Quick answer
A secured business line of credit is a revolving limit, backed by a mortgage over residential or commercial property, that a business can draw, repay and redraw as cash flow needs. Interest applies only to the drawn balance, though many lenders charge a fee on the whole limit. Because property stands behind it, limits are usually larger and pricing lower than an unsecured line, but the facility is typically reviewed each year.
Key points
- A standing limit you draw and repay as needed, with property as security instead of turnover alone
- The size of the limit leans on equity and loan-to-value, then on whether the business can carry it
- Interest runs on the drawn balance, while a line fee often applies to the full approved limit
- Most facilities are reviewed periodically, and the lender can reduce or end the limit at review
- Best for recurring, short swings in cash flow rather than buying long-life assets
- Typical limits
- $20k to $5m (property-secured)
- Security
- Registered mortgage over property
- Cost structure
- Interest on drawn funds plus line fee
- Term
- Revolving, reviewed periodically
Picture a wholesaler who buys most of the year’s stock between August and October, then waits until January for retailers to pay. Every year the same hole opens and closes. A term loan is clumsy for that pattern: you borrow a lump sum, pay interest on all of it, and still have money sitting idle by February. A revolving limit drawn down in spring and cleared by late summer fits the shape of the problem. Putting property behind that line is what turns a modest limit into a useful one.
How does a secured line of credit actually work?
The lender approves a limit, say $400k, and registers a mortgage over a property to secure it. From then on the business takes out whatever it needs, up to $400k, pays it back as customers settle, and uses it again. There’s usually no fixed repayment schedule for the principal; many facilities only require the interest to be paid each month, so the balance moves with the business.
Two things make the secured version different from an unsecured business line of credit:
- Size. Unsecured limits track turnover and bank statements and tend to top out well below what property can support. With real estate behind it, the limit can reach into seven figures for an established business.
- Price. A lender with a registered mortgage is in a much safer position, and that normally shows up as lower ongoing costs than an unsecured line of the same size.
Banks are very good at this product. If your business banks with a major or regional bank, has tidy financials and owns property, ask them first: a bank-secured facility is often the cheapest revolving money you’ll find. When the bank says no, wants more security, or won’t move the limit, non-bank and private lenders offer secured lines too, usually with lighter documentation and higher cost.
What decides the size of your limit?
There are really two ceilings, and the lower one wins.
The first is the security ceiling. The property’s value is multiplied by the highest loan-to-value ratio that lender accepts for the asset class (residential is usually treated more generously than commercial or vacant land), then subtracts anything already owing against it. Our property equity calculator shows that headroom in a few seconds.
The second is the servicing ceiling. Careful lenders test repayments on a fully drawn line, because one day it might be. A business that can comfortably meet interest on $150k but not $400k will likely be offered the smaller limit, even with plenty of equity.
| Lender check | Relevance to a revolving facility |
|---|---|
| Property value and existing debt | Sets the maximum the security can support |
| Cash flow and recent financials | Shows the business can carry the full limit, not just today’s balance |
| How the account has been run | Balances that rise and fall look like working capital; a line pinned at the limit looks like hidden term debt |
| Purpose | Recurring trade needs are the natural fit; lenders ask more questions when the purpose is one-off |
| Who owns the property | A director’s home usually means a guarantee and a mortgage signed by the owner, and the owner should get independent advice |
What does it cost to keep a line open?
Expect three layers of cost. There’s interest on the drawn balance. There’s usually a line fee or facility fee calculated on the full limit, drawn or idle. And there are setup costs: valuation, the lender’s legal fees, mortgage registration, and sometimes an annual review fee.
That line fee changes the maths more than people expect. Suppose your approved limit is $400k but your average drawn balance across the year is $120k. You pay interest on roughly $120k, and the line fee on $400k. A limit far bigger than you actually use can quietly cost more than the interest itself, so size it to the peak you genuinely expect, not the biggest number the property allows. The line fee entry in our glossary explains how lenders usually calculate it.
We never publish rates. Ask every lender for a written estimate of the total yearly dollar cost at a realistic average balance, then compare.
