Quick answer
Most often, the company borrows and you provide your home as security and sign a personal guarantee. That keeps the debt with the business that uses the money. The alternative is borrowing in your own name for the business and passing the funds to the company. Both can work, but they leave different records, liabilities and tax questions, so settle the structure with your accountant before the lender drafts the documents.
Key points
- When a company borrows against a director's home, the director usually signs a mortgage and a personal guarantee.
- Borrowing personally and passing money to the company is possible but leaves a different paper trail.
- Sole traders are the business, so the loan is simply in their name for business purposes.
- The ATO links interest deductibility to what borrowed money is used for, so clean records matter whichever way you go.
- Decide the structure before the lender drafts documents; changing it late costs time.
Most often, the company borrows, and you provide your home as security and sign a personal guarantee. That keeps the debt with the business that uses the money. The other route is borrowing in your own name and passing the funds to the company. Both can work, but they leave different records and tax questions, so settle the structure with your accountant first.
It’s one of the first practical questions owners hit when they decide to use the house for the business. The home is in your name, maybe jointly with a partner. The business is a company. The lender asks: who’s the borrower? Here’s how to think it through.
Why does it matter who the borrower is?
Because the borrower is the one who owes the money, and that shapes everything downstream: whose accounts show the debt, who makes the repayments, how the interest is recorded and what happens if things go wrong.
business.gov.au’s comparison of sole traders and companies explains the basic split. A sole trader is personally liable for business debts. A company is generally liable for its own debts, and its assets belong to the company rather than to its directors or shareholders. It also notes that money gets from a company to its owners through salary, fees, dividends or loans, not personal drawings, and that a separate business bank account is mandatory for a company.
So when a company needs money and the security is a director’s home, there are two sensible ways to join them up.
Option one: the company borrows, you provide the security
This is the most common structure for a home equity business loan.
- The company is the borrower. The loan sits in the company’s name and on its balance sheet. Repayments come from the company’s account.
- You give a mortgage over your home as a security provider. If the home is jointly owned, every owner signs.
- You usually sign a personal guarantee as a director.
The appeal is clarity. The debt belongs to the entity that spends the money, and the business-purpose story is obvious. The trade-off is that your home and your personal guarantee stand behind the company’s promise. Moneysmart’s page on going guarantor is blunt about that: a guarantor can be responsible for the full amount, and a lender may take an asset used as security, such as a home.
Option two: you borrow, then fund the company
Here you’re the borrower, in your own name, for a business purpose, secured by your home. You then pass the money to the company, usually as a loan from you to the company or as additional capital.
This can suit some situations: where the company is brand new with no history, where owners want the company’s balance sheet to look a particular way, or where the funds will be spread across more than one entity. But it adds layers:
- A second loan exists, between you and the company, which should be documented and tracked.
- The paper trail is longer. Money moves from lender to you to company, and each step needs to be clear.
- Tax treatment can differ. The ATO’s guidance on interest expenses shows the general principle: it’s what borrowed money is used for that counts, not which property secures it, and mixed-purpose loans need apportioning for the life of the loan. How that principle applies when you borrow and pass funds to a company is a question for your accountant, before you sign.
| Company borrows | You borrow and fund the company | |
|---|---|---|
| Who owes the lender | The company | You personally |
| Security | Your home, via a mortgage you sign | Your home, via your own mortgage |
| Personal guarantee | Usually required | Not needed; you’re already the borrower |
| Extra paperwork | Company documents and director checks | A documented loan or capital injection to the company |
| Tax questions | Interest recorded by the company | Depends on how funds reach the company; ask your accountant |
| Best suited to | Most trading companies | Specific cases your accountant recommends |
If you’re weighing the two, send a quick enquiry and we’ll talk it through with you before anything’s drafted. There’s no credit check at that stage.
What about sole traders and partnerships?
Sole traders have it simplest. There’s no separate entity, so the loan is in your name, secured by your home and used in your business. The main discipline is keeping it separate: its own loan account, never a redraw from the home loan, so the business purpose is easy to show.
Partnerships sit in between. The partners usually borrow together, and each partner who owns the security property signs. Where only one partner owns a home, the other partners’ agreement and guarantees are commonly part of the deal.
Trading trusts add one more step. If the business runs through a family trust with a company as trustee, the trustee company is usually the borrower, acting for the trust. The lender will read the trust deed to confirm the trustee can borrow and give security, and the directors of the trustee company typically guarantee the loan, with the home offered by whichever family member owns it. Have the deed, and any later variations, ready before you apply.
What will the lender check either way?
- Ownership of the home. Every registered owner signs, and non-borrowing owners are usually asked to get independent advice.
- Company details, if the company borrows: directors, shareholders and ASIC records.
- The purpose. Quotes, an ATO statement, a purchase contract or a clear explanation.
- The existing home loan, and whether a second mortgage needs the first lender’s consent.
- The exit. How the loan will be repaid, from business income, a sale or a later refinance.
Illustrative example: one home, two possible structures
Illustrative example. A two-director electrical contracting company needs $280k to fund materials and wages for a large school project. The directors are a married couple who own their home jointly, worth about $1.3m with $420k owing.
Their accountant prefers the company to borrow. The company signs the loan, both directors sign a second mortgage over the home behind their bank loan, and both give personal guarantees. Repayments come from the company’s account as progress claims arrive, and the interest is recorded in the company’s books where it belongs. A friend had suggested borrowing personally and lending the money to the company, but for this business the extra layer offered nothing except more paperwork. The secured business loans page explains how the second mortgage sits behind the bank.
Records that make life easier
Whichever structure you choose:
- Keep the business loan in its own account, separate from the home loan.
- Record what the money was used for, with invoices and the settlement statement.
- Document any loan between you and the company if you choose option two.
- Get your accountant’s advice in writing before the lender drafts documents.
The CGT side of borrowing against your home is covered separately in our guide to home equity business loans and the main residence exemption. If you’d rather not use the home at all, an unsecured business loan sized on turnover may suit smaller amounts.
Structure sorted? Let’s see what the house can do
Once you know who’s borrowing, the rest is matching the amount, the security and the repayment plan to a lender that suits. Property-secured business loans run from $20k to $5m.
The enquiry takes about 60 seconds and there’s no credit check when you first enquire. We don’t scatter your details across a pile of lenders, so you won’t be chased by strangers. A real person looks at your home, the company and what the money’s for, then calls to talk through the structure that fits. Please fill the form in accurately, including who owns the home and which entity needs the funds, so we can set it up properly from the start.
Frequently asked questions
Can my company borrow against a house that's in my name?
Yes. It's one of the most common structures. The company is the borrower, and you sign a mortgage over your home as a third-party security provider, usually along with a personal guarantee. Lenders will check both the company's details and yours.
Is it better for me to borrow personally and lend the money to my company?
Sometimes owners do this, but it creates a loan between you and the company that needs to be documented and tracked. It can also change how interest is treated for tax. Get your accountant's view before choosing it over a straightforward company loan.
If the company borrows, am I still personally liable?
In most cases, yes, through the guarantee and the mortgage over your home. The company owing the debt doesn't protect the home if you've given it as security.
My spouse co-owns the house. Do they have to sign if the company borrows?
Yes. Every registered owner must sign the mortgage, even if they have nothing to do with the company. Lenders usually expect them to get independent advice before signing.
I'm a sole trader. Does any of this apply?
Only partly. As a sole trader there's no separate entity, so the loan is in your name and used for your business. Keep it in its own loan account so the business purpose is clear.
Can we change the borrower later?
Usually only by refinancing, which means new documents, new costs and fresh checks. It's much cheaper to get the structure right the first time.