Can I use property as security for my business loan?

Yes, real estate can be used as security for a business loan, whether you’re using the cash to start a company, buy new equipment, expand your fleet, hire new staff, or just keep the cash flow going.

Residential, commercial or rural property can be a powerful form of security for your business loan. But is it the right choice for you?

Residential property is often used as security. This could be the family home or an investment property and may be included as part of a personal guarantee provided by the director(s) of the company.

If you own the commercial premises that your business operates from, you could use it as security instead (or as well).

The short answer: if you own property, you may be able to use it as security for a business loan.


What are the benefits of using a property as security?

There are several benefits to choosing to use property as security for a business loan:

  • If you own your own home, you can use it to fund a business without needing an existing business asset
  • Property in New Zealand is generally seen as high-value security, meaning that you may be able to borrow a greater sum (credit criteria and lending terms permitting)
  • By providing security to back up your business loan, especially valuable security like real estate, you can often secure better interest rates compared to unsecured business loans.


What are the risks of using property as security?

Using property as security does come with some risks.

The most significant one is that the property you put up for security could be sold by the lender to cover your loan should you be unable to pay it. This could mean losing the business premises or, even worse, your family home.

However, it’s important to remember that lenders aren’t in the business of selling property. They’re in the business of lending. Many lenders will work with you to find a different payment schedule should you need it. They want to see your business thrive just as much as you do!


What other options are there for security on a business loan?

Real estate is just one option for security on a business loan. For more information, check out our guide to business loan security.


For more information on your business loans options, get in touch with us on 0508 438 227 or make an online enquiry today.

This article is solely for information purposes and is not intended to be financial advice. If you need help, please contact Avanti Finance or your financial adviser. Neither Avanti Finance nor any person involved in this article accepts any liability for any loss or damage whatsoever which may directly or indirectly result from any information, representation or omission, whether negligent or otherwise, contained in this publication. References to third-party websites are provided for your convenience only. Avanti Finance accepts no responsibility for the availability or content of such websites.

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