Private mortgages for business: which one fits your property?

If you own property and your business needs money, a private mortgage is often the shortest line between the two. The term covers three different tools, though, and choosing the wrong one costs time. This page is the starting point: it works out which private mortgage suits your property and situation, then sends you to the detailed page for that path.

What is a private mortgage, in business terms?

A private mortgage is a business loan from a lender that isn’t a bank, secured by property. Moneysmart describes security as an asset “put up to guarantee a loan”, which the lender can sell if the debt isn’t repaid. You stay the owner. In Western Australia, for example, Landgate’s guidance notes that a mortgage under the Transfer of Land Act operates as a charge over the land rather than a transfer of it, and the same principle runs through every state’s Torrens system.

What makes it “private” is how the decision is made. A bank scores your financial statements and your history over many years. A private lender looks mainly at three things:

1. The property and how much equity it holds.
2. The position the loan will take on the title: first, second or by caveat.
3. The exit: the sale, refinance, contract payment or refund that repays the loan.

The government’s own business funding guide lists “often requires collateral” as a drawback of debt finance. For a property owner, that requirement is exactly what opens the door when a bank won’t.

Which kind of private mortgage fits your property?

Start with the title. What is already registered on it decides which structure is available, and the purpose and timing decide which one is best.

Your property	Usual structure	Why it fits	Read next
Owned outright, no loan	Private first mortgage	You rank first, no consent to chase	Unencumbered property loan
Bank loan you want gone	First mortgage refinance	Replaces the bank in one step	Refinance a bank first mortgage
Bank loan you want to keep	Second mortgage	Adds funds behind the bank	Second mortgage business loans
Deadline in days, short need	Caveat loan	Fastest to put in place	Caveat loans
Several properties, each with some equity	Mortgages over more than one title	Combines equity without selling	Multiple properties as security
Owned by a company or trust	Any of the above, signed by the entity	The owner on title gives the security	Private mortgage for companies and trusts

Not sure where you fall? The first, second or caveat quiz asks five questions and points you to the right one.

What do business owners use a private mortgage for?

Almost anything with a business purpose and a plan to repay. The most common reasons we see:

• clearing an ATO debt before it turns into a director penalty or a credit report listing;
• settling on premises, a business or a property deposit when the bank is slow;
• refinancing a lender that has called in a loan or won’t renew;
• funding a large contract, stock order or fit-out before the customer pays;
• buying out a partner or co-owner;
• bridging a gap until a property sale settles.

Personal and home-buying purposes are outside what we do. Every loan here is for business.

How does a private lender decide yes or no?

The weight sits on equity and the exit. Credit history matters, but it isn’t the gate it is at a bank: bad credit, defaults and ATO debt are considered, and none of them is disqualifying on its own.

Here is what a specialist works through on the first call:

• Value. We assess value ourselves, so there is no formal valuation to book or pay for.
• Existing debt. What is owing on every loan secured on the property.
• Lending room. Up to 80% of value on residential security and up to 70% on commercial, lower on large acreage, less existing debt.
• The exit. How and roughly when the loan will be repaid.
• The borrower. Company, trust or sole trader, including start-ups, with no minimum trading period or turnover.

What does a private mortgage cost?

A private mortgage costs more than a bank loan, because it takes on situations a bank won’t and moves faster. Each loan is priced on its own security, LVR, term and exit, and the aim is always the sharpest price your circumstances allow. Rather than chasing a headline number, compare the total cost to your realistic exit, which is made up of:

• interest, capitalised for up to 6 months so there are no repayments in that period;
• a commitment fee, shown on the Letter of Offer;
• legal and registration costs;
• discharge costs when the loan is repaid.

Because terms are open and early repayment carries no penalty, the biggest lever on cost is the length of time you hold the loan. Our guide to private mortgage costs breaks each item down. If you would rather check where you stand first, the 60-second loan check is the quickest way.

Illustrative example: one owner, three possible private mortgages

A Newcastle engineering firm needs $350k to fund a defence subcontract before the first progress payment arrives in five months. The director owns two properties: a workshop worth around $900k with a $400k bank loan, and a debt-free investment unit worth around $500k.

• Option A, second mortgage on the workshop. Keeps the bank loan in place, but needs the bank’s consent and uses commercial security, where lending tops out lower.
• Option B, first mortgage on the unit. No consent needed and residential security, but $350k against a $500k unit is a high LVR.
• Option C, first mortgage on the unit plus a second mortgage on the workshop. Spreads the risk and keeps each LVR comfortable.

Illustrative only: in a case like this, a specialist would usually steer towards whichever option keeps the total LVR moderate and the bank consent off the critical path. The progress payment is the exit, and the loan is repaid when it lands.

When is a private mortgage the wrong tool?

Be honest with yourself about these before you enquire:

• There is no exit. If nothing on the horizon repays the loan, borrowing only delays the problem.
• The need is permanent. Long-term funding belongs with a bank once you qualify. A private mortgage can get you there, but it shouldn’t become the destination.
• The amount is tiny compared with the cost of setting it up. A short supplier extension may be cheaper.
• The money is for personal use. These loans are for business purposes only.

Private mortgages by situation

Each of these pages takes one common situation and works through it in detail:

• Private mortgages across Australia, state by state
• Private mortgage with bad credit
• Urgent private mortgage
• Short-term private mortgage behind your bank
• Private mortgage on commercial property
• Private mortgage to pay an ATO debt

For the legal mechanics, including how the documents are signed, registered and discharged, see our private mortgage lender page.

Got property and a plan? See if you qualify

You already know the property and the reason you need the money. The check asks for exactly that: what you own, what is owing on it, how much you need and how you plan to repay. It takes about 60 seconds.

Asking costs nothing and leaves your credit file alone. There’s no credit check at this stage. Your details go to one direct lender, not out to a pile of lenders who all call at once. A secured-lending specialist reads your answers and calls you personally, so please give accurate figures for the property and the debt. Accurate numbers mean the first answer you hear is the real one.

See which private mortgage fits your property →