Declined because of how your business is structured

Why do structures trip lenders up?

Many Australian businesses are run through more than one entity for good reasons: asset protection, tax planning, family succession or separating a property from the trading business. A common setup might be a family trust with a corporate trustee that runs the business, a separate company that employs staff, and a self-managed super fund or another trust that owns the premises.

Your accountant understands it perfectly. A lender seeing it for the first time often doesn’t. When a lender can’t quickly answer the basic questions, the safe response is to decline.

The questions a lender needs answered

• Who is the borrower? Which entity is actually taking the loan?
• Who controls it? Directors, trustees and appointors.
• Who benefits? Shareholders and beneficiaries.
• Can it borrow? Does the trust deed or constitution allow borrowing and giving security?
• Where is the income? Which entity earns the revenue that will repay the loan?
• Where are the assets? Which entity owns the property or equipment offered as security?
• Who guarantees? Which individuals and related entities will stand behind the loan?

If these answers are scattered across several documents, or simply missing, the application stalls.

Common structure problems we see

Problem	What usually fixes it
Trust deed missing or incomplete	Locate the deed and every variation, or have a lawyer review
Deed doesn’t clearly allow borrowing	Legal advice, possibly a deed variation
Income in one entity, loan in another	Cross-guarantees or a consolidated assessment
Property owned by a different trust	That trust provides security, with its own trustee signing
Many entities, no overview	A one-page group chart from your accountant
Changes of trustee not recorded	Updated ASIC records and trust documents

Why a group chart works so well

A simple diagram, showing each entity, its role, its owners and how money flows between them, answers most of a lender’s questions in thirty seconds. Ask your accountant to prepare one. Add a line under each entity: what it does, roughly what it earns, and what it owns.

Pair it with consolidated figures across the group. A lender assessing the whole structure together can see that the trading trust’s profits, the company’s payroll costs and the property trust’s rental income add up to a healthy business, rather than three entities that each look thin on their own.

Which lenders handle complex structures well?

Larger banks can handle complex structures, but their processes are slow and their policies rigid. Some smaller non-bank lenders avoid trusts altogether. Private and specialist lenders often sit in between: experienced with structures and willing to assess them sensibly, especially where there’s property security.

If the property being offered is held in a separate trust or company, a private first mortgage can be structured with that entity providing security and the trading entity borrowing, as long as everyone signing understands their obligations. Where financials are complicated or behind, low doc lending may also help.

If you’d like help working out how to present your structure, tell us about it.

Documents worth gathering

1. Trust deed and every variation, signed and dated.
2. ASIC company extracts for each company involved.
3. ABNs for each entity.
4. A group chart, as above.
5. Recent financials or BAS for each trading entity.
6. Details of any property, including which entity holds title.
7. Identification for every director, trustee and guarantor.

Illustrative example: A family’s printing business operated through a discretionary trust, with the factory owned by a separate unit trust. Their bank declined, citing complexity, after months of requests for documents. A specialist lender reviewed a group chart and both trust deeds, took security over the factory with the unit trust’s trustee signing, and lent to the trading trust for new equipment.

Questions to settle with your accountant before applying

A short conversation with your accountant before you approach a lender can prevent weeks of back and forth. Useful questions:

• Which entity should borrow, given where the income sits?
• Which entity owns the security, and can it give security for another entity’s debt?
• Does the trust deed allow the trustee to borrow, guarantee and give security?
• Are there any recent changes to trustees, directors or shareholders that ASIC records don’t yet show?
• Can you prepare consolidated figures across the group?
• Will any cross-guarantees be needed, and what are the implications?

Lenders will ask most of these questions anyway. Having the answers ready makes your file look organised rather than complicated.

Who signs what

In a multi-entity structure, many people may need to sign loan documents:

Role	Typically signs as
Directors of the borrowing company	Borrower’s authorised signatories and guarantors
Corporate trustee’s directors	On behalf of the trust
Owners of security property	Mortgagors
Related entities	Guarantors, if cross-guarantees are required

Anyone signing a guarantee or giving security for another entity’s debt should understand their obligations and get independent legal advice.

Let’s make your structure easy to read

A complicated structure isn’t a reason not to lend; it’s just a reason to explain clearly. When you enquire, there’s no credit check at the start, and your details aren’t scattered across a pool of lenders. A real person reads your situation and calls you. Please list each entity involved on the form, as that lets us find a lender comfortable with your setup. Start your enquiry.