Start-up business loans secured by property you own

New businesses have a funding problem that has nothing to do with the quality of the idea. Banks lend against history: two years of tax returns, financial statements, a track record of meeting repayments. A start-up has none of that. Government guidance on business.gov.au says bank loans suit established businesses, venture capital wants proof of success, and the government itself doesn’t provide finance for starting or buying a business.

What many founders do have is equity in property: a home, an investment unit, or a family member willing to help. A private loan secured on that property can fund the start because the lender is relying on the property and the plan to repay, not on accounts that don’t yet exist. This page explains how it works, and is honest about when it shouldn’t be done.

Why do start-ups struggle to borrow?

The government’s funding guide lists the main options for starting a business: a loan, angel investors, hire purchase, chattel mortgage and leasing, plus self-funding, family and friends, and crowdfunding. It also makes three points founders should take seriously:

• Debt keeps ownership but must be repaid, and often requires collateral.
• Equity means giving up part of the business and its revenue, though there are no repayments.
• Lenders and investors expect some self-funding before they will help.

For a business with no track record, unsecured lenders and banks generally look elsewhere. Property security changes the question from “has this business proven itself?” to “is there equity here, and how will this loan be repaid?”

How does a property-secured start-up loan work?

1. Cost the start properly. business.gov.au defines start-up costs as everything you pay before the business starts generating income, and suggests including running costs for the first six months.
2. Choose the security. Your home, an investment property, or a family member’s property as third-party security.
3. Work out the exit. How the loan will be repaid within the term, independently of first-year profits if possible.
4. Enquire. Share the property details, what’s owing, the amount and the exit.
5. Receive terms and a Letter of Offer. Structure, amount, term, how interest is handled and fees.
6. Settle. Every owner of the security property signs, and the funds are paid to you or directly to suppliers.

Interest can be prepaid or capitalised, so the new business needn’t find monthly repayments while it builds revenue. See prepaid or capitalised interest.

What can a start-up loan pay for?

Start-up cost	Usually fundable?	Notes
Fit-out of a shop, clinic, café or workshop	Yes	Lenders rarely take fit-out as security, so property fills the gap; see funding fit-outs
Equipment and tools	Yes	Compare with equipment finance on total cost
Opening stock	Yes	Size it to realistic first-quarter sales
Lease bond or bank guarantee	Yes	See bank guarantees and lease bonds
Franchise fee	Yes	Read the disclosure documents with your solicitor
First months of wages and rent	Yes	Often the most underestimated item
Founder’s personal living costs	No	Loans are for business purposes

Which property and structure suit a start-up?

Security	Usual structure	What to weigh
Your home with a bank loan	Second mortgage or caveat	Keeps the bank loan in place; everyone on title signs; see using your home for business
A debt-free investment property	Private first mortgage	Strongest position, generally keener pricing
A family member’s property	Mortgage plus guarantee as third-party security	They need independent legal advice
Two properties with partial equity	Security over both	Spreads the load

A second mortgage or caveat ranks behind the existing lender and generally costs more than a first mortgage. A caveat loan can later be converted to a registered second mortgage.

How does this compare with other start-up funding?

Option	Needs trading history?	Main trade-off
Property-secured private loan	No	Short term; property at risk
Bank business loan	Usually yes	Cheaper once you have accounts
Equipment finance or leasing	Sometimes	Only covers the equipment
Angel or equity investors	No, but they want proof of the idea	You give up ownership
Unsecured online lender	Usually yes	Small amounts; frequent repayments
Savings, family and friends	No	Limited; relationships at stake

The secured vs unsecured business loans comparison explains the wider trade-offs.

What are the set-up steps that affect funding?

Lenders and solicitors will want the business properly set up before settlement:

• Structure. business.gov.au says you need to decide the legal structure before you start: sole trader, company, partnership or trust.
• ABN. Most businesses need one, and registration is free.
• Business name. Registered if you trade under a name other than your own.
• Director ID. ASIC says anyone planning to become a company director must apply for a director ID before being appointed.

Having these done means the borrowing entity is clear and the documents can be signed without delay.

Who does a property-secured start-up loan suit?

