Balance Sheet Equity Cashouts are a special type of loan where business owners get some money back from their initial investment. For example, if I am a plumber starting my own business, I would spend money to buy a ute and do some marketing to build my brand. These expenses come out of my pocket and are considered a loan to the company.

This company could be set up as a trust or any other structure. When the business grows and becomes profitable, I can withdraw the money I initially invested. This amount shows up as a loan on the balance sheet.

So, if I invested $50,000 for a ute and $20,000 for marketing, I lent $70,000 to the business. Once the business is stable and mature, it can repay me this $70,000, which will be recorded as a loan on the balance sheet.

The key point to understand is that these loans can be secured against a property or they can be unsecured. Whether the loan is secured or unsecured depends on the future plans and current situation of the business and its director. Even if a director doesn’t own a property, these loan structures can still be arranged as loan agreements for the business.