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Revolving facility

A larger limit, a lower rate , and something at risk.

Security is the biggest single lever on what a revolving facility costs and how large it can be. It is also the point at which a business decision starts involving assets outside the business.

Last reviewed 8 September 2026

Indicative interest cost

Weekly

Disclaimer

$212/week

$917 /month $11,000 a year while drawn

Facility limit $250,000

$5,000 $500,000

Average drawn balance $110,000

Nothing drawn Fully drawn

Indicative rate 10.00% p.a.

8% (secured) 30% (unsecured)

Apply directly with Prospa Why Prospa

Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.

The short version

Five lines about what security does.

Security moves both the rate and the limit. On a revolving facility it moves them further than on a term loan, because the lender is committing to an open-ended exposure.
A general security agreement is the usual minimum. It covers the business’s present and after-acquired property, which is broader than most owners assume.
Property security is a different order of decision. It produces the largest limits and the lowest rates, and it puts an asset outside the business behind a business obligation.
Priority has to be sorted before drawdown. Where another lender already holds a general security, the two positions are resolved by agreement between them.
Indicative only. Every figure here is illustrative. Actual limits, rates and security requirements come from the lender after assessment.

What each security does

The same business, four security positions.

Indicative directions rather than any lender’s pricing. The point is the ordering and the size of the steps between rows.

Security offered	Effect on the limit	Effect on the rate	What is at risk
Nothing but trading	Smallest	Highest	The business only
A general security agreement	Larger	Lower	The business’s assets
GSA plus a personal guarantee	Larger again	Lower again	The guarantor personally
Commercial property	Substantially larger	Substantially lower	The property
Residential property	Largest	Lowest	The home

Indicative of direction rather than a schedule. Any particular facility is priced by its lender after assessment.

The general security agreement

What it actually covers, which is more than most people expect.

A general security agreement takes security over the present and after-acquired property of the business, which means everything it owns now and everything it acquires later, registered on the Personal Property Securities Register. It is not limited to a named asset and it does not shrink as the facility is repaid.

The practical consequence appears the next time the business wants to finance something. A financier funding a machine will want a first-ranking position over that machine, and where a general security already exists, that has to be resolved with the existing lender before the new facility can settle. It is routine and it takes time, and it is regularly discovered at the worst moment.

That is worth knowing before signing rather than afterwards, because a general security agreement granted for a modest overdraft can complicate a much larger transaction two years later. Asking the lender whether it will release specific assets on request, and what that process looks like, is a fair question at the outset.

The decision that is not really about finance

Putting a home behind a revolving limit is different from putting it behind a term loan.

A term loan has a schedule and an end date, so the exposure is known and reduces. A revolving facility has neither. The limit can be fully drawn at any point in its life, it can be drawn again immediately after being repaid, and there is no schedule bringing the balance down. Security over a home behind that arrangement is exposure to the limit rather than to a declining balance, for as long as the facility exists. That is a family decision as much as a business one, and it is worth taking to a solicitor and to everyone affected rather than deciding alone at a lender’s desk.

Worked example

What the security is worth in dollars.

A business is offered a $120,000 unsecured limit at an indicative 16%, or a $250,000 limit at an indicative 10% secured over commercial property it already owns. Its average drawn balance would be around $110,000 either way.

On the unsecured facility, interest on $110,000 at 16% is roughly $17,600 a year. On the secured facility at 10% it is roughly $11,000. The security is worth about $6,600 a year in interest, plus the additional headroom the larger limit provides.

Whether that is a good trade depends on what is being secured and on how the business views the risk of the property being exposed. It is a real saving and it is not free, and framing it as a number on both sides is more useful than treating security as either a formality or an impossibility.

Illustrative figures

Unsecured limit: $120,000 at 16%
Secured limit: $250,000 at 10%
Average drawn: ~$110,000
Unsecured interest a year: ~$17,600
Secured interest a year: ~$11,000
Annual difference: ~$6,600

Illustrative on stated assumptions and rounded. Not a quote or offer of credit.

Before granting security

Four questions worth answering first.

What exactly is covered

A general security agreement covers present and after-acquired property, which is broader than a named asset. Knowing the scope is different from knowing that security was granted.

What happens on a default

What steps the lender can take, what notice is required and in what order. The agreement says, and it is the section least often read at signing.

How security is released

On repayment, on request for a specific asset, or not at all until the facility ends. This determines how much friction a future financing will meet.

Who else is affected

A personal guarantee or property security reaches people who are not party to the business decision. They are entitled to understand it before it is signed.

The trade

What security gives and what it costs.

What it gives

A materially lower rate on the drawn balance, every year the facility runs
A larger limit, frequently by a multiple rather than a margin
Access to lenders that will not write unsecured revolving facilities at all
A longer review cycle in many cases, since the lender’s position is stronger
A better position at review, because the exposure is covered

What it costs

Assets exposed to a limit rather than to a declining balance
A general security agreement that complicates later asset financing
A longer, more expensive establishment process where property is involved
Valuation and legal costs that an unsecured facility avoids
A decision that reaches beyond the business where a home is involved

The process

What securing a facility involves.

Generalised rather than specific to any lender. Property security lengthens this considerably.

