Facility agreements
A loan is not just an interest rate. The facility agreement contains covenants, conditions and default triggers that determine what happens when things do not go to plan.
- Financial covenants — ratios you must maintain
- Reporting obligations and their frequency
- Conditions precedent to drawdown
- Review events and annual reviews
- Events of default, and cross-default clauses
- Break costs on early repayment
- The lender's discretion to vary terms
- What triggers a demand
Financial covenants are where solvent businesses get into difficulty. A covenant requiring a ratio to be maintained can be breached by a bad quarter, a revaluation or a change in accounting treatment — without a payment ever being missed. Breach an covenant and the lender may be entitled to call up the facility.
Securities
| Security | Over | Registered |
|---|---|---|
| Mortgage | Real property | Titles Queensland |
| General security agreement | All present and after-acquired property | PPSR |
| Specific security agreement | Identified assets, e.g. plant | PPSR |
| Guarantee | A person's personal covenant | Not registered |
| Directors' guarantee + mortgage | Guarantor's own property | Titles Queensland |
A general security agreement over "all present and after-acquired property" is broader than most borrowers appreciate: it catches assets acquired later, and it can conflict with supplier retention-of-title interests. Where you buy stock on retention of title terms, priority under the PPSA determines who wins — and registration order matters.
Guarantees
A guarantee is not a formality
A director or family member who guarantees a business facility is personally liable for the debt, usually without limit and often supported by a mortgage over their own home.
Guarantees generally survive your departure from the business. If you resign as a director or sell your shares, obtain a written release — it does not happen automatically, and people have discovered years later that they still guarantee a company they no longer own.
Where a guarantee can be negotiated, the terms worth pressing for are a cap on the amount, a limit to specific facilities rather than all present and future liabilities, and a release mechanism on exit.
Independent legal advice certificates
Lenders frequently require a guarantor to obtain independent legal advice and produce a certificate. The requirement exists because of authorities on unconscionable dealing where a person guarantees a debt they receive no benefit from — most commonly a spouse guaranteeing a partner's business.
The advice is genuine, not a formality. Our role is to make sure you actually understand what you are signing, what could happen, and what you might lose. If we think you should not sign, we will tell you.
If things go wrong
Talk to the lender before you miss a payment, not after. Lenders have far more flexibility when approached early, and a proposal presented before default is treated very differently from an explanation offered afterwards.
If you receive a default notice, get advice immediately. There are usually more options at that point than there are a month later: restructuring the facility, an orderly sale, refinancing, or negotiating forbearance. For farm debt, mediation requirements may apply before a lender can take enforcement action — a genuine protection for primary producers, and one worth knowing about.
What it costs
- Fixed fee for facility and security review
- Fixed fee for independent advice certificates
- Registration fees at cost
- Refinancing coordinated with the conveyance
- Urgent advice on default notices
- Stage estimates for enforcement matters
Frequently asked questions
A guarantee makes you personally liable for another party's debt, usually without limit, and it is often supported by a mortgage over your own home. Guarantees generally survive your departure from the business, so if you resign as a director or sell your shares you must obtain a written release rather than assuming one follows.
Because of authorities on unconscionable dealing where someone guarantees a debt from which they receive no benefit, most commonly a spouse guaranteeing a partner's business. The certificate records that you received genuine advice about what you are signing. It is not a formality, and if we think you should not sign we will say so.
Potentially yes. Facility agreements contain financial covenants and review events, and a breach can occur through a bad quarter, a revaluation or a change in accounting treatment without any payment being missed. Breach of a covenant may entitle the lender to call up the facility, which is why the covenants matter as much as the rate.
A security interest over all present and after-acquired property of a business, registered on the PPSR. It is broader than most borrowers appreciate, catching assets acquired later, and it can conflict with supplier retention-of-title interests, where priority under the PPSA determines who prevails.
Get advice immediately. There are usually more options at that point than a month later, including restructuring the facility, an orderly sale, refinancing or negotiated forbearance. For farm debt, mediation requirements may apply before a lender can take enforcement action.
More information
Banking and finance law is no longer as straight forward as it has been in the past. Our lawyers have considerable skills in this area and have a wealth of experience.
Banking and finance lawyers Rockhampton
Our banking and finance law division has a wealth of experience in a wide range of lending transactions, be it personal or home loans, rural or commercial lending.
Our Rockhampton business lawyers provide practical solutions to issues which arise in the lending process to ensure a smooth process for all parties.
We can help you understand the terms and conditions of your loan.
We have experience in a diverse range of commercial lending transactions as well as negotiating private lending transactions.
Our lawyers have also successfully advised clients in relation to whether a loan should have been made or whether there are grounds for challenge
We can assist with:
- Advising on Loan Documents and Guarantees
- Preparing Security Documents for Private Lending
- Preparing Documents to Comply with the National Credit Code
- Self-Managed Superannuation Fund Lending
- Default Proceedings and Repossessions
- Mortgagee Sales
- Assessing whether a loan was correctly approved
We can also assist with:
- Business Structuring
- Business Acquisitions
- Business Succession, Shareholder & Management Agreements
- Franchising
- Commercial Leasing
- Commercial Property Conveyancing
- Agribusiness
- Hiring and Chattel Leases
- Partnerships, Companies & Trusts
- Planning and Environment
- Mining Resource and Resumption
- Taxation
- Insolvency
- Personal Property Security Register
- Mediation
- Business
- Business Structuring
- Business Acquisition
- Agribusiness
- Insolvency
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- Banking and Finance
- Planning and Environment
- Mining, Resource and Resumption
- Mediation
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Extensive Experience
Our professional team has extensive experience in a wide range of legal areas. Our approach is one of planning and involvement. We will continue to be there to support you with accurate and timely advice.
This page is general information about the law as it applies in Queensland, current as at 2026. It is not legal advice and does not take your circumstances into account. Figures set by regulation are indexed and change. Speak to one of our lawyers before acting.