It suits:

• experienced operators going out on their own, such as a chef, tradesperson or clinician with industry knowledge;
• founders with a repayment plan that doesn’t rely only on early profits;
• franchisees with a proven model and an exit to a bank once trading;
• founders whose salary, partner’s income or other assets support the plan.

It doesn’t suit:

• founders whose only repayment plan is that the business will succeed quickly;
• borrowing large amounts of home equity for an untested idea;
• personal spending dressed up as start-up costs.

When is this the wrong move?

Be honest with yourself here.

• The home is all you have. If losing the start-up would mean losing the family home, consider a smaller start, a part-time launch, or an equity partner.
• The exit is “the business will pay it back in 12 months”. Very few new businesses clear their set-up costs that fast. A short-term loan then becomes an expensive extension. Our guide to exit strategy red flags explains why.
• You haven’t priced the first six months. Borrowing only for the fit-out leaves you short when it matters.
• A bank will lend against your home on a longer term. If your bank will provide business-purpose funding secured on your home, it’s usually cheaper for a long-horizon need.

What it costs (without the guesswork)

Pricing is worked out per loan from the security, LVR, term and exit, and we aim for the sharpest price your circumstances support. Costs include:

• interest, which can be prepaid or capitalised so nothing is due monthly, or paid monthly;
• an assessment fee that varies with the loan and is shown in the Letter of Offer;
• legal and registration costs, and discharge costs at repayment.

There is no formal valuation required; the property is assessed directly.

Illustrative example: an experienced chef opens a café

Illustrative: a Sunshine Coast chef with fifteen years’ experience is opening a café in a leased shop. Fit-out, equipment, the lease bond and three months of wages come to $240k. She contributes $40k of savings. Her investment unit is worth about $620k with $260k owing. At an illustrative 65% LVR band the unit supports total secured debt of about $403k, leaving room of about $143k. Her parents agree to add their debt-free home as third-party security for the balance, after taking their own legal advice.

Item	Amount
Private loan secured over the unit (second mortgage) and the parents’ home	$220,000
Less illustrative allowance for 12 months’ capitalised interest	$(14,000)
Less assessment fee, legal and registration costs	$(6,000)
Net funds	$200,000
Plus the chef’s own savings	$40,000
Total start-up budget funded	$240,000

The exit is the sale of the investment unit, planned for month nine, with the café’s early cash flow covering its own running costs rather than the loan. The parents’ home is released when the loan is repaid. The numbers are round and illustrative only.

Key terms for founders

• Start-up costs: everything paid before the business earns income, including the first months of running costs.
• Self-funding: the founder’s own money in the venture, which lenders and investors usually like to see.
• Third-party security: someone else’s property, such as a parent’s home, backing your loan.
• Capitalised interest: interest added to the loan balance instead of paid monthly, so it is repaid at the end.
• Exit: the specific event that repays the loan, such as a sale, a refinance or a known payment.

For how property-backed lending works more broadly, including amounts, terms and the three structures, start with our overview of secured business loans. It explains why the security, rather than the business’s history, carries the lending decision, and how that differs from a bank’s approach.

Documents you’ll need

• A business plan or summary with the start-up budget
• Lease, franchise or supplier documents if signed
• ABN, business name and company or trust details
• Photo ID for every borrower, director, guarantor and security owner
• Title details and loan statements for the security property
• Evidence of the exit: a sale plan, an agreed sale, or other income or assets

How fast can a start-up loan be ready?

Amounts between $20k and $250k against property can be possible the same day once everything is in, and larger loans up to $5m can be possible in 24–48 hours. Founders usually lose time getting a co-owner or family guarantor through legal advice, so start that early. If you’re buying an existing business rather than starting one, see buying a business with property security; if you already trade and want to grow, see business expansion funded by property. Founders on the coast can read about private lending on the Sunshine Coast.

Starting something new? Share your plan and the property behind it and we’ll tell you honestly whether it stacks up.

Launching a business? See if you qualify

Making an enquiry won’t touch your credit file, and we don’t send your details to other lenders. A real specialist reads it, including your plan to repay. Our lending partner fundU lends directly against the property.

Tell us what the property is worth in your estimate, what’s owing on it, how much you need and how you’ll repay. Getting those facts right first means a clear answer, and one you can rely on. Start your enquiry.