Trust Loans – Can They Save Your Business? (2026)

In the complex world of finance, businesses often explore various avenues to secure funding. If you manage a trust and are considering lending money to a company, you may be wondering about the feasibility, legality, and implications of such an arrangement. In a landscape where interest rates and regulatory requirements constantly shift, understanding the ins and outs of trust loans can be critical to making informed decisions. Let's delve into the specifics to help you navigate this financial path with confidence.

Understanding Trust Loans to Companies

A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of beneficiaries. It can be a versatile tool for managing and protecting assets, but can it lend money to a company? The short answer is yes, a trust can loan money to a company, provided the trust deed explicitly allows such transactions. This capability can offer companies an alternative funding source, especially in environments where traditional financing may be less accessible or more expensive.

From the trust's perspective, lending money can be a strategic move to generate returns, diversify assets, and ensure better financial management. However, it's crucial to understand the legal framework, tax implications, and potential risks involved in these transactions.

Key Information About Trust Loans

When considering a trust loan to a company, it's important to evaluate various factors such as interest rates, repayment terms, and eligibility criteria. Let's break down these elements:

Factor	Details	Considerations
Interest Rates	Typically range from 6.49% - 12%	Rates can vary based on risk assessment and market conditions.
Repayment Terms	Usually 1 to 5 years	Longer terms may be negotiated based on company stability and trust objectives.
Eligibility Criteria	Company financial health, trust deed stipulations	Review the trust deed and company’s creditworthiness.

As of 2026, Australia's finance market remains robust, with competitive interest rates and a regulatory framework that supports diverse lending mechanisms. Trusts lending to companies must ensure compliance with both trust law and corporate law to mitigate risks and safeguard all parties involved.

Steps to Facilitate a Trust Loan to a Company

To successfully loan money from a trust to a company, follow these steps:

1. Review the Trust Deed: Ensure the trust deed allows for loans to companies. If not, consult with legal experts to explore amendments.
2. Conduct Due Diligence: Assess the financial health and creditworthiness of the borrowing company. Review financial statements, credit history, and business plans.
3. Determine Loan Terms: Define the loan amount, interest rate, repayment schedule, and any collateral requirements. Ensure the terms align with both the trust’s objectives and the company’s repayment capabilities.
4. Draft a Loan Agreement: Work with legal professionals to draft a comprehensive loan agreement that outlines all terms and conditions, ensuring compliance with relevant laws.
5. Execute the Loan: Finalise the agreement with signatures from all parties and disburse the funds according to the agreed terms.
6. Monitor and Review: Regularly review the loan’s performance and the company’s financial status to ensure compliance and address any issues proactively.

Tips and Considerations

Here are some expert tips to ensure a smooth and successful trust loan process:

• Engage Professionals: Consult with financial advisors and legal experts to navigate the complexities of trust loans and ensure all legal and financial aspects are covered.
• Risk Management: Consider potential risks, such as company default, and implement strategies to mitigate them, such as requiring collateral or personal guarantees.
• Tax Implications: Understand the tax consequences of the loan for both the trust and the company. Seek advice from a tax professional to optimise tax outcomes.
• Documentation: Maintain thorough documentation of all transactions and communications to protect the interests of the trust and its beneficiaries.
• Regular Reviews: Periodically review the loan agreement and financial performance, and be prepared to renegotiate terms if necessary to adapt to changing circumstances.

Frequently Asked Questions

Here are some common questions regarding trust loans to companies:

1. Can any trust loan money to a company?
   Only if the trust deed explicitly permits such transactions. It's essential to review the trust's governing document before proceeding.
2. What happens if the company defaults on the loan?
   The trust may enforce any collateral agreements or pursue legal action to recover the funds. Provisions should be outlined in the loan agreement.
3. Are there any regulatory considerations?
   Yes, trusts must comply with both trust law and corporate law, including any relevant lending regulations.
4. How does a trust benefit from lending to a company?
   Trusts can earn interest income, diversify their portfolio, and achieve better asset allocation.
5. Can Esteb and Co assist with trust loans?
   Absolutely, with a panel of 83+ lenders, Esteb and Co can provide expert guidance and resources to facilitate trust loans effectively.
6. Is it necessary to involve a lawyer in the process?
   While not mandatory, engaging a lawyer is strongly recommended to ensure all legal requirements are met and risks are minimised.