Borrowing through a company or a trust

Many Australian businesses trade through a company, a trust or a company acting as trustee of a trust. Those structures can be good for tax and asset protection, but they add steps to borrowing. Knowing what the lender needs keeps things moving.

Borrowing as a company

A company is a separate legal entity, so the loan is to the company. In practice, lenders lending to small and medium companies almost always ask for:

• Director guarantees: each director personally guarantees the company’s debt.
• ASIC company extract: confirms directors, shareholders and status.
• Company bank statements and, for larger amounts, financial statements.

Because of the guarantees, directors’ personal credit files and assets are part of the assessment too. Our guide to personal guarantees explains what you are signing.

Borrowing as a trust

A trust is not a legal entity in the same way; the trustee acts on its behalf. The lender needs to know the trustee has the power to borrow and to give security. That means:

• The full trust deed, including every variation.
• Trustee details: an individual or, often, a company.
• Guarantees from the individuals behind a corporate trustee.

Already know roughly what you need? Tell us in about a minute. There is no credit check to enquire and your details are not passed around a panel of lenders.

The trust deed problem

The most common delay in trust lending is the deed itself: lost, incomplete, unsigned pages, missing variations or powers that do not clearly cover borrowing. Before applying:

1. Ask your accountant for a complete certified copy.
2. Check that all variations are included.
3. Confirm who the current trustee is.
4. Ask your accountant whether the deed allows the trustee to borrow and give security.

Property held in a trust or company

Property held by a family trust or company can usually secure a business loan if the deed or constitution allows it. Everyone with authority to deal with the property will need to sign. No valuation is needed for the property-secured loans we arrange.

Comparing structures

	Sole trader	Company	Trust
Who borrows	The individual	The company	The trustee
Guarantees	Not needed, debt is personal	Directors usually	Individuals behind the trustee
Key document	ID and ABN	ASIC extract	Trust deed
Common delay	Mixed personal and business banking	Missing director signatures	Incomplete trust deed

When structure changes

If you are moving from sole trader to company, or restructuring a group, talk to your accountant about timing. A new entity has little history, so applying before or after the change can make a difference. If a partner is leaving, see funding a partner buyout.

An illustrative example

A family business trades through a company that is trustee of a discretionary trust. The parents are directors, and the family home is held in their personal names. The business needs $300,000 for new equipment and a tax catch-up. The lender lends to the company as trustee, reviews the full trust deed to confirm borrowing powers, takes guarantees from both directors and registers a second mortgage over the home, which both owners sign. With the deed and company extract ready on day one, the process takes days rather than weeks.

Related reading

• Personal guarantees on business loans: What a personal guarantee on a business loan means, who gives them, what is at risk, how they end and what to check before you sign one.
• Business loans for sole traders: How sole traders can get business funding: what lenders look at, personal liability, keeping business and personal finances separate and which options fit.
• Documents you need for a business loan application: Which documents lenders ask for in a business loan application, from bank statements and BAS to property details, and how to get them ready in advance.
• Funding a partner buyout: Buying out a business partner or co-director? How to fund it, value the share, protect cash flow and structure the deal well.
• Property-secured business loans: Property-secured business loans from $20k to $5m against residential or commercial property, with no valuation needed and flexible repayment options.

Key terms, in plain English

• Second mortgage: a mortgage registered after the home loan already on the title, so it is paid out second if the property sells.
• BAS: the business activity statement used to report and pay GST, PAYG withholding and other amounts to the ATO.
• Personal guarantee: a promise by a director or owner to repay a business debt if the business does not.
• Credit file: the record held by credit reporting bodies of credit applications, accounts and any defaults.

Questions to ask before you sign

• How much lands in my account after any fees are deducted?
• What is the total repayable, and over what period?
• Is the repayment schedule weekly, fortnightly or monthly?
• What property or assets will be secured?
• What are my options if trading dips during the term?

Who else to talk to

Your accountant knows your numbers better than anyone, so involve them early. They can confirm figures for the enquiry, flag tax effects of different structures, and tell you whether the timing of a loan suits your BAS and tax cycle. A lender’s job is to assess whether funding fits; your accountant’s job is to make sure the business is set up to carry it well. The two work best together.

The short version

• Companies: directors usually guarantee the loan
• Trusts: the trust deed must allow borrowing and security
• Missing trust deed pages cause many delays
• Property held in a trust can still secure a loan

From enquiry to an answer

Everything starts with a short enquiry: how much, what for, how long you have traded, roughly what you turn over and whether there is property in the picture. A person, not a scoring engine, reads it and calls you. They ask for the evidence that actually decides the loan, explain the realistic options and give you the full cost in writing. Nothing goes ahead, and no credit check is run, until you say yes. On a complete file, approval within the hour is possible. Every step is explained as it happens, so you always know what is being checked and why.

Is funding the right answer here?

Not every cash problem is a funding problem. Sometimes the better fix is a conversation with a supplier, a payment plan with the ATO, chasing an overdue invoice or adjusting prices. Funding earns its place when it solves a timing gap or unlocks an opportunity worth more than its cost. We will tell you honestly which situation you are in.

Before you send the enquiry

A short checklist before you send the enquiry. None of it takes long, and together it heads off the most common causes of delay:

• Know the amount you need and what it will pay for.
• Check your recent bank statements so nothing in them surprises you.
• Note any loans, leases or payment plans the business is carrying.
• If you own property, know who is on the title and what is owed.
• Make sure every director or co-owner knows you are applying.

Getting the enquiry right

Every question on the form is there for a reason: it changes which funding fits. Describe the business as it stands today rather than the version you expect in six months. Mention any default, tax debt or recent decline in the notes. We look at those situations all the time, and knowing early lets us head straight for options that can actually work.

Put your funding on call

You can check your eligibility in about a minute. There is no credit check to enquire, no lead farming and no call centre script, just a person who looks at your situation and tells you plainly what could work. The more accurate the answers on the form, particularly the amount, revenue and whether you own real estate, the faster and better that first conversation will be.