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| Security offered | What to establish | Why it matters |
|---|---|---|
| Commercial or residential property | Valuation, existing mortgages and the new lender’s priority | Equity is not the same as an available borrowing limit. |
| A vehicle or machine | Exactly which asset is covered and any additional guarantee | Default can threaten an asset needed to keep trading. |
| Business assets generally | What the general security agreement covers | Restrictions may extend beyond one financed purchase. |
| A third party’s asset | Who signs and what liability they assume | The risk extends to someone outside the borrowing business. |
What can secure a business loan?
The security depends on the facility. A property loan may involve a mortgage; equipment finance commonly involves a security interest in the financed asset. Some facilities include broader security over business assets. Personal guarantees may be required as well.
AFSA’s PPSR guide explains that personal property includes equipment, vehicles and company assets, but excludes land and fixtures (checked 10 October 2026). Land security uses the relevant land-title system. Do not assume that signing one security document tells you everything about the lender's rights.
Understand what the lender can rely on
Security over one vehicle, a mortgage over a property and security covering business assets generally are different commitments. Ask for a schedule identifying the assets, the registered owner and the documents that create the interest. If an owner or another company provides the asset, their consent and exposure need separate attention; the borrower and the asset owner are not always the same person.
A valuation measures an asset for a particular purpose and date. It may differ from a recent purchase price or what you hope to receive in a private sale. Ask who appoints the valuer, who pays and whether the report can be used elsewhere if the loan does not proceed. Do not count the highest informal market estimate as confirmed borrowing capacity.
Where existing debt is secured by the asset, the next lender needs to understand the earlier creditor's rights. Consent, priority and payout arrangements can affect whether the new loan is possible and how long settlement takes. These are transaction questions for the proposed lenders and your adviser, not matters that can be resolved from a headline loan-to-value ratio.
Compare offers using the same assumptions
Ask each lender to quote the same net amount, term, repayment frequency and final balance. Add valuation, legal, establishment, ongoing and discharge charges. A cheaper rate can be outweighed by setup costs on a loan you intend to keep only briefly.
A longer term reduces the amount of principal repaid in each instalment but may increase total interest. If there is a balloon payment, include it in the comparison and identify its repayment source now.
Property equity is only the starting point
For illustration, a property valued at $800,000 with a $500,000 mortgage has $300,000 of equity before selling costs. That does not mean a second lender will advance $300,000. Its valuation, maximum lending level, existing debt, lender priority and your capacity to repay affect the offer.
Ask whether the first lender must consent and whether the new agreement limits future borrowing, refinancing or asset sales. These questions can matter more than a small rate difference if you expect to restructure the business.
Work out whether the security buys a worthwhile benefit
Compare the secured and unsecured offers using the same usable advance and intended holding period. A lower interest rate can come with valuation, legal, registration and discharge costs. For a loan kept only a few months, those initial costs deserve particular weight. For a longer project, the effect of the rate and repayment term may become more important.
For illustration, suppose one offer saves $180 a month but costs $2,700 more to set up, with the same balance, term and final payment. It takes 15 months of that saving to recover the extra setup cost. That calculation says nothing about the value of the asset placed at risk, and it stops being a like-for-like comparison if either loan has a different balloon or term.
Think about future decisions too. If a workshop may need to be sold to fund relocation, ask how the proposed mortgage would be discharged and whether replacement security would be required. If the lender takes rights over several assets, establish the process for releasing only one. A facility that suits today's purchase can restrict tomorrow's sale or refinance.
Prepare both a repayment case and an asset file
Have the usual trading and debt information ready alongside title or ownership details, existing secured debts, insurance, asset descriptions and any valuation requested. For equipment, include the make, model, age, serial details where relevant and supplier quote. For property, identify the use, existing mortgage and proposed transaction. The provider determines the exact requirements.
Security does not turn a weak trading forecast into a reliable repayment source. If the proposal depends on selling the asset, show net proceeds after earlier debt and costs. If it depends on ordinary business receipts, show that the business can service the loan without a forced sale. Keep those two repayment cases distinct.
Map the assets covered before accepting the rate
Have your adviser identify each secured asset and guarantee in the full document set. Check whether security covers only this facility or other debts as well. A loan against one purchase can have wider consequences if the agreement also includes a general security interest or additional property.
Consider what losing access to the asset would do to trading. Equipment needed for every job has a different role from surplus property. A family home also brings a personal consequence that does not appear in the interest-rate comparison.
Read reporting obligations, default events and the process for selling, refinancing or releasing the security. After repayment, confirm that the required discharge or release has occurred. A zero loan balance is not the same document as a completed security release.
Use the written quote and security documents together. A lower rate can be worthwhile for a durable, affordable business purpose; it is much less persuasive where the new debt is being used to cover repeated losses without a workable recovery plan.
Ask which assets secure the proposed amount
Current product descriptions illustrate the distinction. Prospa publishes different asset-security conditions above $150,000, including combined exposure; Capify has a secured product separate from its unsecured-loan FAQ. The pages were checked on 10 October 2026. Neither headline maximum tells you the value a lender will accept for your specific asset.
Request a security schedule identifying the property, equipment, general business assets and any guarantees. Establish who holds prior security, who pays valuation and registration costs, and the conditions for release. Compare the net funds after those costs, especially when a refinance requires an existing lender’s payout.
Use the business-rate benchmark with care
The RBA’s August 2026 table reports 7.23% p.a. for new small-business loans, checked on 10 October 2026. It combines different fixed and variable facilities. It is not a quote for a residentially secured loan, a caveat loan or your property.
For a specific secured product, compare the written rate and net advance with the valuation, establishment, legal and discharge costs. We have not inserted an unverified universal LVR or a secured-only average into this guide.