Releasing Equity from an Investment Property for a Business

Key takeaways

• A business can draw on the equity in an investment property by using it as security for a business-purpose loan, without selling it.
• Equity Tap lends its own money on property-secured business facilities from $50,000 to $5 million, over one to twelve months.
• No credit check is run when you enquire or at initial assessment, and past credit problems are weighed against the whole scenario.
• Looking at the net cash received, the total repayable and what happens if the exit slips gives a clearer picture of the real cost.

How releasing equity works, step by step

The process moves from understanding the equity in the property through to the lender's assessment and settlement.

1. Understand the equity. Equity is the gap between what the property is worth and what is still owed on it.
2. Pin down the business purpose. Equity Tap's facilities are for business purposes and are secured by property.
3. Plan the exit. Repayment at the end of the term can come from a sale, a refinance or incoming business funds.
4. Make an enquiry. No credit check is run when you enquire or at initial assessment.
5. Assessment and settlement. Once the lender's assessment, documents and final checks are complete, eligible and straightforward loans may settle in as little as 24 hours, which describes an eligible scenario rather than a set timeframe.

Can you use equity in an investment property for your business?

In many cases, yes. An investment property can be offered as security for a business-purpose loan, so the business can access funds while the property stays in place.

Equity, in plain terms, is the difference between the property's current value and the balance of any loan secured against it. As the value moves or the existing loan is paid down, the equity changes too.

A business-purpose loan funds the needs of the business, such as stock, equipment or a timing gap in cash flow. A personal or consumer loan, by contrast, is used for personal, family or household spending. Equity Tap's facilities are business-purpose only, so the funds go towards the business rather than personal costs.

Moneysmart has general background on borrowing and on what it means to use property as security for a loan.

How does a property-secured business loan from a private lender work?

A direct private lender uses its own funds and makes its own lending decisions. Equity Tap has been lending its own money since 2022, with a small team making decisions for borrowers Australia wide.

Its equity release business loans are business-purpose facilities secured by property, ranging from $50,000 to $5 million over terms of one to twelve months. Residential or commercial real estate can be considered as security, so an investment property may be offered. Borrowers can range from sole traders and micro businesses through to larger Australian companies.

A short-term facility tends to suit needs with a clear end point, such as bridging a gap until a property sells, a refinance completes or expected business income arrives. For ongoing, open-ended funding needs, a short-term facility can be harder to justify, because the debt needs to be repaid when the term ends.

What does a lender look at when you borrow against an investment property?

The lender's assessment centres on the security property, the business purpose and the exit, with credit history considered as part of the wider picture.

The property. Because the loan is secured by real estate, the property offered and the equity it holds sit at the centre of the scenario.

The purpose. The funds must be for a business purpose, so a clear explanation of what the money is for forms part of the picture.

The exit. A lender wants to understand how the loan will be repaid at the end of the term, and Equity Tap considers exits such as a sale, a refinance or incoming business funds.

Credit history. There is no credit check when you enquire or at initial assessment. Past defaults, arrears or a low credit score are looked at in the context of the whole scenario rather than in isolation. More detail sits on our page about business loans with bad credit considered.

Every outcome depends on the lender's assessment of the full scenario.

How do repayments and prepaid interest work?

For eligible facilities, up to six months of interest may be prepaid into the loan, so no scheduled payments fall due during that period.

The interest is not waived. It is still charged, and it affects both the total cost of the loan and the net proceeds the business receives.

Because the prepaid interest is set aside from the loan at the start, the cash the business actually receives is lower than the facility amount. That trade-off can ease pressure on cash flow in the early months, but the interest remains part of what is repaid.

Equity Tap does not publish an interest rate or rate range. When looking at any offer, the useful comparison is the cash received at the start against the total repaid at the end.

How long can it take to access the funds?

Eligible, straightforward loans may settle in as little as 24 hours once the lender's assessment, documents and final checks are complete. That figure describes an eligible scenario and is not a promise of when any loan will be assessed or settled.

Timing depends on how straightforward the scenario is and how quickly the documents and final checks come together. Having property details, identification and information about the business ready can help avoid delays, while more complex security or ownership structures tend to take longer.

Eligibility, and any timing, depends on the lender's assessment.

What are the costs and risks to weigh up?

The clearest way to judge a property-secured loan is to look at the whole cost, not just the facility amount. Points worth comparing include:

• the net cash received after all costs and prepaid interest, keeping in mind that prepaid interest is not waived and affects total cost and net proceeds
• the total amount repayable at the end of the term
• what happens if the planned sale, refinance or incoming funds take longer than expected

Some lenders in the market charge fees that can make short-term borrowing expensive, so reading the full cost breakdown matters.

Using property as security carries real risk: if the loan cannot be repaid, the property may be sold to recover the debt.

Borrowing for a business can raise tax questions, and the ATO has general information for businesses. business.gov.au sets out general information on finance and funding options for Australian businesses.

Who can it suit, and when is it not the answer?

A short-term property-secured loan can suit a business with equity in an investment property, a clear business purpose and a realistic exit by the end of the term. It may also be relevant where past credit issues have made other finance harder to find, because credit history is considered alongside the whole scenario.

It may not be the answer where there is no clear way to repay at the end of the term. Where the need is ongoing rather than short term, or the amount required sits below the facility range, a different type of finance may fit better, and business.gov.au outlines general options.

For a tax debt, the ATO may offer a payment plan, which in some cases can be enough on its own. And where the risk of putting an investment property on the line outweighs the benefit, not borrowing is also an option worth weighing.

Next steps

If you have equity in an investment property and a clear plan for the funds, the next step is to start your application. Having the property address, a short note on what the business needs the money for and how the loan would be repaid at the end of the term makes that first conversation easier, and it doesn't take long to begin. Eligibility depends on the lender's assessment of your full scenario.

No obligation. Eligibility is subject to assessment.

This is general information only and does not take into account your objectives, financial situation or needs. All applications are subject to lending criteria, assessment and approval.

Frequently asked questions

General information only, not legal, tax or financial advice.