Can I consolidate business debt into my home loan?

Debts in the borrower's own name: a sole trader's overdraft, business credit cards held personally, equipment or vehicle finance for the business, personal guarantees that have been called, and personal tax debt arising from business income. Company debts are the company's, not yours, and cannot be consolidated into a personal mortgage directly. The workaround is for the director to borrow against the home and lend the funds to the company under a written loan agreement, so the company pays out its debts and owes the director. Lenders accept this structure when it is documented.

The business financials come into the file: two years of statements or BAS, current position, and whether the business can meet the increased home loan repayment from its cash flow. A business consolidating debts that arose from growth is different from one consolidating losses. Non-bank lenders are more comfortable with the second case, at a higher rate. Major banks often route this through business banking and may prefer a business loan secured on the home rather than a home loan increase.

Unsecured business debt can be negotiated, and if the business fails a company's debts usually die with it. Once that debt is secured on your home, it does not. Consolidation makes sense when the business is sound and the debt is expensive; it is dangerous when the business is failing, because you are converting a problem the business could walk away from into one you cannot. Specialists ask the hard question first.

ATO debt consolidation is common because the general interest charge is high and not deductible, and because an unpaid business tax debt can lead to a director penalty notice or a credit default. Specialist lenders pay the ATO at settlement. The tax side is covered in depth at gettaxdebthelp.com.au.