Trusts

How a loan to a trust works

A trust is not a separate legal person, so the borrowing is done by its trustee - an individual, or more often a company - in its capacity as trustee for the trust. Property the trust already holds secures the capital, and the file is weighed on that security and a clear exit, not on lodged financials, which is what settles it in days where a bank’s commercial credit team runs weeks. Where the property already carries a mortgage, the position can sit behind it: a second mortgage or equity release to draw on owned equity, a faster caveat loan where the timing is tight, or a private commercial mortgage as the senior facility on a purchase or refinance. Combined LVR - measured on the gross balance, including capitalised interest and fees - is the real constraint where a mortgage already sits. Representative ranges are set out on rates and fees, subject to assessment.

What the trust structure changes

Borrowing by a trust for a business purpose sits outside the consumer-credit regime that governs a home loan, so the file is weighed on the security and the exit, confirmed simply by a business purpose declaration the trustee signs. Two things matter beyond the asset. First, the trust deed must give the trustee power to borrow and to grant security over trust property; we review it upfront, and where it is silent or restrictive a deed variation may be needed before settlement. Second is who signs and stands behind it: the trustee enters the loan in its own right and as trustee, and where a company acts as trustee its directors are usually asked for a personal guarantee - some arrangements ask adult beneficiaries as well. A trustee is personally liable on the loan with a right of indemnity from trust assets, and that indemnity can be lost if it borrows outside its powers, so the borrowing has to stay within the deed and a genuine business purpose.

What we’ll need to start

Four details get you matched with a funder and on to indicative terms: the trust and the property, the amount and its business purpose, any existing mortgage and balance, and the exit. Once it is progressing we will want the stamped trust deed and, where there is a corporate trustee, the company constitution - a light file, not full financials. The funder confirms indicative terms within 24 to 48 hours of your reply and can settle in days. The honest part: a genuinely personal need, no real equity or no realistic sale or refinance exit, or a deed that does not permit the borrowing, is not a fit - and the first call may belong with your accountant or lawyer. When it stacks up, tell us what you need.