Want terms on your version of this?
Two boxes now, the rest on the form below. No cost, no obligation.
Many small and medium companies own no real property. The equity sits in the director’s home. Using it to support a business loan is one of the oldest structures in commercial lending, and it works the same way for a caveat loan.
How it is structured
The company is the borrower. The director, as owner of the home, gives a personal guarantee of the company’s debt and charges the home to secure that guarantee. The charge is the caveatable interest, and the caveat is lodged on the home’s title. If the home has a bank mortgage, the caveat sits behind it, and the usual combined LVR limits apply - indicatively up to around 65%.
Business purpose is the line
Business-purpose lending to a company sits outside the National Credit Code. What matters is what the money is used for. Paying the company’s ATO debt, funding stock, bridging a commercial settlement and buying out a shareholder are business purposes. Dressing up a personal loan as a company loan to avoid consumer protections is not, and a false declaration has serious consequences. See what happens if a business purpose declaration is false.
Co-owners and independent advice
If the home is jointly owned, both owners must sign. Courts have long protected guarantors, particularly spouses, who sign without understanding what they are risking. Lenders therefore require each guarantor to receive independent legal advice, and often independent financial advice, with a signed certificate. It adds a day or two. It also protects the family.
Weigh the risk honestly
The home is on the line. The questions to answer before signing are whether the amount is the minimum needed, whether the term leaves real margin, and whether the exit is an event with evidence behind it. If company-owned or investment property is available, offer that first. If the only security is the home and the exit is uncertain, the better advice may be not to borrow. More on this structure is in using your home as security for a business loan.
We match you with a funder and email you their introduction. Reply to it and they’ll be in touch.
Get matched with a funderFAQ
Does that make it a consumer loan?
No. The test is the purpose of the loan, not the type of property. A loan to a company for its business is business purpose even when a home is the security.
My spouse co-owns the home. Do they have to sign?
Yes. Every registered owner must give the security, and a spouse who does not benefit directly from the business will be required to obtain independent legal advice before signing.
Can the home be sold if the company defaults?
Yes, ultimately. That is what giving security means. It is the reason to be conservative about the amount, the term and the exit.