Using your home or property to secure a business loan

For many small business owners, the most valuable thing they own is their home. It’s natural to wonder whether it can help the business borrow. The answer is often yes, but it’s a decision to understand properly before you make it. This lesson gives you the whole picture, calmly.

Why do lenders like property as security?

Remember the lender’s second question from lesson one: “if something goes wrong, how do we get our money back?” Property is a strong answer. It doesn’t disappear, it’s registered on a public title, and its value can be checked.

Because the lender has that safety net, property-secured business loans can:

• go larger, from $20,000 up to $5,000,000
• suit businesses that are newer or have uneven trading
• help where credit history has bumps or there’s ATO debt (both considered case by case)

The Reserve Bank’s October 2025 bulletin on small business conditions notes that residential property is commonly used as security for small business loans. You’re in very normal company.

What is equity, and how much can you use?

Equity is the part of the property you own outright:

Equity = property value − what you still owe on it

Lenders don’t lend against all of your equity. They leave a buffer in case property values fall or costs arise if the property ever has to be sold. The share of the property’s value a lender is comfortable with is called the LVR (loan-to-value ratio). You’ll meet that term in the jargon buster.

Illustrative example. Jess runs a small landscaping business and owns a home valued at around $850,000, with $480,000 left on the home loan. Her equity is about $370,000. A lender won’t lend all of that, but there may be room for a meaningful business loan secured by a second mortgage, depending on her business, the property and the lender’s policy. (Illustrative only.)

First mortgage, second mortgage or caveat: what’s the difference?

These words describe where the lender stands in the queue on your property’s title.

Structure	Plain-English meaning	Typical situation
First mortgage	Lender is first in line on the title.	No existing loan, or the business loan replaces the existing one.
Second mortgage	Lender sits second, behind your existing home loan.	You have a home loan you want to keep, plus spare equity.
Caveat loan	Lender lodges a caveat, a notice on the title that it has an interest in the property.	Often shorter-term needs where a quick, simple structure helps.

According to Land Use Victoria, a caveat is a document lodged by someone with an interest in a property, which appears on the title and warns anyone dealing with the property about that interest. States each have their own titles office, but the idea is the same across Australia.

Wondering which structure your property would suit? Start a 60-second enquiry and a real person will explain it, without a credit check at the enquiry stage.

What else should you think about first?

Using property is a big decision. Before you go ahead, work through these honestly:

• Who owns the property? If it’s jointly owned, both owners will be involved and must agree.
• Is the loan for business purposes? It must be. These loans aren’t for personal spending.
• How will the loan be repaid? From business cash flow, a sale, or a refinance later? Have a clear plan, especially for short-term loans.
• What if things go slower than planned? Could your household cope if the business had a lean patch?
• Independent advice. It’s wise to talk to your accountant, and any other owner of the property should understand exactly what they’re agreeing to.

What happens during a property-secured loan?

The steps are similar to any loan, with a few extras for the property:

1. Enquiry and chat about the business, the purpose and the property.
2. Property check, which may involve a valuation.
3. Title search to see what’s already registered on the property.
4. Offer and documents, including the mortgage or caveat paperwork.
5. Settlement, where the security is registered and the money is paid out.

Our illustrative tradie story walks through these steps from a first-timer’s point of view.

Quick check: what to have handy about your property

You don’t need a pile of documents to ask the first question, but knowing these answers makes the conversation much more useful:

• The address and type of property — house, unit, rural block, shop or warehouse.
• Roughly what it’s worth — a recent estimate is fine to start with.
• What’s owed on it now — your current home loan balance, and who it’s with.
• Who’s on the title — just you, you and a partner, or a company or trust.
• What the money is for — the business purpose, in a sentence. Not sure how much? Try how much to borrow.
• How you plan to repay — from trading, a sale or a refinance down the track.

Don’t worry if some answers are approximate. The point is to give an honest starting picture so the options discussed are realistic ones.

Is borrowing against property right for you?

It can open doors that unsecured lending can’t, especially for larger amounts or trickier situations. It also asks more of you. The right choice depends on your numbers, your plans and your comfort with the commitment.

If you’d like to explore it, our enquiry takes about a minute. Asking doesn’t touch your credit file, and your details aren’t shopped around to lender after lender. A real person talks you through what your property and your business could support, in words that make sense. Please be accurate about the property’s value, what’s owed and who owns it, so the options you hear about are genuine ones.

Explore what your property could support →