Equity release loans for business owners

Most business owners who own property are sitting on capital they can’t spend. The factory has risen in value, the bank loan on the shop has been whittled down, the family home is worth far more than when it was bought. Equity release turns some of that locked-up value into cash for the business, while the property stays in your name and keeps doing its job.

This page explains equity release as a product: which properties qualify, the three structures a private lender uses, what it costs without quoting a single number you can’t rely on, and how to do it without putting the property at needless risk.

What does equity release mean for a business owner?

Equity is the part of a property’s value that you own outright. If a warehouse would sell for $1.2m and $500k is owed against it, there is $700k of equity. Equity release means borrowing against some of that $700k and using the funds for a business purpose.

It is worth clearing up a common mix-up early. In Australia, “equity release” is also used for retirement products, such as reverse mortgages and the Government’s Home Equity Access Scheme, which Services Australia describes as being for people of Age Pension age or older. Those are consumer products for living costs. Business equity release is different in almost every way: it is short-term, it is for a business purpose, and it is repaid by a planned exit rather than at the end of someone’s life in the home.

At a glance: key terms

• Equity: what the property would realistically sell for, less everything secured on it.
• Usable equity: the slice of that equity a lender will actually lend against. Our guide on how much equity you can use explains why it is always smaller.
• LVR (loan-to-value ratio): total secured debt divided by the property’s value. Moneysmart defines it as the loan amount divided by the value of the asset.
• Exit: the event that repays the loan, such as a sale, a bank refinance or a known business payment.
• Letter of Offer: the written terms you sign before settlement, including every fee and how interest is charged.

Which properties can you release equity from?

Almost any real property you or your business owns can be considered. The type of property changes how the deal is structured more than whether it can be done.

Property	Usual owner	Structure often used	What to watch
Family home	Individual or couple	Second mortgage or caveat	Every owner signs; home lender may need to consent
Residential investment	Individual, company or trust	First or second mortgage	Lease details; trust deed powers
Shop or office	Individual, company or trust	First or second mortgage	Lease terms and vacancy
Factory or warehouse	Operating business or related entity	First or second mortgage	Specialised fit-out, zoning, environmental history
Vacant land	Individual or developer	First mortgage	Considered case by case
Rural property	Farming family or entity	First mortgage	Considered case by case
A relative’s property	Third party	Second mortgage or caveat	Their independent legal advice

Where the property belongs to a company or a trust, the company and trust ownership page covers who signs and which documents are needed. If a family member is offering their property, read the page on third-party security before anyone commits.

Which equity release structure fits your property?

A private lender has three tools. The right one usually depends on whether there is already a loan on the property and how long you need the money.

	First mortgage	Second mortgage	Caveat loan
Existing loan on the property	None, or it is paid out at settlement	Stays in place, ranks first	Usually stays in place
Where the new lender ranks	First	Second, behind the existing lender	Protected by a caveat, not a registered mortgage
Typical term	1 to 24 months	Shorter	Shorter
Best for	Debt-free property, or replacing a bank that won’t help	Keeping a well-priced bank loan	Urgent, smaller and short needs
Relative cost	Lowest of the three	Higher, because the lender ranks behind	Higher, for the same reason

First mortgage. If you own the property outright, a private first mortgage over unencumbered property is the cleanest release. There is no other lender to deal with. A first mortgage can also pay out an existing bank loan and release extra cash on top, which suits owners whose bank won’t increase their limit.

Second mortgage. When the existing loan is cheap and in good order, there is little sense in disturbing it. A second mortgage business loan adds a new loan behind it. The catch is consent: many loan contracts require the first lender’s permission before further security is registered. Queensland’s government home lender, for instance, states plainly that borrowers must get its permission to register a second mortgage on the title.

Caveat loan. For speed and smaller amounts, a caveat loan protects the lender with a caveat on the title rather than a registered mortgage. It suits a short window with a firm exit, and it can later be converted to a registered second mortgage if more time is needed.

Not sure which applies? The 60-second structure quiz points you in the right direction, and the secured borrowing power calculator gives a first estimate across one or several properties.

Who is equity release suited to, and who should think twice?

Equity release works best for owners with solid equity and a known date when the money comes back.

It tends to suit:

• a business that has a profitable reason to spend now, such as a contract, stock, equipment or an acquisition;
• an owner who needs to clear an ATO debt or a supplier before it escalates;
• a property owner whose bank is slow, has declined, or won’t lend against the asset type;
• someone with a property sale, refinance or large receivable expected within the loan term.

Think twice if:

• there is no realistic exit, and repayment depends on things improving somehow;
• the money is to cover ongoing losses with no change to the business behind them;
• the property is the only roof over your family’s head and the plan is tight;
• the purpose is personal or household spending. This lender funds business purposes only.

How does releasing equity work, step by step?

