Quick answer
Before lending to a trust, lenders check the trust deed to confirm who the trustee is, that the trustee has power to borrow, give security and guarantee, who controls the trust through the appointor, who the beneficiaries are, and whether the deed has been varied or is close to its vesting date. Having the deed, every variation and a structure diagram ready avoids most delays.
Key points
- The trustee borrows on the trust's behalf, so the deed must give it the power.
- Security and guarantee powers matter as much as borrowing powers.
- Every variation to the deed must be available, in order.
- Vesting dates and changes of trustee are common sources of delay.
- Directors of a corporate trustee are usually asked to guarantee.
Plenty of Australian businesses trade through a trust, and plenty of their owners have never read the trust deed. It was signed years ago, it lives in a folder at the accountant’s office, and it’s rarely needed. Until you apply for a loan and the lender’s first request is for “the trust deed and all variations”.
That document decides whether, and how easily, your trust can borrow. Here’s what lenders look for.
Why do lenders care so much about the deed?
Because a trust isn’t a separate legal person the way a company is. The ATO describes a trust as an obligation on a person or entity to hold property for beneficiaries, and notes that a trustee can be a person or a company (a corporate trustee). Trustees must deal with trust property in line with the intentions set out in the trust deed.
So when a trust borrows, the trustee signs, and the lender needs to be sure the deed actually lets the trustee do what the loan requires. If it doesn’t, the loan or the security may not bind the trust’s assets.
The checklist: ten things a lender looks for
| # | What the lender checks | Why it matters |
|---|---|---|
| 1 | The trust’s full name and date | Confirms you’re dealing with the right trust |
| 2 | The current trustee, correctly named | The right entity must sign |
| 3 | A power to borrow | Without it, the loan may not bind the trust |
| 4 | A power to give security (mortgage or charge) | Needed for property-secured loans |
| 5 | A power to guarantee or give security for another party | Needed if the trust supports a related entity’s loan |
| 6 | The appointor or principal | Shows who ultimately controls the trust |
| 7 | The beneficiaries | Shows who benefits, and flags any unusual classes |
| 8 | Every deed of variation, in order | Variations can change powers, trustees or beneficiaries |
| 9 | The vesting date | A trust near its end date raises questions about the loan term |
| 10 | Any limits on the trustee’s liability | Affects what the lender can recover from, and how it structures guarantees |
Most well-drafted modern deeds tick these boxes. Older or home-made deeds sometimes don’t, and that’s where delays start.
What documents should I gather?
- The original trust deed, signed and dated.
- Every deed of variation, in date order.
- Any deed of appointment or retirement of trustee, if the trustee has changed.
- Company extracts for a corporate trustee, showing directors and shareholders.
- A one-page structure diagram: the trust, the trustee, the appointor, key beneficiaries, and any related companies or trusts.
- The trust’s ABN and TFN details, and recent tax returns if available.
- Bank statements in the trustee’s name as trustee for the trust.
If you want a view on how your trust would be assessed before gathering everything, start a 60-second enquiry. There’s no credit check when you first enquire.
What problems slow trust loans down?
The same few issues come up again and again:
- A missing variation. The deed was varied years ago to change the trustee, and nobody can find the document.
- Wrong names on accounts. Bank accounts or contracts in the trustee’s personal name without “as trustee for” can cause confusion.
- An appointor who has died or moved overseas, leaving control of the trust unclear.
- A vesting date that’s close or has passed, which needs legal attention before a long loan is written.
- Mixed-up entities. Money moving between the trust, the directors and related companies without clear records.
None of these is fatal. Each is a job for your accountant or lawyer, and each is much faster to fix before you apply than halfway through an assessment.
Who will be asked to guarantee?
Usually the directors of a corporate trustee, because the trustee company itself often has few assets of its own; the assets sit in the trust. Where a trust gives security for another entity’s loan, the people who control both are commonly asked to guarantee too. Directors must also be eligible to hold office: ASIC notes that a person who is currently bankrupt, or covered by a personal insolvency agreement, can’t be a company officeholder.
Everyone signing a guarantee should understand what it means and get their own advice.
What loans suit a trading trust?
The full range, once the deed checks out:
- Property-secured business loans from $20,000 to $5,000,000, over property the trustee owns or that a related party offers. First mortgages, second mortgages and caveat loans are all possible.
- Unsecured, cash-flow and line-of-credit options, typically $5,000 to $500,000, sized on the trading trust’s turnover and bank statements.
Our page on business loans for trusts explains the lending side in more detail. If the trust sits within a wider group, see complex structure business loans and loans for groups of companies. And if the security belongs to a family member or related company, see using a related party’s property.
What if the bank has already declined because of the trust?
It happens often, and it’s rarely about the trust being risky. More often the bank’s process simply didn’t want to work through the deed for a mid-sized loan. A specialist lender who reads deeds every week will usually get to an answer faster, provided the documents above are ready.
Are unit trusts and hybrid trusts treated differently?
The core checks are the same: the trustee, its powers, control and variations. With a unit trust, lenders also look at who holds the units and in what proportions, because unitholders have fixed interests in the trust property. If units are held by several unrelated parties, the lender may want to understand any unitholders’ agreement and whether unitholder approval is needed for borrowing or security. Hybrid trusts, which mix fixed and discretionary features, get the same careful read of the deed. None of this is unusual for a lender who handles trusts regularly.
Should I update an old deed before applying?
Only if your accountant or lawyer says it’s needed. Varying a trust deed can have tax and stamp duty consequences, so it isn’t something to do casually or just to tidy up. The better first step is to have a lender’s solicitor, or your own, review the existing deed against the checklist above. Often the powers are already there in broad terms. If a genuine gap turns up, such as no power to guarantee a related company’s debt, your lawyer can advise on the right fix and its costs.
Illustrative example: the missing variation
Illustrative only, not a real client. A family-owned engineering business in Adelaide trades through a discretionary trust. Ten years ago, the founders replaced themselves as trustees with a company. When they apply for a loan to buy a larger workshop, nobody can find the deed of variation that appointed the company.
Their solicitor locates a signed copy in archived files. With the original deed, the variation and a structure diagram, a specialist lender’s solicitor confirms the borrowing and security powers. The loan is written to the trustee company, secured over the new workshop, with guarantees from the two directors.
Trust structure? Let’s get the paperwork working for you.
Trust deeds cross our desk every week. Tell us about your structure in the one-minute enquiry, knowing there’s no credit check when you first enquire. We match trust files with a single suitable lender rather than a crowd, and a specialist calls to check the deed questions with you.
Please tell us accurately which entity trades, who the trustee is and who owns any property. That’s what lets us match you with the right lender first time. See if you qualify →
Frequently asked questions
Where do I find my trust deed?
Usually with your accountant or the solicitor who established the trust. Ask for the original deed and every deed of variation, and keep certified copies somewhere safe.
What if the deed doesn't mention borrowing?
Many deeds give trustees broad powers that include borrowing, even without the exact word. A lender's solicitor will review it. If the powers are genuinely missing, a deed of variation may be needed, which is a job for your lawyer.
What is a vesting date and why does it matter?
It's the date the trust is set to end and its assets be distributed. If the vesting date is near, or has passed, a lender will want to understand how the trust's assets and the loan will be dealt with.
Do beneficiaries have to sign the loan?
Not usually, unless they're also trustees, directors of the trustee company, guarantors or security providers. Lenders do want to know who the beneficiaries are.
Can a trust give security for a loan to a related company?
It can, if the deed allows the trustee to give security or guarantees for another party and there's a proper benefit to the trust. Lenders look closely at this clause.