01
The register position
A search of the Personal Property Securities Register showing what is already registered against the business. Where an existing lender holds a general security, that is the first thing to resolve rather than the last.
Documents commonly required
- Register searches
- Details of existing security
02
Valuation, where property is involved
An independent valuation on a basis the lender accepts. This is the step that adds the most time, and starting it early is the single largest influence on how quickly a secured facility completes.
Documents commonly required
- Valuation
- Title and property details
03
Documentation and independent advice
Security documents, and where a guarantor or a third-party property owner is involved, independent legal advice for them. That requirement exists to protect the person granting security and it should not be treated as a formality.
Documents commonly required
- Security documents
- Guarantee documents
- Certificates of independent advice
04
Registration and drawdown
The lender registers its interest and the facility becomes available. Where a priority arrangement with another lender is needed, drawdown waits for the deed between them.

When it goes wrong

Three consequences specific to a secured revolving limit.

The exposure is to the limit, not the balance

A facility drawn to $250,000 the week before difficulty arises is a $250,000 exposure against the security, however modest the average drawing had been.

What happens:A worse position than the historic usage pattern suggests, which is the specific risk of securing a revolving rather than a reducing facility.

A later financing is blocked

A general security agreement over present and after-acquired property means a new asset financier cannot take the position it needs without agreement from the incumbent.

What happens:Delay at best, and a transaction that does not proceed at worst, discovered late in the process.

A guarantee is called

Where a personal guarantee or third-party property security exists, a default reaches a person rather than only the company.

What happens:Consequences outside the business entirely, for someone who may not have been part of the decision.

The first is the reason a secured revolving limit deserves more thought than a secured term loan of the same size. There is no amortisation reducing the exposure over time.

The honest position

When to take the unsecured facility instead.

Where the limit needed is small, where the rate difference on the expected drawn balance is a few thousand dollars a year, and where the security on offer is a home, the unsecured facility is frequently the better decision even though it is the more expensive one. The saving is real and it is bounded, and the exposure is not.

Where the business is stable, the limit is substantial, the drawn balance is consistently large and the security is commercial property already committed to the business, the arithmetic points the other way clearly and the decision is straightforward.

The cases in between deserve the calculation done properly, on the actual expected drawn balance rather than on the limit, and a conversation with a solicitor about what is being granted. Nothing on this page is legal advice, and the scope of a security document is precisely the thing a solicitor should read before it is signed.

The cost while drawn

What a secured drawn balance costs.

The rate is where security shows up. Running the same drawn balance at a secured and an unsecured rate shows what the security is worth in dollars. Indicative only, and not a quote or offer of credit.

Indicative interest cost

Weekly

Disclaimer

$212/week

$917 /month $11,000 a year while drawn

Facility limit $250,000

$5,000 $500,000

Average drawn balance $110,000

Nothing drawn Fully drawn

Indicative rate 10.00% p.a.

8% (secured) 30% (unsecured)

Apply directly with Prospa Why Prospa

Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.

References

Sources

Personal Property Securities Register
The register underlying general security agreements and priority arrangements.
Personal Property Securities Act 1999
The governing legislation for security interests, registration and priority.
New Zealand Law Society
Referenced for the point that security documents and guarantees are matters for a solicitor.
Commerce Commission
The regulator whose guidance covers lender conduct and guarantor disclosure.
Financial Markets Authority, financial advice
Backs the distinction between general information of this kind and regulated financial advice.

FAQ

Secured line of credit in New Zealand, questions answered

What is a secured line of credit?

A revolving limit with security behind it, ordinarily a general security agreement over the business and frequently property security as well. The security produces a larger limit and a lower rate than an unsecured facility.

What does a general security agreement cover?

The present and after-acquired property of the business, meaning everything it owns now and everything it acquires later. It is broader than a named asset and it does not shrink as the facility is repaid.

How much does security save?

It varies by lender and by what is offered, and the effect is material rather than marginal. Running the expected drawn balance at a secured and an unsecured rate gives the figure for a particular case, and the limit difference matters as well.

Why does security matter more on a revolving facility?

Because there is no amortisation reducing the exposure. A term loan’s balance falls on a schedule; a revolving limit can be fully drawn at any point in its life, so the security is exposed to the limit rather than to a declining balance.

Does a general security block other borrowing?

It complicates it. A new financier wanting a first-ranking position over a specific asset needs agreement from the incumbent, which is routine and takes time. Asking about asset releases at the outset avoids discovering the issue late.

Should a home be used as security?

That is a family decision as much as a business one, and it deserves a solicitor and a conversation with everyone affected. The saving is real and bounded, and the exposure is to the limit for as long as the facility exists.

What is a personal guarantee?

An undertaking by a person to meet the company’s obligation if the company does not. It reaches beyond the business, what it covers is what the document says, and independent legal advice is ordinarily required before it is signed.

Is security released when the facility is repaid?

Not automatically while the facility remains in place, because a revolving limit is not repaid in the way a term loan is. How and when security is released is set out in the agreement and is worth reading before signing.

How long does a secured facility take to arrange?

Longer than an unsecured one, and this site does not publish timings. Where property is involved the valuation is ordinarily the longest step, and starting it early is the largest single influence on the overall duration.

What is a priority deed?

An agreement between two lenders about whose security ranks first over which assets. It is required where a new facility needs a position an existing lender already holds, and drawdown waits for it.

Is a valuation always required?

Where property security is taken, ordinarily yes, on a basis the lender accepts. A general security agreement over business assets does not usually require one, which is part of why it is faster to put in place.

Is this page legal or financial advice?

No. It describes how security generally affects a revolving facility. This site is not a law firm, a lender or a registered financial adviser, and the scope of any particular security document is a question for a solicitor.