Quick answer
A secured loan is borrowing backed by a specific asset, such as property, a vehicle or equipment, that the lender has a legal right to take and sell if the loan isn't repaid. Because the lender can recover its money from the asset, secured business loans are usually larger, longer and cheaper in total dollars than unsecured ones. The trade-off is that the asset is at risk if repayments stop.
Key points
- Backed by a named asset the lender can sell after a default
- Property is secured through the state land registry; equipment and vehicles through the PPSR
- Usually means a bigger amount, a longer term and a lower total cost
- Many so-called unsecured business loans still carry a director guarantee
Put simply, a secured loan comes with a fallback. The borrower pledges an asset, and if the repayments stop, the lender can turn that asset into cash to get its money back. The larger limits, the longer terms and the extra paperwork all follows from that one promise.
Why lenders care so much about security
A lender weighs two questions: how likely is this borrower to fall behind, and how much would we lose if they did? Security answers the second question. Even a borrower with a patchy year can look acceptable if a house or a near-new excavator sits behind the loan.
The Reserve Bank has noted that banks are often reluctant to lend to small businesses without real estate as security, and that larger unsecured amounts are hard to get. That’s the practical reality behind the term: in Australian business lending, security is often the difference between a modest unsecured limit and the amount the business actually needs.
What can secure a business loan in Australia
| Asset | How the lender records its claim | Common loan types |
|---|---|---|
| Home or investment property | Mortgage or caveat at the state land registry | Secured business loans, second mortgages |
| Commercial property | Registered mortgage on the title | Commercial property loans, first mortgages |
| Vehicles, machinery, equipment | Registration on the PPSR | Chattel mortgage, equipment finance |
| All business assets | General security agreement registered on the PPSR | Bank facilities, larger fintech loans |
| Unpaid invoices | Security over receivables, registered on the PPSR | Invoice finance |
| Cash | Charge over a term deposit | Bank guarantees |
Property claims go through each state’s land titles office. Claims over almost everything else, including vehicles, stock and receivables, sit on the national Personal Property Securities Register (PPSR). Our entry on security interests explains how that register works.
Secured or unsecured: the grey zone
Plenty of online loans are marketed as unsecured, yet the paperwork includes a personal guarantee from each director and sometimes a general security agreement covering whatever the company owns. No single asset is named, but the lender can still pursue the business and the directors personally if the loan goes bad.
So when comparing offers, ask two things: which assets does the lender take a claim over, and who signs a guarantee? That gives a truer picture than the word on the brochure. For a fuller side-by-side, read secured vs unsecured business loans.
Example: a plumbing business choosing between two offers
A Perth plumbing company with three vans needs $90k for a new van fit-out, a drain camera and a hydro-jetter. It gets two offers.
The first is unsecured: approved quickly, a two-year term, a director guarantee and higher total interest. The second is a chattel mortgage over the new equipment and van, with a five-year term and smaller monthly repayments. Because the lender can repossess the gear if needed, it accepts lower pricing, and across the life of the loan the company repays several thousand dollars less.
The secured option wins on cost; the unsecured one wins on speed and simplicity. Neither is wrong. The right pick depends on how quickly the business needs the money and how long it wants to be paying. If you’d like help working out which suits, send through a short enquiry.
Related terms
Security, collateral, unsecured loan, loan-to-value ratio and general security agreement.
Have an asset that could support a loan?
Whether it’s a home with equity, a commercial building or a yard full of equipment, putting the right asset behind a loan can change the answer. Owners whose bank wanted more security than they had often find a fit elsewhere.
Our form asks only the essentials and most people finish it inside a minute. No credit enquiry is run when you submit it, and your details aren’t passed around to multiple lenders. A person, not an algorithm, reads your enquiry and rings you back. List the assets and existing debts accurately so the first structure we suggest is the one that suits.
Frequently asked questions
What can be used to secure a business loan?
Residential or commercial property, vehicles, machinery and equipment, business assets generally under a general security agreement, unpaid invoices, and cash such as a term deposit. Each lender sets its own list and how much it will lend against each type.
What happens if I can't repay a secured loan?
After formal default notices, the lender can enforce its security, which may mean repossessing equipment or taking possession of property and selling it. If the sale doesn't cover the debt, you may still owe the shortfall, and a guarantor may be asked to pay it.
Is a secured loan always cheaper?
Usually, but not always. A short caveat loan against property is secured yet can cost more per month than some unsecured facilities. Compare the total dollars repaid, including fees, over the period you'll actually have the loan.
Can I get a secured loan if my bank said no?
Often, yes. Non-bank and private lenders focus more on the quality of the security and the exit plan than on the bank's credit scoring, so owners with property equity have options after a bank decline.