Can a Second Mortgage Help Unlock Goods Stuck at the Port? A $250,000 Case Study in Bronte, NSW

When time-sensitive goods are held at the port, business operations can grind to a halt. This was the situation for a Sydney-based importer whose inventory had arrived at the Port of Sydney. However, without immediate access to funds to pay import duties, their goods could not be released—jeopardising fulfilment deadlines, revenue, and customer relationships.

Rather than facing the long delays associated with traditional bank lending, the business opted for a strategic alternative: a $250,000 second mortgage secured against a residential property in Bronte, New South Wales. With a competitive interest rate of 1% per month and a low Loan-to-Value Ratio (LVR) of 35%, the borrower was able to access fast, short-term capital, meet their obligations, and continue business operations without disruption.

In this article, we’ll explore how this second mortgage was structured, why it was an effective solution, and how second mortgages can assist Australian business owners in accessing equity for time-sensitive funding needs.

What Is a Second Mortgage?

A second mortgage is a type of secured loan taken out against a property that already has an existing first mortgage. The second mortgage is subordinate to the first, meaning it ranks behind the primary mortgage in terms of claim to the asset in the event of default.

Second mortgages are commonly used by business owners, investors, and developers to access equity without refinancing their existing loan. This can be particularly useful when the primary mortgage has a favourable long-term rate or when the borrower needs funds quickly without disrupting their current financing arrangement.

The Scenario: Import Duties Delaying Delivery

The client in this case was a growing Sydney-based business specialising in manufactured goods. They had ordered a large shipment of stock from overseas, which successfully landed at the Port of Sydney. However, the business encountered a short-term cash flow constraint and was unable to immediately pay the required import duties and port charges to release the goods.

Traditional finance options, such as bank overdrafts or unsecured business loans, were not viable because:

• Bank processing times were too slow, risking late penalties and customer dissatisfaction.

• Unsecured loans from fintech lenders came with prohibitively high rates and restrictive criteria.

• The business had strong asset backing but needed a solution that was fast and minimally burdensome.

The solution came in the form of a second mortgage, facilitated by Innovate Funding through one of our trusted private lending partners.

The Solution: $250,000 Second Mortgage at 35% LVR

Innovate Funding arranged a $250,000 second mortgage secured against a residential property in Bronte, NSW. The property already had a first mortgage but had substantial equity available, making it suitable for a second charge. Key loan terms:

• Loan Amount: $250,000

• Security: Residential property in Bronte, NSW

• Position: Second mortgage

• LVR (combined): 35%

• Interest Rate: 1% per month

• Loan Purpose: Payment of import duties and port fees

• Loan Term: Short-term (3–6 months)

• Settlement Timeframe: Under 5 business days

This second mortgage allowed the client to unlock equity in their property without refinancing their primary home loan. It also enabled them to meet urgent payment obligations at the port and avoid substantial delays in their manufacturing schedule.

Why the Borrower Chose a Second Mortgage

For this client, a second mortgage was the preferred option over other forms of lending due to several key advantages:

1. Fast Access to Funds

   Private second mortgages can often be settled in under a week, especially when security and exit strategies are clear. In this case, the lender processed and settled the deal in less than five business days—something traditional lenders simply couldn’t match.

2. No Disruption to First Mortgage

   The property already had a favourable first mortgage. Refinancing would have taken time and potentially triggered break fees. By choosing a second mortgage, the borrower could preserve their existing loan while accessing new capital.

3. Strong Equity Position

   With a total LVR of only 35%, the borrower was able to obtain funding on favourable terms. The strong equity position reduced the lender’s risk and streamlined the approval process.

4. Short-Term Loan Structure

   The borrower had a defined repayment strategy—revenue from the sale of the released goods. This made a short-term loan ideal, allowing them to cover their cash flow gap without committing to a long-term financing product.

The Role of Innovate Funding

At Innovate Funding, we specialise in sourcing and structuring commercial loans through private lenders and non-bank financiers. Our expertise in second mortgage lending enabled us to:

• Identify a lender offering competitive pricing and rapid turnaround.

• Structure the loan behind the first mortgage with minimal disruption.

• Ensure the borrower’s exit strategy was viable and clearly understood.

• Complete due diligence on both the security and the borrowing entity efficiently.

We act as both facilitator and advisor, ensuring each deal supports our clients’ short-term and long-term goals.

Strategic Use of Second Mortgages in Business

Second mortgages are often underutilised by business owners who may be unaware of their flexibility and accessibility. While commonly associated with property investors or developers, second mortgages can play a crucial role in business operations—particularly when timing is critical. Common business use cases include:

• Import/export finance: Covering port fees, shipping costs, and customs duties.

• Stock purchases: Capitalising on wholesale pricing or bulk order opportunities.

• Bridging finance: Managing cash flow between major receivables or asset sales.

• Working capital: Funding payroll, production, or advertising campaigns.

• ATO payments: Settling tax debts while negotiating repayment plans.

When structured correctly, a second mortgage provides business owners with flexibility, speed, and minimal administrative burden.

Understanding LVR and Risk

Loan-to-Value Ratio (LVR) is a critical metric in second mortgage lending. It refers to the total loan amount as a percentage of the secured property’s value, inclusive of both first and second mortgages.

In this scenario, the LVR was only 35%, meaning the total combined debt on the Bronte property—including the first and second mortgages—was well below market value. This low LVR provided:

• Comfort for the lender due to the reduced risk profile.

• Faster approval and settlement because of the strong security position.

• A competitive interest rate (1% per month) for a second mortgage loan.

Borrowers with low LVRs are often in a stronger position when negotiating loan terms and fees.

Key Takeaways for Australian Business Owners

If you're a business owner in Australia considering funding options for urgent or short-term needs, this case study highlights several points:

• Second mortgages are a powerful alternative to bank finance, particularly for time-sensitive transactions.

• They enable access to equity without refinancing, preserving existing home loans or commercial lending arrangements.

• Low LVRs can unlock faster approvals and better pricing, even in second position.

• Funding can be tailored to a business’s cash flow cycle, helping manage critical costs such as importing stock or settling ATO obligations.

• Working with a specialised commercial broker, like Innovate Funding, ensures access to the right lender, terms, and timeline.

This $250,000 second mortgage in Bronte is an excellent example of how businesses can unlock capital quickly by leveraging equity in real estate. Whether it's port delays, short-term cash flow issues, or working capital needs, a well-structured second mortgage can be a valuable funding bridge.

If you're facing similar challenges, talk to Innovate Funding—we specialise in navigating complex financial situations with speed, clarity, and a focus on outcomes.

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