A secured business loan uses property or a business asset as collateral in exchange for a lower interest rate, a larger borrowing limit, and a longer repayment term than an unsecured facility typically allows. It is the structure most businesses move to once they need a meaningful amount of capital or a rate that makes a real difference to their bottom line.
This guide covers how secured business loans actually work, what counts as acceptable security, how much you can realistically borrow, and how the numbers compare against going unsecured.
A secured business loan is finance backed by an asset the lender can recover if the loan is not repaid. That asset is usually residential or commercial property, though business equipment, vehicles, and other assets can also qualify depending on the lender.
Because the lender’s downside is covered by the security, the assessment leans less heavily on trading history and cash flow alone than an unsecured application does, though serviceability still matters. This is the key trade off against the lower rate: you get better pricing and a bigger ceiling, but the asset is genuinely at risk if repayments stop.
Type of security offered. Residential property generally unlocks the most competitive pricing and the largest amounts, followed by commercial property, then business assets such as equipment or vehicles.
Loan to value ratio. Lenders will only advance up to a set percentage of the security’s value, commonly 65% to 80% for property. This ratio sets the practical ceiling on how much you can borrow against a given asset, regardless of how much you want.
Valuation. Property offered as security is typically valued by the lender before approval. This adds time to settlement compared with an unsecured facility, but it is what supports the lower rate on offer.
Term length. Because the security offsets the lender’s risk, secured business loans can run considerably longer than unsecured facilities, in some cases 15 years or more against commercial property.
Our guide to business loan requirements in Australia covers the broader eligibility criteria lenders assess alongside the security itself, including trading history and turnover.
There is no fixed ceiling. Borrowing capacity is driven primarily by the loan to value ratio the lender applies to your security, commonly 65% to 80% of a property’s value, combined with your business’s ability to service the repayments. A business offering $1 million in property equity at a 75% loan to value ratio could access up to $750,000, subject to serviceability, whereas the same business relying on unsecured lending alone would likely be capped well below that regardless of the security available elsewhere.
Run your numbers through our Business Loan Repayments calculator to see what a given amount and term actually costs before you commit to an application.
Secured pricing sits well below unsecured lending, because the lender’s risk is materially reduced by the security. On Reserve Bank of Australia data, average business lending rates, which blend secured and unsecured lending together, sit meaningfully lower than the rates typically quoted on unsecured products alone.
The exact rate you are offered still depends on the strength of the security, the loan to value ratio requested, your business’s serviceability, and the lender. Our Business Loan Interest Rates guide breaks down what drives pricing in more detail, including how secured and unsecured rates compare side by side.
Secured business loan | Unsecured business loan | |
Security required | Property, equipment, or other asset | None, though a personal guarantee is usual |
Typical rate | Lower | Higher |
Typical amount | Larger | Smaller |
Typical term | Longer, up to 15 years or more | Shorter, commonly 1 to 5 years |
Approval speed | Slower, involves valuation | Faster, often within days |
Best suited to | Larger amounts, longer terms, lowest total cost | Smaller amounts, speed and flexibility |
A $30,000 short term cash flow gap rarely justifies putting property on the line, given the speed an unsecured facility offers for that kind of need. A $500,000 commercial property purchase repaid over ten years is a different calculation, where the rate difference on secured lending usually outweighs the extra time a valuation adds. Our full comparison in the Unsecured Business Loans guide covers the other side of this decision in detail.
The trade off in a secured business loan is genuine, not theoretical. If the business cannot repay, the lender has the right to recover the debt by selling the property or asset offered as security. ASIC’s Moneysmart has independent guidance on the risks of using property, including your home, as loan security, and it is worth reading before you sign anything, not after.
It is also worth checking whether a security interest has been registered against any business assets, whether the loan is described as secured or not. The Personal Property Securities Register lets you search this directly.
Every lender values the same security differently and applies its own loan to value limits, meaning identical property can unlock a materially different loan amount and rate depending on who you ask. Comparing that spread yourself, one lender at a time, is slow and generates a separate credit enquiry with each application. Lodestar Finance’s Secured Business Loans service compares structures and lenders across a panel at once, so the comparison happens before you commit to one rather than after.
FAQs
Generally yes, since the lender's risk is offset by the security offered. The exact gap depends on the lender, the loan to value ratio, and your business's overall risk profile.
The lender has the right to recover the debt from the security, which could include selling the property or asset offered. This is the core risk that comes with the lower rate and should be weighed carefully before committing an asset.
Yes, many lenders accept a director's residential property as security. It is one of the most common ways smaller businesses without commercial premises access secured lending.
This depends on the lender's loan to value ratio, commonly 65% to 80% of the property's value, alongside your business's ability to service the repayment.
Yes. Security reduces the lender's risk but does not remove the requirement that your business can comfortably afford the repayments, which lenders still assess as part of the application.
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