Quick answer
Multiply the property's value by the lender's limit (up to 80% for residential and 70% for commercial at Company Cash), then subtract what is already owing. What is left is the room for a new loan, up to $50,000 on the fast path.
Key points
- Equity limit equals value times the percentage limit, minus what is owing.
- Residential limit up to 80%, commercial up to 70%.
- A vehicle owned outright can support up to 50% of its sale value.
- Estimates are fine to start, no formal valuation is needed.
Before you ask anyone for money, it helps to know roughly how much your assets can support. For a small business owner with property, the maths is simple, and the answer is often larger than expected.
The formula
Room for a new loan = (property value x limit) minus what is already owing.
At Company Cash the limit is up to 80% of value for residential property and up to 70% for commercial property. The fast path covers loans of $20,000 to $50,000.
A worked example, residential
A director owns a home worth roughly $750,000 with $450,000 owing on a mortgage.
- 80% of $750,000 is $600,000.
- Take away $450,000 owing.
- Room for a new loan: up to $150,000.
The director needs $40,000. That sits comfortably inside the room, so the amount fits the fast path.
A worked example, commercial
A company owns a small workshop worth about $900,000 with $550,000 owing.
- 70% of $900,000 is $630,000.
- Take away $550,000 owing.
- Room for a new loan: up to $80,000.
The company needs $50,000, so it fits, with some margin.
A worked example, not enough equity
A home is worth $600,000 with $470,000 owing.
- 80% of $600,000 is $480,000.
- Take away $470,000 owing.
- Room: about $10,000.
That is not enough for a $20,000 loan. Options include adding another property, offering a company vehicle as well, or looking at other forms of finance.
What to count as “owing”
Include every loan secured against the property: the main mortgage, any second mortgage, a line of credit or offset facility with a limit drawn, and any caveat. If you are unsure, check your latest statements or ask your bank. Under-stating what is owing only creates problems later.
Estimating the value
You do not need a formal valuation to start, but you do want a sensible estimate. Useful guides:
- recent sales of similar properties in the same street or suburb;
- an online estimate (treat it as a rough indicator);
- a recent bank or insurance figure; and
- for commercial property, recent comparable sales or rental yield.
If you are unsure, round down. A cautious estimate makes the numbers more reliable.
Vehicles
A company vehicle owned outright can also support borrowing, up to 50% of its sale value, because vehicles are harder to sell quickly and lose value. A truck worth $90,000 could therefore support about $45,000. See vehicle-secured business loans for more.
Combining assets
If one asset is not enough, two together might be. A smaller property and a vehicle, or two properties, can combine to support a larger loan, up to the $50,000 ceiling on the fast path.
What the figure does not tell you
Equity tells you what you could borrow, not what you should. Before borrowing, think about repayments, how the loan will end and what happens to your property if things go wrong. Ask about total cost, fees and extension terms. ASIC’s guidance on unfair contract terms is a good starting point for what to look for in a contract.
Why lenders use a limit below 100%
Lenders do not lend the full value of a property for good reasons. Estimates can be wrong, markets can fall and selling takes time and costs money. A limit of 80% for residential or 70% for commercial property leaves a margin that protects the lender and, in practice, the borrower too, since a loan that is a modest share of value is far less likely to turn into a forced sale.
Commercial property has the lower limit because it is usually harder to sell. A shop, workshop or office depends on a narrower pool of buyers, and values can move more with the economy and the local market. Residential property has a deeper market, so lenders are comfortable with a higher share.
Second mortgages and existing lenders
If you already have a mortgage, a new loan from another lender would typically sit behind it as a second mortgage. The limit applies to the combined debt: first mortgage plus the new loan. That is why the formula subtracts what is already owing. If your first mortgage lender needs to consent, mention it early. Our page on second mortgage business loans covers how that works.
Rural and other property
Rural, vacant land and specialised property can attract lower limits than ordinary residential property, because they can be harder to value and to sell. The calculator includes a lower rural option as an example. If your property is unusual, say so on the form and a person will tell you how it is treated.
What happens next
Once you know the room, you can choose an amount with confidence. Then the form, a call and, if approved, funding that can follow in as little as 24 hours. If the room turns out to be smaller than you need, the options are to add another asset, borrow less, or look at the larger path with a few extra questions.
Common mistakes in the calculation
The most frequent error is forgetting a second charge, such as a line of credit or an old caveat, which makes the equity look larger than it is. The second is using an asking price rather than a realistic sale price. The third is applying the percentage to the wrong figure: the limit applies to the property’s value, and then you subtract the debt, not the other way round. A fourth is forgetting that more than one owner may be involved, so check the title and make sure everyone with an interest agrees. Take a few minutes to check each of these and your estimate will be much closer to what a lender sees.
A final point on timing. Property values move, so an estimate from a year ago may be out of date. A quick look at recent sales nearby will tell you whether to nudge the figure up or down before you apply.
If you are borrowing for a specific bill, work backwards from the amount due. Add the fees, round up a little and compare the total with your room. If the total fits, you can apply with confidence, and if it does not, you know early enough to change the plan.
Check your numbers
Our property equity and LVR calculator does this arithmetic for you, with a choice of residential, commercial or rural limits.
Ready to apply?
If your numbers look right, the application form asks for the same things: the amount, the property’s estimated value and what is owing. A person will call you to confirm. No part of this page is an offer of finance, and all lending is subject to assessment.
Frequently asked questions
Do I need a valuation to find out?
Not to start. Use a recent sale of a similar property, an online estimate or your own judgement as a guide. No formal valuation is needed for the fast path.
What counts as owing?
The total of all loans secured against the property, such as mortgages and lines of credit.
Can I use more than one property?
Yes, the equity in more than one property can be combined where it suits.
Is the loan limited to $50,000?
On the fast path, yes: $20,000 to $50,000. For more, there is a second path with a few extra questions.
Does the property have to be in my company's name?
Not always, but ownership and consent matter. Tell us who owns it when you apply.