Is a property-secured business loan right for you?

For many business owners, the most valuable asset they have isn’t in the business at all — it’s their home, an investment property or the commercial building they trade from. A property-secured business loan puts that equity to work for the business.

It’s a powerful option. It’s also a serious one. This page helps you decide whether it’s the right fit for you, or whether something else suits better.

How does a property-secured business loan work?

The lender takes security over a property — residential or commercial — for a loan used for business purposes. The security can take a few forms:

• First mortgage. The loan is secured by a first-ranking mortgage, either over an unencumbered property or by refinancing the existing mortgage.
• Second mortgage. The loan sits behind an existing mortgage, using the equity above what’s already owed.
• Caveat. A caveat is lodged on the title to protect the lender’s interest, typically for short-term funding.

Amounts range from $20,000 to $5,000,000, depending largely on the property’s value and what’s already owed against it.

Who does it tend to suit?

You…	Why it can fit
Need a larger amount	Security supports amounts well beyond unsecured options
Are a newer business	The property carries weight that trading history can’t yet
Have bruised credit or ATO debt	Considered case by case; security helps
Want to consolidate several debts	One facility, one repayment
Are buying premises or another business	A long-term investment suits long-term funding
Need funds for a short-term gap with a clear exit	A second mortgage or caveat can suit

Who might want to think twice?

• If the need is small and short — an unsecured option or a line of credit may be simpler.
• If you’d lose sleep over it — using your home is a personal decision as much as a financial one.
• If the repayment plan is shaky — security doesn’t fix a business that can’t carry the debt.
• If other owners of the property aren’t on board — everyone on title needs to understand and agree.

Weighing it up? Talk it through with a real person — no credit check when you first enquire.

How is equity worked out?

A simple way to think about equity:

1. Estimate the property’s value. A lender will confirm it, often with a valuation.
2. Subtract what’s owed on any existing mortgages.
3. The difference is your equity. A lender won’t lend against all of it — they’ll keep a buffer based on the property type and their own policy.

For example, if a property is worth a certain amount and has an existing home loan, the lender looks at the gap between the two and decides how much of that gap can support a new loan. Commercial and residential properties are treated differently, and location matters too.

What questions should you ask yourself first?

A good coach asks the uncomfortable questions before you sign anything:

• What exactly is the money for, and how will it produce the repayments?
• What’s the exit? For short-term funding, how and when will it be repaid — a sale, a refinance, trading income?
• What if things go slower than planned? Could you still make repayments for six months?
• Who else is affected? Partners, co-owners and family members on title.
• Have you compared the total cost? In dollars, including all fees.

Our good debt vs bad debt guide has a seven-question self-test that’s especially useful here.

What will you need?

• Photo ID for all borrowers and guarantors
• ABN (and ACN for a company)
• Property details: address, latest rates notice and current mortgage statement
• Business bank statements (the number depends on the lender and the amount)
• A clear explanation of the purpose and the exit or repayment plan
• Details of any ATO debt or credit issues, if relevant

An illustrative example

Illustrative only. A two-year-old electrical business wants to buy out a departing partner. The amount is too large for an unsecured loan given the business’s turnover, and the remaining owner has solid equity in his home.

His funding plan ranks a property-secured loan first. It’s set over a term that lets the business’s cash flow carry the repayments comfortably, and his checklist includes the partnership exit agreement, his rates notice and home loan statement, and six months of business bank statements.

How does it compare to other options?

• vs unsecured loans: larger amounts and more flexibility on history and credit, but your property is on the line.
• vs second mortgages and caveat loans: these are forms of property-secured lending, typically for shorter-term needs.
• vs lines of credit: a lump sum for a defined purpose rather than a revolving limit.

What does a valuation involve?

For most property-secured loans, the lender arranges a valuation to confirm what the property is worth. A valuer inspects the property (sometimes a desktop valuation is used for simpler cases), considers recent comparable sales and reports back. The result sets the ceiling on what can be lent. It helps to make access easy, flag any recent improvements and be realistic about value — the valuation, not your estimate, is what counts.

Property in the picture? Let’s see what it opens up

Using property is a big step, and it deserves a proper conversation. We’ll help you work out whether it’s the right fit, how much makes sense and how to keep the plan comfortable.

The enquiry takes about a minute with no credit check. Your details aren’t dispatched to a dozen lenders; a real person looks at your situation and calls you. Please be accurate about the property, what’s owed on it and what the money is for, so we can match you properly first time.

See if you qualify →