Speed Premium: What It Really Costs to Raise Business Capital

Every business owner learns eventually that money has two prices. There is what it costs, and there is what it costs today in business capital.

The gap between those two numbers is bigger than most operators expect, and it is almost never explained properly before someone signs. This is a look at how short-term secured business lending is actually priced in Australia, and how to work out whether the speed is worth what you are paying for it.

Key Takeaways

• Short-term property-secured business loans are quoted in monthly rates, not annual ones, so 1.5% per month is 18% a year and 5% per month is over 60%.
• The spread between lenders in this market is enormous, which is where most of the avoidable cost sits.
• A caveat is a notice on your property title. Unlike a mortgage, it does not give the lender power of sale.
• Credit provided wholly or predominantly for business purposes sits outside the National Credit Code, so the consumer protections you may be used to do not apply.
• The exit strategy determines the real cost. A facility that rolls over past its term gets expensive fast because interest is usually capitalised.

Why the deadline sets the price, not the amount

Conventional lending prices risk. Fast lending prices risk and time together, and time turns out to be the more expensive input.

A bank assessing a secured business facility will want financial statements, BAS lodgements and a valuation. That process is not slow because anyone is being difficult. It is slow because verification takes as long as it takes.

Strip the verification out and someone has to be compensated for the information they no longer have. That compensation is the speed premium, and it is charged as interest.

Where the business capital pressure is actually coming from

The demand for fast business capital in Australia is not abstract. A large share of it traces back to one creditor.

The Australian National Audit Office reported in its 2025-26 audit of ATO small business debt management that small business collectable debt has reached $35.9 billion, more than two thirds of all collectable tax debt. Enforcement has scaled with it.

The same audit records the ATO issuing 64,342 director penalty notices in 2024-25, up from 35,774 the year before. Garnishee notices rose from 6,150 to 15,199 over the same period.

Those two instruments are why timelines compress. A garnishee notice requires a bank to pay funds from a business account directly to the ATO, and a director penalty notice can make a director personally liable for company tax debts, with only a 21-day window to act on the non-lockdown version.

That is a very different problem from a general funding gap, and it explains why cash flow lending and other revenue-based products, which assess trading performance over time, often cannot solve it. The clock is the constraint, not the credit assessment.

How a business capital caveat actually works

A caveat is a legal notice lodged on a property title under state land titles legislation. It records that a third party claims an interest in the property, and it operates in New South Wales, Victoria, Queensland, Western Australia and South Australia.

It sits behind any existing mortgage and does not disturb it. Crucially, and this is the part most explanations get wrong, a caveat does not confer power of sale the way a registered mortgage does.

What it does is block dealings on the title. You cannot sell or refinance cleanly while it sits there, which is what gives the lender its leverage.

Because the security is the property rather than the trading history, the assessment is short. Typical documentation runs to a rates notice, photo identification and a current mortgage statement, and most lenders in this space weigh equity more heavily than credit history.

Settlement timing reflects that. A clean title on metropolitan property can settle inside 24 hours, while anything with a complex ownership structure, a company title or a regional valuation tends to take closer to a week.

The other mechanical difference worth understanding is how interest behaves. On most of these facilities interest is capitalised, meaning nothing is repaid during the term and the whole amount falls due at the end.

That is genuinely useful if your cash flow is the problem you are trying to solve, since it removes any monthly servicing burden. It also means the cost is invisible until the day it is not, and it compounds if the term runs long.

Loan-to-value ratios go higher here than in mainstream lending, sometimes past 80% of property value including the existing mortgage. Higher leverage means less margin for error if the exit slips or the valuation comes in soft.

The math nobody does before signing

Here is where the real money is won or lost, and it is arithmetic rather than negotiation.

Rates in this market are quoted monthly. Across active Australian lenders they range from under 1% per month to more than 5%, which annualises to somewhere between roughly 12% and over 60%.

Run that on a real number. On a $300,000 facility held for six months, the difference between 1% and 3% per month is around $36,000. Same loan, same security, same borrower.

There is no comparison site for private lenders, and pricing is set deal by deal across a fragmented panel of roughly 15 to 20 active participants. Going direct to one lender gets you one quote with no way to know where it sits in the range.

That structural gap is the argument for using a broker rather than approaching a lender directly. Switchboard Finance, an FBAA-accredited brokerage operating as credit representative 576702 under Australian Credit Licence 517192, arranges caveat loan finance for business owners across a panel of private lenders rather than lending from its own book, with facilities from $50,000 to $5 million and terms of one to twelve months.

The broker model also creates an incentive worth noticing. A direct lender is paid when you take their product, whereas a broker comparing structures can tell you that a second mortgage at two to four weeks or a bridging facility might cost materially less if your deadline allows it.

Then check the fee stack separately from the rate. Establishment fees, legal costs, valuation, state caveat registration fees and, importantly, early repayment penalties all change the total. A facility that punishes you for repaying early defeats the purpose of a short-term loan.

The regulatory business capital gap worth knowing about

This is the part that deserves more attention than it gets in most coverage of the sector.

Credit provided wholly or predominantly for business purposes falls outside the National Credit Code, the regime that governs consumer lending in Australia. Responsible lending obligations and the consumer protections attached to them do not apply.

That is not a loophole, it is deliberate policy. The assumption is that business borrowers are commercially sophisticated and do not need the same statutory guardrails.

The practical consequence is that due diligence sits with you. Read the total dollar cost, the default rate, the extension terms and the security position, because no regulator is going to review the suitability of the product on your behalf.

When it is the wrong tool for business capital

Speed only earns its premium when there is something specific to be fast about. There usually is not, more often than people admit.

The clearest disqualifier is the absence of an exit. If there is no incoming settlement, no refinance in progress and no confirmed receivable, a short-term facility is not bridging anything, it is just deferring a problem at a high interest rate.

The second is a structural rather than a timing shortfall. If the business is losing money every month, expensive short-term capital accelerates the outcome instead of preventing it.

The third is purpose. These facilities are for business use, and personal or household borrowing against residential property is a different product under a different regulatory regime entirely.

Conclusion

Fast capital is a legitimate tool with a narrow and real use case. Clearing a tax debt before enforcement escalates, or covering a settlement gap where the funds are confirmed but late, are both situations where paying a premium for two days instead of six weeks is straightforwardly rational.

What separates a good outcome from a bad one is almost never the decision to borrow. It is whether the exit was defined before the money landed, and whether anyone bothered to compare more than one quote.

This article is general information only and does not take your objectives, financial situation or needs into account. Consider obtaining professional advice before entering any credit facility.

FAQ

What is a caveat loan in business capital lending?

It is a short-term business loan secured by a caveat lodged on property you own. The lender assesses your equity rather than your trading history, terms typically run from one to twelve months, and interest is usually capitalised rather than repaid monthly.

Does a caveat let a lender sell my property?

No. A caveat records an interest and blocks dealings on the title, but it does not carry the power of sale that a registered mortgage does. It does prevent you from selling or refinancing until it is removed.

Why are these loans quoted per month rather than per year?

Because the terms are short, monthly quoting reflects how the facility is actually used. It also makes the cost look smaller than it is, so always convert to an annual figure before comparing.

Are caveat loans regulated like home loans?

Not when the purpose is business. Credit provided wholly or predominantly for business purposes sits outside the National Credit Code, so responsible lending obligations and consumer protections do not apply.

What happens if I cannot repay at the end of the term?

Most lenders will offer an extension, though usually at a higher rate with additional fees. Because interest capitalises, an extended facility compounds quickly, which is why the exit strategy matters more than the entry rate.