Secured loans to pay suppliers and get off stop credit

The call usually comes on a Tuesday. Your account manager says the order will not be picked until the overdue balance is cleared, and from now on it is cash on delivery. Stock stops arriving, jobs stall, and the money your customers owe you is still weeks away.

A short loan secured on property you already own is one of the cleanest ways out of that squeeze. It pays the supplier now, and your own receipts repay the loan later. This page explains how that works, when it is worth doing, and when it is not.

Why do suppliers put a business on stop?

Trade credit is an unsecured loan from your supplier. When an account runs past terms, the supplier has three levers: stop supply, move you to cash on delivery, or start formal recovery. Most suppliers try the first two before the third.

Common triggers we see:

• A large customer paid late, so you paid suppliers late.
• A seasonal build-up of stock that sold slower than planned.
• A credit insurer behind the supplier cut your limit.
• A one-off hit, such as an ATO payment or equipment repair, that drained the account.

Suppliers often hold more than a phone call. Under the Personal Property Securities Register rules, a supplier selling on written credit terms with a retention of title clause holds a security interest in the goods it supplied. The PPSR says registering gives that supplier the best chance of recovering goods if it is not paid, and that this kind of interest is a purchase money security interest with higher priority than other security over the same items. In plain terms, an unpaid supplier may be able to take its stock back.

How does a secured loan to pay suppliers work?

The loan is secured on real property: your home, an investment property, or business premises. It is not secured on the stock or your receivables. That is what makes it fast and flexible.

1. Enquire in 60 seconds. Tell us the property, what is owing on it, the amount needed and how you will repay.
2. Specialist review. A real person reviews it, usually the same day, and confirms the structure that fits.
3. Indicative terms, then a Letter of Offer. Costs, term and interest arrangement are set out in writing.
4. Security is lodged. A caveat on the title or a registered second mortgage, depending on the deal. See how second mortgages rank.
5. Funds are paid out. Often directly to the supplier, so the stop lifts the same day.
6. You repay from the exit. Typically your debtor receipts, a refinance, or the sale of an asset.

For most supplier gaps of two to eight weeks, a caveat loan is the quickest tool. If the gap is longer or the amount larger, a registered second mortgage gives everyone more certainty. You can start with a caveat and convert it to a registered second mortgage later.

If you need funds today, have the documents ready and read our page on same-day business loans. You can also start a supplier funding enquiry and come back to the rest of this page.

Who it suits

A property-secured supplier loan is a good fit when:

• You own property with real equity, even if the business itself has thin financials.
• The shortfall is temporary and you can name the money that will repay it.
• Losing the supplier would cost more than the loan: lost jobs, idle staff, penalty clauses with your own customers.
• The amount is between $20k and $5m. Many private lenders start at $250k; supplier gaps are often far smaller.
• You need certainty in days, not a bank credit process measured in weeks.

It also suits businesses whose bank has said no to a limit increase. A refusal on serviceability does not stop a property-secured short-term loan, because the decision rests on the security and the exit.

When this isn’t the right move

Be honest with yourself about the cause. Secured short-term money solves a timing problem; it does not fix a margin problem.

• If the business is losing money each month, borrowing to pay suppliers delays the problem and puts property at risk. Speak to your accountant about restructuring first.
• If the supplier will negotiate a payment plan, an interest-free arrangement with the supplier is cheaper. Ask before you borrow.
• If the gap is a few thousand dollars, a short-term overdraft extension or simply prioritising receipts is likely cheaper than any secured loan.
• If your receivables are strong and spread across good customers, invoice finance may suit a recurring gap better. Our page on late-paying customers compares the two.
• If there is no realistic exit, do not borrow. A short-term loan without a clear repayment source is the fastest way to turn a supplier problem into a property problem.

Supplier funding options compared

Option	Speed possible	Security	Best for	Watch out for
Payment plan with the supplier	Days	None	Small arrears with a cooperative supplier	Supply may stay on hold until terms are met
Bank overdraft increase	Weeks	Usually property or a general security agreement	Ongoing working capital	Full credit assessment; may be declined
Unsecured online loan	1–3 days	Director guarantee	Small, short gaps	Daily or weekly debits can deepen the cash crunch
Invoice finance	1–2 weeks to set up	Your receivables	Recurring debtor delays	Customers may be notified; fees on every invoice
Caveat or second mortgage	Same day to 48 hours possible	Equity in real property	One-off arrears with a clear exit	Ranks behind the first mortgage, so it costs more than a bank loan

The comparison between asset-backed and unsecured money is covered in more depth on secured vs unsecured business loans.

