The trust, formed in 1989, owns historic buildings in the Harbour-Tyne Sts area and is responsible for developing and promoting the precinct.
The loan, interest-free for the first two years, is part of the council's 2009-19 long-term council community plan and will enable the trust to bring the historic buildings up to a tenantable standard and make improvements to those already tenanted.
Waitaki Mayor Alex Familton said the funding was a recognition that the community had assets in the historic precinct which would bring valuable returns to ratepayers.
The council had agreed to support the loan-financing costs up to a maximum of $60,000 over two years.
Progress in the precinct had been static for several years and Mr Familton believed it was time to begin a substantial development.
Trust chairman Phil Hope said the loan would allow the trust to flesh out its strategic plan.
"Our vision is to make the historic precinct a vibrant place and a must-see destination for visitors.
"Our first priority is to attract more tenants to the buildings in the precinct and, in order to do that, we need to upgrade some of them to make them viable," he said.
Immediate projects were a fire escape in the Loan and Mercantile building and a sprinkler system in Maudes Store.
The loan would also enable the trust to obtain other funds through grants and donations, Mr Hope said.
Waitaki deputy mayor Gary Kircher said the trust had made good progress developing some of the buildings, but it had reached "a plateau" and needed to get beyond that.
The council's $500,000 input could be boosted to more than $1 million with grants from other organisations, he said.
A loan agreement is still to be negotiated between the council and trust.
