How long does a business loan take?

An unsecured cashflow lender can answer within a day. A property-secured private lender can give an indicative answer on the first call and fund in as little as 24 hours from a clean, complete scenario. A bank typically takes three to eight weeks, most of which is the valuation and the analysis rather than the decision.

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Realistic timeframes

The gap between the first two columns is worth noticing. Getting an answer is fast almost everywhere; getting money is where the timetables diverge, and the difference is made up almost entirely of valuation, documentation and other people's processes.

Where a bank's weeks actually go

• The valuation. Ordering a sworn valuation, waiting for a valuer, and waiting for the report. A week or two for residential, longer for commercial and longer again outside a capital city. This is usually the single largest block of time.
• The financial analysis. Two years of accounts, interim figures, an ATO position and a serviceability model. Careful work, and not fast.
• The credit process. A file passing through several people, each with a queue.
• Documentation and settlement. Preparing and issuing documents, then booking settlement with everybody's solicitors.

The decision itself is often made in a day once the file is complete. The weeks are the assembly, which is why removing the valuation and the financial analysis changes the timetable so dramatically rather than marginally.

Where HomeSec's hours go, hour by hour

Paul Stone drew this for brokers as the HomeSec clock and then filmed it — the video above. It is worth reading directly against the list before it, because it is the same job in a different shape: the two blocks that make up most of a bank's weeks, the sworn valuation and the financial analysis, are not in it at all. The steps and the timings below are his, from that video.

1. 1
   The application arrives. Call it ten in the morning.Nothing has to be attached to it. What is assessed is the property, what is already secured against it, how much is wanted and for how long, and how the loan is repaid at the end.
2. 2
   Assessment, then a conditional approval if it holds up.In Paul's words: "we get the loan application through, we quickly do an assessment, and if everything looks okay, we'll issue a conditional approval, or it's sometimes known as a letter of offer." Conditional is the operative word — it sets out what the loan would be and what still has to be true. It is read, signed, scanned and emailed back.
3. 3
   Due diligence, about four hours.Searches on the title, on the company and on the people behind it, and confirmation of what is actually owed against the property. This is the step a surprise on the title lands in, and the reason an accurate payout figure at the start is worth so much.
4. 4
   Lawyers instructed, contracts out within about two hours.The loan contracts are drawn and emailed to your own solicitor rather than to you, because that is who has to witness the signing.
5. 5
   You sign with your solicitor, and they email the documents back.This is the one step in the sequence whose clock belongs to somebody else's diary. Everything above it can be compressed; an appointment cannot. Booking it before you need it is the single most useful thing a borrower can do to a timetable.
6. 6
   Overnight.By this point the day has usually gone. Nothing is waiting on anybody — the signed documents are sitting with the lawyers to be checked first thing.
7. 7
   Next morning: documents checked, security lodged, settlement instructed.The caveat or the mortgage is lodged, whichever the loan is written on, and only then is settlement instructed.
8. 8
   Telegraphic transfer, in the account within about two working hours.Which is why the money lands the following morning rather than at the end of the following day.

Ten in the morning to ten the next morning. That is what "as little as 24 hours" describes, and it is a sequence rather than a promise — every step above assumes the one before it finished. Where it stretches, it stretches at step five, or at the first mortgagee's consent below, and almost never in the middle.

The four things that make a file fast

1. 1
   A documented exit.A contract of sale, an approved refinance, a certified claim, a named debtor with terms. An intention is not an exit, and it is the most common reason a file stops moving.
2. 2
   Accurate figures for what is already owed.A surprise on the title — a balance larger than stated, a caveat, a writ, rates arrears — costs a day at best.
3. 3
   Everyone on the title available to sign.A co-owner overseas, unwell, or simply not yet told is the single most common reason a 24-hour file becomes a 72-hour one. Say so at the start and it can be planned around.
4. 4
   The deadline, stated on the first call.Nobody can make a lawyer answer the phone, but knowing the date means nothing waits on us.

The one thing outside anybody's control

If the security is a registered second mortgage, your existing lender's consent is usually required, and most Australian banks take a week or two to issue it. That is not a HomeSec timetable, a broker timetable or anything that can be escalated — it is a queue in someone else's operations centre.

It is also why a caveat exists as an alternative. A caveat needs nobody's consent, which is frequently the difference between funding before a settlement date and funding after it. The trade is price: a caveat sits in a weaker position on title and is priced accordingly, so where the date allows time for consent, the second mortgage is usually the better loan. The difference between the two, in full.

Getting an answer today

An indicative answer takes one phone call and seven details, none of which is a document: what the property is roughly worth, its address, what is owed on it and to whom, how much you want, how long for, how many people are on the title, and what the money is for. Conditional approval then takes about fifteen minutes and three documents. Settlement follows in as little as 24 hours from a clean, complete scenario.

Reviewed by Jason Brockmuller, Joint Chief Executive