A Trading Trust is a trust structure where the trustee actively runs a business on behalf of beneficiaries. Lenders review the trust deed, trustee authority, financial statements, revenue, net income, and usually require a director’s guarantee if a corporate trustee is used. Trading trusts commonly apply for Business Loans, Working Capital Loans, and Low Doc Asset Finance.

Why Trading Trusts Matter in Lending

Lenders treat trading trusts differently from sole traders and companies because ownership, control, and distributions are split across multiple parties.

• The trustee holds legal responsibility for borrowing
• Beneficiaries receive income distributions
• Lenders must confirm the trust’s power to borrow or grant security
• Corporate trustees often improve borrowing clarity
• Financial stability is assessed at both trust and beneficiary levels

Trading trusts often use invoice finance to stabilise cashflow, especially when clients pay on long terms.

Common Features of Trading Trusts

• Trustee operates an active business
• Beneficiaries receive distributions based on trust deed rules
• Corporate trustee often used for liability protection
• Tax efficiency for families and multi-owner groups
• Clear separation between asset ownership and business operations

Official reference: business.gov.au