Secured business loans: what property security changes

Putting property behind a business loan changes almost everything about the deal: how much you can borrow, how long you have to repay it, how long it takes to arrange and what’s at stake if things go wrong. This page compares the three main property-backed structures with each other and with unsecured lending, so you can decide whether the trade is worth making.

What counts as a secured business loan?

In everyday use, “secured” means secured by real property. The three common forms are:

• First mortgage. The lender is first on the title. This usually allows the largest amounts and the longest terms.
• Second mortgage. Sits behind an existing home loan or first mortgage and relies on the equity left over.
• Caveat loan. A short-term loan where the lender lodges a caveat on the title instead of a full mortgage. Quick to arrange, built for short periods.

Property-backed business loans through our network run from $20,000 to $5,000,000 over residential or commercial security.

How do the property-backed options compare?

	First mortgage	Second mortgage	Caveat loan	Unsecured loan
Position on title	First	Behind existing loan	Caveat lodged	None
Usual term	Longest	Medium	Short, often months	Short to medium
Speed	Slowest	Moderate	Quickest secured option	Often quick
Upfront costs	Valuation, legal, registration	Similar, plus first lender consent in some cases	Legal and establishment	Mostly establishment fees
Typical use	Large or long-term needs	Equity release without refinancing	Urgent, short-term gaps	Smaller, shorter needs
Main risk	Property at risk over a long period	Two lenders on one property	Cost if it runs past the planned exit	Personal guarantee

A caveat loan is not a cheap way to borrow for a long time. It is a bridge with a clear exit, such as a sale settling, a refinance going through or a large invoice being paid. If the exit is uncertain, a longer structure is safer.

When is property security worth it?

Using property tends to make sense when:

1. The amount is larger than trading alone supports. Unsecured options generally top out around $500,000.
2. The purpose is long-lived. Buying premises, a large fit-out or a business acquisition shouldn’t sit on a short repayment schedule.
3. Cash flow can’t carry short-term repayments. A longer term spreads the cost.
4. Credit history has issues. Strong security can offset a patchy file; see bad credit business loans.

It’s harder to justify when the need is small and short, when the property has little equity, or when the risk to a family home outweighs the saving. Our compare by security page sets these situations out side by side.

What does a lender need for a secured loan?

• Property address, estimated value and what’s currently owing on it.
• Consent and signatures from everyone on the title.
• ID for all borrowers and guarantors.
• Details of the business and the purpose of the loan.
• For larger amounts: financial statements, tax returns or an accountant’s letter.
• A clear exit strategy for short-term loans.

What extra costs come with security?

Secured loans carry costs that unsecured loans often don’t:

• Valuation of the property.
• Legal and documentation fees, sometimes for both sides.
• Title searches and registration of the mortgage or caveat.
• Discharge fees when the loan is repaid.
• Lender’s mortgage-style fees or line fees on some products.

These can make a secured loan cost more than expected on a small amount over a short period. Our fees page lists them, and the total cost guide shows how to add them into a fair comparison.

Illustrative example. A Geelong builder needs $350,000 to fund materials and wages on a large commercial job. His turnover supports about half that unsecured. He owns an investment unit with solid equity. A second mortgage over the unit, over three years, provides the full amount with monthly repayments that fit the job’s progress claims. He compares it with a caveat loan, which could settle faster but would need refinancing within months. Because the job runs for 14 months, he picks the second mortgage.

Secured or unsecured: a quick test

Ask yourself three questions:

• Is the amount more than about $500,000, or more than my turnover would support?
• Will it take more than two or three years for the purpose to pay for itself?
• Am I comfortable with the property being at risk for the whole term?

Two “yes” answers to the first questions and a confident “yes” to the third usually point to property. Otherwise, compare unsecured business loans first.

Find out what your property could support

If you’re weighing up whether to use property, a short conversation will tell you a lot. Enquiring doesn’t touch your credit file; a check only comes up once you decide to proceed. We don’t send your details to a pile of lenders. A real person looks at the property, the purpose and the exit, and compares a secured option with the alternatives before you commit to anything.

Please give accurate figures on the form for the property value and what’s owing, so the comparison is grounded from the start. Check your options, or use the comparison tool to rank the loan types first and then send your enquiry.