Borrowing against company or trust owned property

A large share of business property in Australia isn’t held in anyone’s personal name. It sits in a company, a unit trust, a discretionary family trust, or some combination, usually set up years ago on an accountant’s advice. None of that stops the property being used as security. It just changes who signs, what the lender needs to read, and where the hold-ups tend to happen.

Can property owned by a company or trust secure a business loan?

Yes. The structure affects the paperwork, not the eligibility. What a private lender wants to understand is:

• who legally owns the property, as shown on the title
• who has authority to sign for that owner
• whether the owner is allowed to borrow, mortgage or guarantee
• who stands behind the deal, usually through personal guarantees

Once those four points are clear, a company or trust title is assessed just like any other: location, type, condition, what’s owing and the exit plan.

How does it work when a company owns the property?

business.gov.au describes a company as a separate legal entity that can incur debt, sue and be sued, with earnings belonging to the company rather than its members. That separateness is the point of the structure, and it’s also why a lender wants a direct line to the people running it.

In practice:

1. The company signs the loan and mortgage, executed by its directors in the way the law and its constitution allow.
2. The lender checks the company’s current details: directors, shareholders, registered office, and that it’s registered and in good standing.
3. Directors give personal guarantees, so the people controlling the company stand behind its promise to repay.

If the borrowing company and the property-owning company are different entities in the same group, the property owner gives a guarantee and mortgage in support of the borrower. That’s a form of third-party security and is treated the same way.

How does it work when a trust owns the property?

A trust isn’t a separate legal entity in the way a company is; the Australian Business Register says so in as many words, and describes the trustee as holding property for the benefit of others. business.gov.au adds that a trustee, which can be a person or a company, holds the business for the benefit of the beneficiaries and is responsible for everything in the trust, and that trusts require a formal trust deed setting out how they operate.

For a lender, the key consequence is what the title does and doesn’t show. NSW Land Registry Services states that fiduciary relationships are not to be shown on the Torrens register; a dealing involving a trust is registered in the trustee’s name only. So the title might show a trustee company as owner without any mention that it holds the property for a family trust.

That’s why the trust deed matters so much. The lender needs to confirm from it:

• who the current trustee is, and that it was properly appointed
• that the trustee has power to borrow, to mortgage trust property and to give guarantees
• whether any consent is needed first, for example from an appointor or guardian
• that the borrowing benefits the trust in a way the deed allows

Owner type	Who signs	Main document the lender reads	Who usually guarantees
Company	The company, through its directors	Company search and constitution if relevant	Directors
Trust with individual trustee	The trustee personally, as trustee	Trust deed and all variations	The trustee, often other key people
Trust with corporate trustee	The trustee company, through its directors	Trust deed, variations, company search	Directors of the trustee company
Unit trust	The trustee	Trust deed, unit register	Trustee directors and major unitholders

What documents will I need?

The list is a little longer than for a personally owned property, but it’s predictable. Having it ready at the start saves days. Expect to provide:

• the full trust deed and every deed of variation, plus any change-of-trustee or appointor document
• a recent company extract for each company involved
• identification for each director and guarantor
• rates notices and insurance for the property
• statements showing what’s owing on any existing mortgage
• a short explanation of the loan purpose and the exit

Our documents guide runs through the full checklist. If your financials are not up to date, a low-doc first mortgage may still work, because the focus is on the property and the exit rather than tax returns.

Illustrative example: a Sunshine Coast landscaping company needs $400,000 to fund equipment and a large council contract. The company owns no property, but the owners’ discretionary trust holds a debt-free industrial unit with an assessed value of $1,000,000. For this example only, suppose the deal is set at 40% of the unit’s value. The company is the borrower; the trustee of the family trust, a separate company, gives a guarantee and a first mortgage over the unit; the two directors give personal guarantees. The trust deed is checked and confirms the trustee can guarantee and mortgage for a related company. The exit is the contract’s progress payments plus a planned bank refinance in month eleven.

What slows down company and trust deals?

The same few issues come up again and again:

• Missing variations. A deed amended in 2014 and again in 2019 needs both documents, not just the original.
• A trustee change that was never finalised, so the title and the deed don’t line up.
• Narrow borrowing powers in an older deed, which may need a variation drafted by your solicitor.
• Deregistered or non-compliant companies in the chain, which have to be fixed before anything can be signed.
• A guarantor who wasn’t expecting to be one. Talk to every director early.

Ask your accountant or solicitor to pull the trust deed out of the file before you enquire. If you can send it with your enquiry, it often removes a full round of questions.

Do the people behind the structure have to guarantee?

Usually, yes. In private secured lending, guarantees from directors, and from the people who control a corporate trustee, are standard. business.gov.au notes that a company’s members generally aren’t liable for its debts. A guarantee is how the lender connects the people behind the company to this one loan.

Every guarantor should understand what they’re signing and get their own legal advice. Our how it works page explains where guarantees fit in the overall process.

Property in a company or trust? See if you qualify

You don’t need to sort the structure out before you ask. Tell us who owns the property, who the directors or trustee are, what the property is and exactly what’s owing on it. A specialist will tell you what documents will be needed and how the security would be set up.

Enquiring doesn’t involve a credit check, and your details stay with the direct lender rather than being circulated to other funders. A real person reads every enquiry, and accurate details about the property and the structure get you a dependable answer the first time.

Begin your enquiry for a company or trust property.