Startup equipment on director property security

The situation

This is an anonymised composite reflecting a recurring pattern, not a specific settled transaction. A newly incorporated startup, still pre-revenue, needs to purchase specialised production equipment to begin manufacturing its first product run, but has no trading history, no revenue and no assets of its own to offer as security.

Why it's hard

Standard equipment finance is generally assessed against the borrower's trading history and the asset's own resale value, neither of which offers much comfort where the company has no revenue at all and the equipment may be specialised enough that its resale market is thin. Most lenders will not fund a facility of this kind on the company's standing alone.

How it can be structured

Equipment finance secured both by the equipment itself and by a director's guarantee, backed by equity in the director's own property, is the standard structure, giving the lender a fallback security position beyond the equipment alone; the exit is servicing from the business's future revenue once production and sales begin, with the director's property standing behind the facility in the meantime. Where the amount needed is modest relative to the director's available equity, a straightforward unsecured facility supported by the guarantee, rather than a dedicated equipment structure, is sometimes simpler to arrange. Lenders will want to see a credible business plan and evidence of committed orders or a clear path to revenue, since the director's guarantee reduces but does not eliminate the lender's interest in the underlying business genuinely succeeding.

Lenders will also look closely at how the director's guarantee interacts with any existing mortgage over the same property, since a facility ranking behind an established first mortgage needs either that lender's consent or a documented deed of priority before it can settle, adding a step to the process the founders should anticipate rather than discover late. Where more than one director is involved, some lenders prefer combined guarantees from all directors with a meaningful stake in the business, spreading the personal exposure rather than concentrating it on a single founder's property. Presenting a conservative, well-reasoned cash flow forecast, ideally reviewed by an accountant experienced with early-stage businesses, tends to carry more weight with this category of lender than an ambitious projection unsupported by comparable evidence from similar ventures. Because the facility is genuinely a bridge to the business's own future serviceability, founders should also have a clear view of what happens to the director's property exposure once the business is trading and a refinance to a standard business facility becomes realistic.

What it typically costs

Pricing reflects the pre-revenue risk being accommodated through the director's guarantee and property security, generally above the rate an established business would receive for the same equipment, quoted on enquiry once a lender has reviewed the business plan and the director's property position. Costs are otherwise standard for equipment finance.

Timeline

1. Same day — scoping call confirming the business plan, equipment and available director security.
2. 3–5 business days — document collection, including the business plan and property valuation.
3. 5–10 business days — lender matching and approval.
4. 3–5 business days — settlement and equipment delivery coordination.

Questions we'd ask you

1. What equity does the director hold in the property being offered as security?
2. What is the business plan, and are there any committed orders or customer agreements in place?
3. What is the equipment's cost, and does it have an established resale market if needed?
4. Are there multiple directors, and if so, will more than one provide a guarantee?
5. What is the expected timeline from equipment installation to first revenue?

Related

Asset & equipment finance · Unsecured business loans · Startups · Chattel mortgage