Security requirements are one of the most misunderstood aspects of commercial lending. This guide explains what lenders actually count as security, at what LVR, and how to structure your security position to get the best outcome.
Security is what a lender can fall back on if the borrower can't repay. It's not the primary basis for an approval decision — serviceability is — but it significantly influences the terms, the LVR offered, and whether some lenders will participate at all.
Residential or commercial property is the most widely accepted form of security. LVRs typically range from 65–80% for commercial property and 70–85% for residential property — depending on location, lender appetite, and loan purpose.
Equipment, vehicles, and plant — particularly where being financed on a chattel mortgage or finance lease — serve as security for asset-backed facilities. The lender holds a security interest in the asset until the loan is repaid.
For invoice finance and debtor finance, the outstanding receivables are the security. The lender advances against the value of verified invoices — typically 70–85% of eligible debtors.
Directors and trustees providing a personal guarantee expose their personal assets to the lender's claim in the event of default. A personal guarantee is not the same as a registered mortgage — but it does create personal liability.
Loan-to-Value Ratio (LVR) is the proportion of the security value that the lender will advance. A property worth $1,000,000 with an 80% LVR supports a loan of $800,000. The remaining $200,000 is the equity buffer that protects the lender against market movements.
Every lender has different LVR limits by asset class, location, and purpose. Getting the LVR analysis right — before approaching a lender — prevents the common outcome of an approval with worse terms than expected because the security position was presented incorrectly.
Linking multiple properties to a single facility creates convenience for the lender but exposure for you. If one property in a cross-collateralised structure falls in value, it can affect the entire loan. We advise on when to allow cross-collateralisation and when to avoid it.
Where possible, limiting security to business assets (rather than the family home) reduces personal risk. Not all lenders require personal property security for commercial facilities — the right lender and structure matters.
For smaller facilities and strong-covenant borrowers, unsecured commercial lines of credit are available. These carry higher rates but preserve security for larger future requirements. We advise on the trade-offs.
Before we approach any lender, we map your available security, its value at current market conditions, and the LVR each lender in our network would apply. This means our lender recommendation reflects your actual security position — not an optimistic assumption that falls apart during due diligence.
Start a Free Finance Assessment →We'll map your security position and tell you honestly what it supports — and what it doesn't — before anything formal is submitted.
