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New companies borrow against property all the time. Developers set up a special purpose vehicle for each project. Buyers register a company to purchase a commercial property or a business. Established operators restructure and move activities into a clean entity. None of these has trading history, and all of them can need funding on day one.
Why banks struggle and private lenders do not
A bank’s credit model is built on serviceability proven by past financial statements. With nothing to assess, the application stalls or is sent down a slow path that relies on the directors’ personal income. A private lender’s first question is different: what is the property worth, how much is owed on it and how will this loan be repaid.
What the lender assesses
- The security. Type, location, value and existing debt.
- The directors and shareholders. Identity, background, credit history and experience relevant to the purpose.
- The purpose. What the funds will do, and that it is a business or investment purpose.
- The exit. Sale, refinance, project completion or incoming funds.
- The structure. Whether the company acts in its own right or as trustee.
Common structures
| Situation | Structure |
|---|---|
| New company buying a property | Company borrows, first mortgage over the purchase, directors guarantee |
| New company, property owned by a director | Company borrows, director guarantees with a mortgage or caveat over their property |
| New SPV for a development | SPV borrows, mortgage over the site, guarantees from directors and often the parent or related entities |
| New company, property in a family trust | Company borrows, trustee guarantees and mortgages, if the deed allows |
The last two are covered in more detail in borrowing against property held in a different entity.
Documents to have ready
- ASIC certificate of registration and a current company extract.
- The company constitution, if there is one, and the trust deed if it is a trustee.
- ABN details.
- Identification for directors and guarantors.
- Contract of sale, feasibility or business plan, depending on the purpose.
- Details of the security property and any existing loans.
A caution on phoenix activity
Lenders are alert to a new company being used to leave debts behind in an old one. If the new entity follows the failure of a previous business, explain what happened and how creditors, including the ATO, were dealt with. A straight account is far better than having the lender find it in a search.
Where a new trading business differs
If the question is about a start-up that needs working capital, not a new holding entity, read caveat loan for a new business. For how companies are assessed generally, see funding for companies.
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 the company need an ABN and GST registration?
An ABN is expected, because it supports the business purpose. GST registration depends on the activity and turnover and is a question for your accountant.
Can the company borrow against property its director owns?
Yes. The company borrows and the director gives a guarantee supported by a mortgage or caveat over the property.
Is the rate higher for a new company?
Not necessarily. Pricing follows the security, the loan to value ratio and the ranking of the mortgage more than the age of the borrower.