Quick answer
Using property equity to expand means borrowing for a business purpose against residential or commercial property you or the business own. Property-secured growth loans range from $20,000 to $5,000,000 and can be arranged as a first mortgage, a second mortgage behind an existing lender, or a caveat loan. Security often allows larger amounts and longer terms, which suits slower-maturing moves like second sites and acquisitions.
Key points
- Property-secured growth loans range from $20,000 to $5,000,000.
- Options include first mortgages, second mortgages and caveat loans.
- Available equity is property value minus existing debt, within a lender's loan-to-value limits.
- Security suits larger, slower-maturing moves; weigh the risk to the property carefully.
- Loan range
- $20,000 to $5,000,000
- Security
- Residential or commercial property
- Structures
- First mortgage · second mortgage · caveat
- Purpose
- Business purposes only
For many Australian business owners, the biggest pool of capital they can access isn’t in the business at all. It’s in the family home, an investment property or the commercial premises the business operates from. Using that equity can fund growth on a scale — and over a term — that unsecured finance can’t always match.
It’s also a serious commitment. The property backs the loan. That makes the payback maths even more important.
How does a property-secured growth loan work?
You borrow for a business purpose, and the loan is secured over residential or commercial property owned by you, the business or a related party. Because the lender has security, property-secured loans can offer larger amounts, longer terms and more flexibility on trading history than unsecured options.
Property-secured growth loans range from $20,000 to $5,000,000, using one of three structures:
| Structure | How it works | Often used when |
|---|---|---|
| First mortgage | The primary loan over the property | The property is unencumbered, or you’re refinancing the existing loan |
| Second mortgage | Sits behind an existing first mortgage | You’d like to keep your current home loan and access the equity above it |
| Caveat loan | A caveat on the title records the lender’s interest | A shorter-term need where a caveat suits the property and exit plan |
How much equity can you access?
A rough way to estimate it:
- Property value — ideally a recent valuation or realistic market estimate.
- Maximum lending — the property value multiplied by the lender’s maximum loan-to-value ratio (LVR) for that property type and loan position.
- Subtract existing debt — whatever is owed on the property now.
- The difference is roughly what may be available.
Lenders also look at the business’s ability to meet repayments, the purpose and the exit strategy. A second mortgage or caveat usually works within a lower combined LVR than a first mortgage, because the lender ranks behind the existing loan.
When does property equity suit a growth move?
- Larger amounts. Second locations, major fit-outs, acquisitions and big equipment packages. See second location funding and buying a competitor.
- Slow-maturing moves. A longer term keeps repayments below the move’s profit during a long ramp-up.
- Combined needs. One facility can fund set-up, equipment and working capital together.
- Limited trading history. Security can help where unsecured lending is harder, for example in a younger business.
- Past credit issues or ATO debt. These are considered case by case, and security can make more options available.
A worked example (illustrative)
An accounting practice owner wants to buy a retiring accountant’s client base for $600,000 and fit out extra desks for two staff who’ll come across. Total need: about $660,000.
Her home is worth around $1.6 million with $450,000 owing on the home loan, which she’d rather keep because of its current terms. A second mortgage behind the existing loan could release the funds without refinancing. Over a seven-year term, with a quoted total cost of finance of about $260,000, the average repayment is about $10,900 a month.
The client base bills about $600,000 a year — $50,000 a month. If 85% of fees are retained, the acquired clients should produce about $22,000 a month of gross profit after the two staff and their costs — coverage of about two times. Even at 70% retention, the contribution of roughly $15,000 a month still covers the repayments. With a buffer that strong, putting the home behind the move is a considered risk rather than a leap. Test your own plan in the Growth ROI calculator, and when the numbers are this clear, ask what your property could help fund.
What are the risks and how do you manage them?
Using property as security means the property is at risk if repayments can’t be met. Manage that risk by:
- Stress-testing the move. Can repayments be met if revenue is 25–50% below forecast? See stress-testing a growth plan.
- Borrowing what the move needs, not what the property allows. Available equity isn’t a target.
- Matching the term to the payback. Long enough that the move’s profit carries the repayments.
- Having an exit plan. Know how the loan will be repaid or refinanced at the end of the term, especially for shorter-term structures.
- Getting advice. Talk to your accountant about structure and tax, and read the loan documents carefully.
What will you need?
- Property details: address, estimated value, existing mortgage balance and lender
- Business details: ABN or ACN, trading history, recent business bank statements
- The purpose of the funds and how the move will pay back
- Identification for all borrowers and guarantors
A property valuation is usually part of the process. See business growth loans for how secured options compare with unsecured ones.
Put your equity to work for the business
If you’ve built equity in property and have a growth move that stacks up, that equity can be the fuel that makes it happen. Tell us about the property, the move and the amount.
The form takes about a minute, and no credit check is run when you first make contact. Your property and business details go to one specialist, not a room full of lenders, and they’ll call you to talk through the equity and the plan. Accurate property values and loan balances let us map out the right structure first time.
Frequently asked questions
Can I use my home equity to fund my business?
Yes. Many business owners borrow for business purposes against their home. A property-secured growth loan from $20,000 to $5,000,000 can be arranged as a first mortgage, a second mortgage behind your existing home loan, or a caveat loan, depending on the situation.
How much equity can I borrow against for my business?
Start with the property's value, subtract any existing mortgage, then apply the lender's maximum loan-to-value ratio for that property type and loan position. The result is roughly the equity that may be accessible. Valuations and the business's ability to service the loan also affect the final amount.
What's the difference between a first and second mortgage for business funding?
A first mortgage is the primary loan over a property; a second mortgage sits behind an existing first mortgage. A second mortgage lets you access equity without refinancing your existing home loan, which can be useful when you'd like to keep that loan in place.
What is a caveat loan?
A caveat loan is secured by lodging a caveat on the property's title, which records the lender's interest. Caveat loans are typically used for shorter-term business needs, and whether one suits depends on the property, the amount and the plan to repay.
Is it risky to use my house to fund business growth?
It puts the property on the line if repayments can't be met, so the growth move needs to be well tested. Stress-test the plan, size the loan conservatively and choose a term the move's profit can carry even if it ramps up slowly.