He recently met members of the trust to discuss the loan, which allowed the redevelopment of the Montecillo Veterans Home and Hospital at St Kilda.
Trust chairman David More said negotiations with the minister were continuing, although he could not disclose details as it was a ''delicate'' process.
''The trust has met with the minister and we are discussing the terms of the government loan with a view to renegotiating some of it,'' he said.
In 2004, the Government lent $225,000 to the trust to help it raise funds for the redevelopment, and the following year it lent a further $2.5 million to make up the shortfall in funding required for the project.
Money was lent on the basis it was repaid when there were no longer any World War 2 veterans living in the home, or in the event the home was sold or transferred from trust ownership. The loan was also subject to interest, charged at a capital rate and to be paid with the principal.
Montecillo chief executive Fred Daniel said 26 of the home's 43 residents were World War 2 veterans.
Widows and wives of WW2 veterans also lived at the home, which had a 97.8% average occupancy rate.
''That shows there is demand,'' he said.
Montecillo's WW2 veterans included four women and most were aged in their 80s. Mr Woodhouse said the trust had approached successive veterans' affairs ministers about its loan, from soon after it was granted under a Labour government.
No final decisions had been made and he had not set an end date for discussion with the trust.
Asked whether he had concerns about the trust's ability to repay its loan, Mr Woodhouse said it was not his place to speculate, ''but I note that loan conditions are only one of a number of challenges currently facing Montecillo''.
He did not elaborate on the comment.
Government loans to other veterans trusts around the country were not being considered for amendment by the minister.
