What is a property-secured business loan?
It is business funding where the lender’s main security is a registered mortgage over New Zealand property. The property does not have to belong to the business. It can be:
- the owner’s home
- a rental or investment property
- a commercial or industrial building
- land, including sections and some rural property
The mortgage can be a first mortgage, where the property is unencumbered or the existing loan is being repaid, or a second mortgage that sits behind an existing bank home loan. That second option is what makes property-secured lending so useful to SME owners who have built up equity but do not want to refinance their home loan.
Why do established SMEs choose property security?
Property-secured lending changes the conversation with a lender:
| Common obstacle | How property security helps |
|---|---|
| Latest financial statements are not finished | No financials or tax returns needed for the initial assessment |
| A past default or arrears on the credit file | Considered case by case, with more weight on security and purpose |
| The purpose is hard for banks to lend against (goodwill, IRD debt) | The lender relies on the property, not the asset being bought |
| Time pressure from a sale deadline or IRD | Funding possible within 24 hours of approval in some cases |
| A large amount needed | Loans up to $1m, subject to equity |
What can the money be used for?
Any genuine business purpose. The most common across our enquiries are:
- working capital and cash flow
- buying an established business
- buying out a partner or funding succession
- refinancing business debt, including IRD arrears
- fit-outs and premises upgrades
- expansion and new sites
How much can be borrowed?
Loans run from $20,000 to $1m. Within that range, the amount depends mainly on the property’s value, the existing lending against it and the type of property. A lender will usually obtain a valuation and confirm the existing mortgage balance. The purpose and the plan to repay also matter, because a short to medium term property-secured loan needs a clear exit, whether that is business cash flow, a sale or a longer-term refinance.
What does it cost?
Every loan is priced on the individual circumstances: the property, the loan-to-value position, whether it is a first or second mortgage, the purpose and the exit plan. We do not publish headline figures because they rarely match what a particular business is offered. What we do is look across the options available for your situation and present the sharpest one we can find, with all costs set out before you commit.
Before you offer a property as security
- Talk to everyone on the title. Every owner, including trustees, will need to sign.
- Check your existing mortgage terms. Some first mortgage lenders require notice or consent for a second mortgage.
- Get independent legal advice, particularly if a family member or trust is providing security.
- Be clear on the exit. Know how the loan will be repaid before it is drawn.
Our guide on using property as security for a business loan explains valuations, second mortgages and supporting-party security in plain language.
Example scenario
Example scenario, generic and for illustration only. The owner of an Auckland wholesale business has an unexpected IRD bill, and the year-end accounts are not yet complete. He owns a rental property in Hamilton with a modest bank mortgage. A second mortgage over the rental clears the IRD balance within days of approval, and the loan is repaid over the following year from business cash flow.
Questions SME owners ask
Can I use my home as security if it already has a mortgage?
Yes. A property-secured business loan can be a second mortgage behind your existing home loan. The lender looks at the property's value and the existing lending to work out the available equity.
Does the property have to be owned by the business?
No. The property can be owned by you, your family trust or another supporting party, such as a relative or business partner who agrees to provide security. Supporting parties should take independent legal advice.
Why are financials not needed for the initial assessment?
Because the property security carries much of the lender's risk, the first question is about equity and the purpose of the loan rather than last year's accounts. Further information may be requested as the application progresses.
Can I use rural land or a lifestyle block?
Land can be used as security. Lenders assess rural and lifestyle properties individually, looking at value, location and saleability.
Is this personal lending?
No. These loans are for business purposes only. The property is security, but the money must be used for the business.