Quick answer
A secured business loan is backed by an asset the lender can claim if the loan is not repaid, most often residential or commercial property. Because the lender carries less risk, secured loans usually allow larger amounts and longer terms than unsecured finance. Property-secured business loans typically range from $20,000 to $5,000,000. The trade-off is that the property is at risk if repayments stop.
Key points
- Security can be a first mortgage, a second mortgage, a caveat or a specific business asset.
- Larger amounts and longer terms are usually possible than with unsecured lending.
- The lender's main questions are the property's value, existing debt and your exit plan.
- Your home or premises is genuinely at risk if the loan is not repaid.
At a glance
- Typical amount
- $20,000 to $5,000,000 against property
- Security
- Residential or commercial property, or a specific business asset
- Terms
- From a few months (bridging, caveat) to many years (term loans)
- Key measure
- Loan-to-value ratio (LVR) and the plan to repay
Our review: secured business loans at a glance
What works well
- Larger amounts than most unsecured lending
- Longer terms keep each repayment smaller
- Past credit issues can matter less when security is strong
- Short-term secured options can move quickly when time matters
What to watch
- The property can be sold if the loan goes into default
- Legal, valuation and registration costs add to the price
- Takes longer to set up than a small unsecured loan
- Uses equity you might need for something else later
Usually suits
- Owners with equity in a home or commercial property
- Larger purchases, refinances and growth projects
- Urgent needs where unsecured limits are too small
Probably look elsewhere if
- The business has no realistic way to repay the debt
- You are not comfortable putting the property at risk
- A smaller unsecured facility would do the job
Security changes the conversation with a lender. Instead of relying only on how the business has traded, the lender can look to an asset that would cover the debt if things went wrong. That reassurance is what makes larger amounts, longer terms and sometimes faster decisions possible. It is also what puts that asset on the line, which is why secured business finance deserves a slower, more careful review than almost any other kind.
What can secure a business loan?
Most secured business lending relies on property, but not all of it does:
| Type of security | How it works |
|---|---|
| First registered mortgage | The lender is first in line on the property title, usually because the property is unencumbered or the existing loan is refinanced |
| Second registered mortgage | Sits behind an existing home loan or commercial mortgage; the first lender is repaid first if the property is sold |
| Caveat | An interest noted on the title that stops the property being sold or refinanced without the lender’s consent; common for short-term loans |
| Specific business asset | A vehicle, machine or piece of equipment financed by the loan |
| General security agreement | A charge over all present and after-acquired business property, registered on the PPSR |
Residential property, commercial buildings, industrial units and sometimes vacant or rural land can all be used, although lenders treat each differently. Our reviews of caveat loans and second mortgage business loans go deeper on those structures.
How do lenders assess a secured business loan?
The lender wants to answer three questions. First, what is the security worth and how much is already owed against it? This produces the loan-to-value ratio, or LVR, which you can estimate in our property LVR and equity calculator. Second, can the business, or the borrower, meet the repayments? For longer loans this is a full servicing assessment; for short-term loans, the lender may focus more on the third question: how will the loan be repaid at the end? That exit might be a sale, a refinance to a bank, an incoming payment or a business event with a known date.
Credit history still matters, but strong security and a believable exit can carry an application that an unsecured lender would decline. That is why secured lending is often where owners with a past default, an ATO debt or a short trading history find options.
Costs to expect beyond the interest
Secured loans carry more setup work than unsecured ones, and those steps cost money. Expect some combination of:
- an application or establishment fee;
- a valuation or property assessment;
- legal fees for preparing and registering the mortgage or caveat;
- title search and registration charges set by the state land registry;
- discharge fees when the loan is repaid.
None of these are unusual, but they add up, and on a short loan they can be a large share of the total cost. Put every fee into the true cost calculator so you are comparing complete numbers.
The risk you are accepting
It is easy to treat security as a box to tick. It is not. If the loan defaults and cannot be fixed, a lender with a registered mortgage can ultimately take possession of the property and sell it. With a caveat, the lender can take legal steps to enforce its interest. If the property is your family home, other people’s lives are tied to the business’s fortunes. Before you sign, be honest about the worst realistic outcome and whether the loan is worth that risk. Independent legal advice is strongly recommended, and some lenders insist on it.
Secured or unsecured: a quick test
If you need under a few hundred thousand dollars for a short period and the business has steady deposits, an unsecured business loan or line of credit may do the job without touching property. If you need more, need it for longer, or have been declined unsecured because of credit history or trading time, secured finance is usually the next door to try. Our guide to secured versus unsecured business loans sets out the comparison in full.
Questions to ask before you sign
- What exactly will be registered on the title, and when will it be removed?
- What is the total of every fee, including legal and discharge costs?
- What happens at the end of the term if the exit is delayed?
- Does the contract allow early repayment, and at what cost?
- Which events, beyond missed repayments, count as default?
Could a secured loan work for you?
If you own property with equity and need a larger or faster amount than unsecured lending allows, a property-secured business loan between $20,000 and $5,000,000 may be an option. You can make one enquiry to find out. There is no credit check when you first enquire, a real person reviews your situation, and your details are not passed around a list of lenders. Please give an honest estimate of the property’s value and what is owed on it, because those two figures shape everything else. If you are unsure whether to use property at all, say so in your enquiry and ask about unsecured alternatives as well.
Frequently asked questions
Can I use my home to secure a business loan?
Yes, many business owners use equity in their home to secure business finance, through a first mortgage, a second mortgage or a caveat. It can unlock larger amounts, but the home is at risk if the business cannot repay, so it deserves careful thought and independent advice.
How much can I borrow with a secured business loan?
Property-secured business loans typically range from $20,000 to $5,000,000. The amount depends mainly on the property's value, what is already owed against it, the lender's maximum loan-to-value ratio and your plan for repaying.
Is a secured business loan cheaper than unsecured?
Usually, because the lender's risk is lower. But fees for valuations, legal work and registration add to the cost, and short-term secured products can be priced quite differently from long-term ones. Compare total cost rather than assuming.
What happens if I can't repay a secured business loan?
The lender will usually work through missed-payment and default notices first. If the debt is not resolved, it can enforce its security, which can include taking possession of and selling the property. Talk to the lender early if trouble is coming.
Sources and further reading
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