Wondering whether your property could support a working capital limit? Tell us roughly what you need and someone will look at it; asking doesn’t touch your credit file.
Where do secured lines go wrong?
Most problems are self-inflicted and avoidable.
The balance never comes down. If the line sits at its limit month after month, it has become a long-term loan with revolving pricing and review risk. Lenders notice this at review time. If the debt is really permanent, refinance it into a term loan and keep the line for genuine swings.
Mixing private and business spending. Whether interest is deductible generally depends on the use each dollar was put to. A line that pays a supplier one week and a family holiday the next creates a tracing headache for your accountant. Keep the facility strictly for the business.
Ignoring the review clause. Read how and when the lender can reduce the limit. A facility that can be pulled at review shouldn’t be the only thing standing between the business and payroll in a bad month.
Using it to buy long-life assets. A vehicle or machine that earns money for seven years suits equipment finance with a repayment schedule. Parking it on the line eats the headroom you’ll want later.
Who is it a good fit for?
A secured line usually suits a business that has a predictable cash cycle and owns property with spare equity: wholesalers buying seasonal stock, builders waiting on progress claims, agribusinesses carrying costs until harvest, or service firms whose clients pay slowly. If that sounds like you, our guide on funding seasonal stock walks through sizing.
It’s a weaker fit for a one-off need (a lump-sum loan is simpler), for a business with no property (an unsecured line or invoice finance may suit better), or for anyone uneasy about putting a home behind revolving debt.
How do you apply?
- Work out your real peak. Map the last two years of cash flow and find the deepest point. Our cash flow gap calculator helps.
- Check your equity. Know the property’s likely value and what’s owed against it.
- Gather documents. Your latest BAS or financial statements, a few months of business account statements, identification, ABN, and the address of the property on offer.
- Ask your bank first, then compare. If the bank declines or caps the limit, see our page on what to do when you’ve been refused an overdraft increase.
- Valuation and documents. The lender values the property, issues an offer and registers the mortgage when you sign.
Alternatives worth weighing
- A business overdraft attached to your transaction account, secured or unsecured.
- Home equity business loans, a lump sum against your home with a set repayment plan.
- Invoice finance, which grows with your debtor book rather than your property.
- An unsecured line for smaller limits where you’d rather keep property out of it.
Turning a cash cycle into a conversation
Revolving finance works best when it’s set up before the squeeze, not during it. If you already know where your cash dips each year, you’re in a good position to ask for the right limit at a fair cost.
Send us the outline. It’s roughly a minute of typing, and your credit record isn’t looked at just because you asked. We keep the enquiry in-house instead of firing it off to dozens of funders, and someone who works with property-backed facilities rings you personally. Be exact about the property, what’s owed on it and the deepest dip you need covered; honest numbers let us suggest a structure that fits from the very first call.
Frequently asked questions
What is a secured business line of credit?
It's a revolving facility with a fixed limit that the business can dip into and pay back repeatedly. The lender takes a mortgage over property, usually the owner's home or a commercial building, which supports a bigger limit and lower pricing than an unsecured line.
Do I pay interest on the whole limit?
No. Interest is charged on what you've actually drawn. Many lenders also charge a line fee or facility fee calculated on the full limit, so an approved but unused limit still costs something each month or quarter.
Can the lender cancel a secured line of credit?
Most facilities are subject to review, often annually. At review the lender can renew, change the terms, reduce the limit or ask for repayment. Strong, current financials and a balance that moves up and down rather than sitting at the limit make renewal far easier.
How is the limit worked out?
Lenders start with the property value and their maximum loan-to-value ratio for that property type, subtract any existing mortgage, then check the business can service the full limit if it were fully drawn. The lower of those two figures usually becomes the approved limit.
Is a secured line of credit the same as an overdraft?
They're close cousins. An overdraft sits inside your transaction account, while a line of credit is often a separate facility you draw into your account. Both revolve, and both can be secured by property. The fee structure and review terms are what usually differ.
Can I use it to buy equipment or property?
You can, but it's rarely the best fit. A revolving line is priced and structured for short, repeating needs. Long-life assets usually belong on a term loan or equipment finance with a set repayment schedule, which keeps the line free for working capital.