1. Enquire in about 60 seconds. Tell us what you need, what it’s for, the property, roughly what it’s worth and what’s owing. There is no credit check at this stage.
2. Talk to a specialist. They check the figures, ask about the purpose and the exit, and tell you which structure fits.
3. Assessment. The property is assessed directly. No formal valuation required, so there’s no report to order or wait for.
4. Letter of Offer. You receive the amount, the term, how interest is charged, every fee and the conditions in writing. Have your solicitor review it.
5. Documents and consents. ID for every signer, statements for any existing loans, entity documents and, for a second mortgage, the first lender’s consent where its contract requires it.
6. Settlement. Solicitors finalise the documents, the mortgage or caveat is lodged and the funds are paid. Settlement is commonly completed through PEXA, the digital platform where documents are signed, lodged with the land registry and funds are exchanged electronically.

What documents will you need to release equity?

The list is shorter than most bank applications. Expect to provide:

• photo ID for every borrower, owner and guarantor;
• recent statements for every loan secured on the property;
• the council rates notice or other evidence of ownership details;
• company extract or trust deed, if an entity owns the property or borrows;
• a short explanation of the business purpose;
• evidence of the exit, such as a sale contract, a refinance plan, or contracts showing incoming payments.

Our full document checklist for a private mortgage goes line by line.

How quickly can equity be released?

Speed depends mostly on preparation, not on the lender. Funding is possible within 24 to 48 hours for up to $5m once documents are in, and smaller property-secured amounts of $20k to $250k are possible the same day.

What slows things down is usually outside the private lender’s control: an existing lender that takes a week to issue a payout figure or a consent, missing trust documents, or a co-owner who is overseas. Asking for consents and statements on day one takes most of the waiting out of the process.

What does releasing equity cost?

There is no published price list, and you won’t find one here. Pricing is set on each deal’s security, LVR, term and exit, and we aim for the sharpest price your situation allows. As a rule, a second mortgage or caveat loan costs more than a first mortgage, because the lender ranks behind another lender and carries more risk.

The cost items you should expect to see listed on a Letter of Offer:

• Interest, charged monthly, prepaid at the start, or capitalised and added to the loan. See prepaid or capitalised interest for how each works.
• An assessment fee, which is small, varies per loan and is shown on the Letter of Offer.
• Government registration fees for lodging the security, and later its discharge.
• Your own solicitor’s costs for reviewing and settling the loan.

What you won’t pay for is a formal property report, because there’s no formal valuation required.

On tax, the ATO’s position is that deductibility follows what the borrowed money is used for, not which property secures it. Its own example shows a loan secured on a rental property where the interest isn’t deductible because the money bought a private home. Ask your accountant how your release will be treated before settlement.

What are the risks, and how do you manage them?

Equity release is a tool, and like any secured loan it puts the property on the line if the plan fails. The main risks, and the habits that keep them small:

Risk	How to manage it
The exit runs late	Build in a buffer; start the refinance or sale early
Capitalised interest eats into equity	Borrow what you need, not what’s available
The first lender objects	Ask for consent on day one
The family home is the security	Make sure the exit doesn’t depend on hope
Default interest and enforcement	Raise problems before maturity, not after

If an exit is slipping, the guide to loan term extensions explains how to ask and what lenders need to see. And it is worth reading exit strategy for a short-term mortgage before you sign, not after.

What does a business equity release look like in practice?

Illustrative example: a Dandenong South food manufacturer owns its factory, which the lender assesses at $2m, with $800k owing to a bank on a loan in good order. The business wins a supermarket contract and needs $350k for packaging equipment and extra stock before the first invoice is paid. Illustrative: combined lending of $1.15m is about 58% LVR. A second mortgage leaves the bank loan untouched, interest is capitalised for nine months, and the loan is repaid from a refinance with the bank once the first two quarters of contract income are on the books.

Illustrative example: a Newcastle electrician owns a debt-free investment unit assessed at $600k and needs $90k to pay out a tax debt within a week. Illustrative: $90k is 15% LVR on a first mortgage over the unit. The loan settles within days, interest is prepaid for six months, and it is repaid from retained earnings and a large commercial job due to complete in month five.

Where do business owners use released equity?

The same release can solve very different problems. These pages go deeper on the situations we see most often:

• Paying an ATO debt with property equity
• Funding business expansion
• Buying out a business partner
• Funding a big contract
• Releasing equity from an investment property
• Using the family home for a business purpose

For an overview of every property-secured option side by side, see secured business loans. When you have a figure in mind, you can check what your property could release in about a minute.

Equity in a property you own? See if you qualify

You don’t need a finished plan to ask the question. Tell us about the property, what’s owing on it and what the business needs the money for. A secured-lending specialist reads your enquiry and calls you, and fundU, the direct lender behind this site, makes the decision, so your details aren’t passed around a panel of funders.

Enquiring involves no credit check. The more accurate your figures on the property and the loans against it, the more reliable the answer you get back on the first call.

Start your equity release enquiry and find out what your property could unlock.