What it costs (without the guesswork)

You will not find a price list here. Each supplier loan is priced on the property behind it, the loan-to-value ratio, how long you need the money and how solid the repayment source is, and the aim is the keenest price that particular deal supports. What we can explain is where the cost comes from:

• Interest, either paid upfront from the advance or added to the balance, which means the business may have nothing to pay monthly while it waits for receipts.
• An assessment fee, a small amount that differs from deal to deal and appears in writing on your Letter of Offer.
• Legal and registration costs for preparing and lodging the caveat or mortgage, and later removing it.
• Your own solicitor’s costs, if you choose to have the documents reviewed, which we encourage.

There is no formal valuation required, which removes both a cost and a wait from the timeline. Expect a caveat or second mortgage to be dearer than bank money: sitting second in line on the title is riskier for the lender. That is exactly why the term should match the gap you are funding and no more.

Documents you’ll need

• Photo identification for each borrower, director and guarantor.
• The property address, ownership details and latest statement for any existing mortgage.
• The supplier’s statement, overdue notice or demand showing the amount to clear.
• Evidence of the exit: an aged debtors report, signed customer contracts, a sale contract, or a refinance approval in progress.
• Company or trust details if the borrower is not an individual.

Answer the enquiry accurately. A wrong figure for what is owing on the property is the most common reason an answer changes later.

How fast can supplier arrears be cleared?

Funding is possible within 24 to 48 hours for up to $5m once documents are in, and smaller property-secured amounts from $20k to $250k are possible same day. The two things that slow it down are missing identification and an existing lender who is slow to supply a payout or consent. If a supplier has already served a statutory demand, read what to do with a statutory demand: the Federal Court notes the company has 21 days after service, and the demand can be for as little as $4,000.

Illustrative example: getting a Geelong fabricator off stop

Illustrative example: A Geelong steel fabricator is put on stop by its main steel merchant, with $140,000 overdue. A government contractor owes the business $260,000, due in about six weeks. The director owns an investment townhouse worth around $900,000 with $420,000 owing to the bank. Applying an illustrative lending band of 70% across total debt, the townhouse supports total borrowing of about $630,000, leaving headroom of roughly $210,000 behind the bank.

Line	Amount
Overdue steel account	$140,000
Buffer for next fortnight’s cash-on-delivery orders	$40,000
Interest allowance, capitalised for a 3-month term	Set per deal
Assessment fee and legal costs	Set per deal
Loan requested	About $180,000 plus costs
Exit	Contractor payment of $260,000 in about six weeks

The steel merchant is paid directly at settlement and releases the order. When the contractor pays, the loan and capitalised interest are cleared and the caveat is withdrawn. The term was set at three months, not six weeks, to allow for a late payment. Sizing the term to the realistic exit, not the hopeful one, is the most important decision in the deal.

Victorian property? Our Geelong private lending page covers local title and security points.

Frequently missed: protecting the relationship after you pay

Paying the arrears is only half the job. Before funds go out:

• Get the new terms in writing. Ask the supplier to confirm, by email, that supply resumes and on what terms.
• Ask about their PPSR registration. A supplier’s registration over goods usually stays in place for future supplies. That is normal, but you should know it is there.
• Check how your large customers pay. Large businesses report their small-business payment times twice a year under the Payment Times Reporting Scheme, and the public register lets you compare reports. It is a useful reality check before you rely on a customer’s payment date as your exit.
• Line up the next 90 days. If receipts arrive late again, a short extension costs more than getting the term right first time. Our guide to exit strategy explains what lenders look for.

Supplier stress often travels with other deadlines. If you are also behind on tax, see paying an ATO debt with property equity. If you are funding a big new contract, read funding a big contract with property security.

See if you qualify before the next order is due

Getting a supplier off your back should not mean a week of paperwork or your details being passed around a dozen lenders. There is no credit check to enquire. Your enquiry goes to one direct lender, fundU, and a specialist reads it rather than a scoring engine. Tell us accurately what the property is worth, what is owing on it and when your receipts land, and you will get a straight answer the first time.

Check if your property can fund the supplier account, or read about secured business loans in general first.