Borrowing against property owned by a trust or company

Plenty of business owners hold their premises or investment property in a family trust or a company, for asset protection, tax or succession reasons. When a short-term need comes up, that property is just as useful as security as a house in your own name. What changes is the paperwork — and on a short-term loan, the paperwork is where the hours go. Get it right and a trust-owned property can fund almost as quickly as a personally owned one.

Can property in a trust or company secure a short-term loan?

Yes. Lenders regularly accept property owned by:

• a discretionary (family) trust with an individual or corporate trustee;
• a unit trust, common for jointly owned commercial premises;
• a company, whether it’s your trading company or a separate property-holding company.

The loan structure doesn’t change because of the owner. A Victorian title can carry a caveat loan; a title anywhere else takes a short-term registered second mortgage, which is the standard form every conveyancer and bank expects to see for an interest of this kind; a clear title can take a first mortgage.

Why doesn’t the trust appear on the title?

Because title registers are built to record who owns land, not the arrangements behind that ownership. Western Australia’s Landgate, for one, says it plainly: the Registrar cannot enter trusts on a certificate of title, and the registered proprietor continues to be shown as the trustee.

The ATO describes a trust as an obligation imposed on a person or other entity to hold property for the benefit of beneficiaries, and notes that in legal terms a trust is a relationship rather than a legal entity. So when the title shows “Smith Holdings Pty Ltd”, we have to find out whether that company owns the property outright or holds it as trustee — and if it’s a trustee, what the deed allows.

What does the lender check first?

Check	What we’re confirming	Where it comes from
Who is on title	The exact registered owner’s name	Current title search
Company details	The company exists, its ACN, who its officeholders are	ASIC search and extract
Trust deed	The trust exists, who the trustee is, and that it can borrow and give security	Certified copy of the deed
Variations and appointments	Every change of trustee or deed amendment since it was set up	Deeds of variation, appointment and resignation
Purpose fit	Giving security for this loan is within the trustee’s powers	The powers clause of the deed

ASIC’s free company search shows the company’s name and type, ABN and ACN, registration date, next review date, the suburb, state and postcode of its registered office, and a list of documents lodged. Details of the company’s officeholders come with a paid extract. Lenders typically order the extract themselves; having your own copy simply avoids surprises, such as a director who resigned years ago still showing as current.

Our documents checklist covers the full list for a private business loan.

Who has to sign?

• Company owner: the company signs through its directors, and directors usually give personal guarantees.
• Corporate trustee: the trustee company signs as trustee, its directors sign for it, and they usually guarantee.
• Individual trustees: every individual trustee signs.
• The borrowing business, if it’s a different entity, signs the loan itself.

When the property is held for one entity and the loan is for another — say, the family trust’s warehouse securing the trading company’s tax debt — we’ll look closely at the deed’s powers to make sure the trustee can give security for someone else’s debt. Most modern deeds allow it, but older deeds can be narrow.

Have the structure sorted and a date to hit? Start your enquiry and mention the owner’s name as it appears on title.

A worked example: the trust’s warehouse backs the trading company

Illustrative only — round numbers, no real people.

A family runs a wholesale bakery supplies business through a trading company. Its warehouse in Melbourne’s west is owned by the family trust, whose trustee is a separate company with the same two directors. The warehouse is worth about $2 million with $700,000 owing to the bank.

The trading company has a $300,000 ATO debt it wants cleared before firmer action begins, and a large contract payment due in about ten weeks. The property is in Victoria, so the security is a caveat loan over the warehouse. The trustee company gives the security, the trading company is the borrower, and both directors guarantee.

The directors had the trust deed, two deeds of variation and the latest ASIC extract scanned before they enquired. The lawyer confirmed the trustee’s powers the same morning, the valuation was booked, and the deal moved at the pace of the valuation, not the paperwork. When the contract payment arrived, the loan was repaid and the caveat withdrawn. Short-term loans like this are measured in months, not decades.

What slows trust and company deals down — and how do you avoid it?

1. Incomplete deeds. The original deed without its variations, or a draft rather than the signed version. Find every page now.
2. Out-of-date ASIC records. A director who left but was never removed, or an old registered office address. Fix it with your accountant before signing day.
3. A trustee name that doesn’t match the title. If the trustee changed but the title wasn’t updated, that has to be sorted at the registry.
4. A narrow powers clause. Some older deeds restrict borrowing or giving guarantees. Your solicitor can advise whether a variation is needed.
5. Missing signatories. Every director or trustee has to sign and be identified — plan around travel.

For companies and trusts needing larger or more complex short-term finance, see corporate finance.

Property held in a structure? Let’s see what it can do

Structures exist to protect what you’ve built. Used well, they don’t stand in the way of fast short-term funding — they just need the right papers on the desk early.

Tell us about the property and the entity that owns it. It takes about 60 seconds, there’s no credit check when you first enquire, and your details don’t get passed around a panel of lenders. A real person reviews the structure and calls you to map out the next steps. Please fill in the form carefully — the owner’s exact name, the property and its state, and when you need the funds.

See if your structure qualifies →