and the equity available can help you determine if a second mortgage is viable.
Work with Trusted Lenders: Choose lenders specialising in non-bank finance, like Innovate Funding, to ensure you get tailored and professional service.
Plan Your Loan Use: Have a clear strategy for how you’ll use the funds and how they’ll contribute to your business’s success.
Ready to Unlock the Equity in Your Property?
At Innovate Funding, we specialise in helping Australian businesses access the capital they need to succeed. Whether it’s through a second mortgage, bridging finance, or another type of commercial lending, our team is here to guide you every step of the way. If you’re ready to explore your options, contact Innovate Funding today. Let us help you unlock the potential of your property and achieve your business goals.