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Many business owners hold commercial premises, development sites or investment property in a company. Borrowing against that property is routine, and the process differs from a personal loan in a few practical ways.
How the documents are signed
A company executes a mortgage and loan agreement under section 127 of the Corporations Act. That means two directors, a director and a company secretary, or a sole director who is also the sole secretary. A lender is entitled to assume a document signed this way has been properly authorised. Electronic signing is now permitted under the Act, although land registries and lenders set their own requirements for mortgages.
What the lender checks
- ASIC company extract. Directors, shareholders, registered office and whether the company is registered and not in external administration.
- PPSR search. Existing security interests over the company’s assets, such as a bank’s general security agreement or equipment finance.
- Title search. That the company is the registered proprietor, and what mortgages or caveats are already on title.
- Court and insolvency searches. Winding-up applications and judgments.
- Trustee status. Whether the company owns the property in its own right or as trustee. If it is a trustee, the trust deed is needed. See can a trust borrow against property.
Guarantees
Because shareholders have limited liability, lenders nearly always ask the directors, and sometimes the shareholders, to guarantee the loan. The detail is in do directors have to give personal guarantees.
Company loan versus personal loan
| Company borrower | Individual borrower | |
|---|---|---|
| Consumer credit law | Does not apply | May apply, depending on purpose |
| Signing | Section 127 | Personally, usually witnessed |
| Searches | ASIC, PPSR, title | Credit file, title |
| Guarantees | Directors, commonly | Not usually needed |
| PPSR registration | Common | Rare |
Existing bank security
If a bank already holds a general security agreement over the company, a new lender taking a second mortgage will work around it or seek a priority arrangement. It is not normally a barrier where the new loan is secured mainly against the land.
What it means in practice
A company with clear title, up-to-date ASIC records and directors available to sign can settle quickly. The common delays are an outdated ASIC record, such as a director who has resigned but is still listed, and a missing trust deed. Fix those first. This is general information, not legal advice.
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Get matched with a funderFAQ
Does a sole director company need two signatures?
No. A sole director who is also the sole secretary can sign alone under section 127. A company with two or more directors normally signs by two directors, or a director and the secretary.
Is a company loan covered by consumer credit law?
No. The National Credit Code applies to credit provided to individuals and strata corporations for personal, domestic or household purposes or residential investment. Loans to companies fall outside it.
Will the lender register anything against the company?
Often a general security agreement on the PPSR, as well as the mortgage on title. It is released when the loan is repaid.