Private lending is commercial, business-purpose capital from non-bank and private lenders, secured against property or other assets. It is used when speed, leverage or a complex story matters more than the cheapest headline rate. Credit is assessed deal by deal against the asset and the exit, not a standardised bank scorecard. Pricing sits above bank rates and reflects the security, gearing and risk of each specific structure.
For local buyers, private lending fills the gap where bank credit policy ends and deal-specific capital begins
Private Lending Explained
A bank assesses a loan application against a standardised scorecard and a published credit policy. A private lender assesses the specific deal: the asset, the security position, the borrower's track record and a credible exit strategy. That distinction matters enormously for developers and investors whose deals are sound but fall outside bank appetite on policy, timing or leverage.
Key structural differences include:
- Credit decision: deal-by-deal assessment against the asset and the exit, not a fixed policy matrix.
- Security: registered first or second mortgage over property, and in some short-term cases a caveat.
- Settlement speed: the credit decision sits closer to the deal, so funding can settle on a timeline a bank process rarely matches.
- Pricing: reflects the security, gearing and risk of the specific structure, and sits above standard bank rates accordingly.
Bottom Line Finance arranges this type of capital through a network of non-bank and private lenders, covering residential, commercial, industrial and specialised assets across all states.
When non-bank capital is the right tool
Non-bank lending is a commercial product designed for developers, builders and asset-backed investors. It is not consumer credit and is not available for owner-occupied home loans or personal borrowing. The following situations are where it is most commonly used:
- The deal is sound and asset-backed but does not tick every box in a bank's credit policy.
- Settlement needs to occur on a timeline a mainstream bank process cannot accommodate.
- Higher leverage is required to preserve equity and improve return on equity.
- The project story needs a lender who will read it rather than a scorecard that will reject it on a single criterion.
- A complex capital stack requires a subordinated layer, such as mezzanine finance or preferred equity, sitting behind senior debt.
Bridging finance, caveat loans and residual stock loans are all variants of the same broad category, each structured around a specific timing gap or asset position.
How a private loan is priced and structured
Pricing and terms depend on the lender, the security and the risk profile of the deal. The main drivers are the loan-to-value ratio (LVR) against the security, the strength and timing of the exit, the term, the ranking of the security (first or second) and the quality of the asset and the sponsor.
There is no standard rate because no two deals are identical. A clean, low-geared deal with a clear exit prices very differently to a stretched, second-ranking position with a less certain exit. As a general guide, expect pricing to sit above bank funding and to track the risk of the specific structure.
Common loan structures in this space include:
- Private lending: general-purpose, asset-backed commercial capital.
- Construction loans: drawn in progress payments against the build program.
- Bridging finance: short-term capital that closes a timing gap between two transactions.
- Mezzanine finance: a subordinated debt layer sitting behind the senior lender in the capital stack.
- Caveat loans: very short-term capital secured by a caveat over property, typically used to solve an urgent settlement issue.
- Second mortgages: registered behind the first mortgage, used to unlock additional equity from an existing security.
Private versus mainstream bank debt: choosing the right structure
Mainstream bank debt is generally the lowest-cost capital when a deal fits bank credit policy. Non-bank capital is the appropriate alternative when it does not, or when the value of moving quickly and preserving equity outweighs the benefit of a lower rate. The two are not rivals: many developers use bank debt where it fits and private capital where it does not.
The relevant question is whether the structure improves return on equity and lets your capital do more work across deals, not the rate in isolation.
For projects that include a construction component, see our independent guide to construction loans in Australia, which covers how progress-draw facilities are structured and what lenders assess at each stage.
The private lending covered here is commercial and business-purpose only. It is not consumer credit and does not extend to owner-occupied residential home loans.
Who this applies to
Non-bank lending is appropriate for a specific borrower profile. This guide is relevant to you if you fall into one of the following categories:
- Property developers: residential, commercial or mixed-use projects requiring construction, development or residual stock funding.
- Commercial property investors: acquisitions or refinances where bank credit policy creates a timing or leverage constraint.
- Builders: working on projects that require a structured construction draw facility rather than a lump-sum advance.
- Asset-backed borrowers: with property or other hard assets as security and a sound deal story that sits outside a standard credit matrix.
- Rural and agribusiness operators: farm and rural deals that do not fit a standard bank template.
Non-bank capital is not appropriate for personal borrowing, owner-occupied home purchase or any purpose that constitutes consumer credit under Australian law.
- Define your deal. Identify the asset, the security position, the loan amount and the exit strategy before approaching any lender.
- Assess fit. Determine whether the deal fits bank credit policy or whether speed, leverage or a non-standard story makes non-bank capital more appropriate.
- Prepare the information pack. Gather the project details, financial position, security particulars and a clear statement of the exit before submitting to a broker.
- Engage a specialist broker. A broker with access to a network of non-bank and private lenders can match the structure to the lender most likely to approve it on suitable terms.
- Review the term sheet. Assess pricing, fees, LVR, term and any conditions precedent before accepting, ideally with independent legal and financial advice.
- Proceed to formal approval and settlement. Once the term sheet is accepted, valuation, legals and security documentation are completed before funds are advanced.
| Factor | Non-Bank Private Lending | Mainstream Bank Debt |
|---|---|---|
| Credit assessment | Deal-by-deal: asset, exit, sponsor track record | Standardised scorecard and published credit policy |
| Settlement speed | Faster: decision sits closer to the deal | Slower: centralised credit approval process |
| Leverage / LVR | Can consider higher gearing where the deal supports it | Policy-capped, typically more conservative |
| Pricing | Above bank rates, reflects risk of specific structure | Lower rate when deal fits policy |
| Security types | First or second mortgage, caveat (short-term) | Usually first mortgage only |
| Complex stories | Lender reads the deal, not a scorecard | Policy may decline on a single criterion |
| Use case | Outside bank appetite on policy, timing or leverage | Deals that fit bank credit policy |
Common questions
Is private lending regulated consumer credit in Australia? No. The private lending arranged through non-bank brokers is commercial and business-purpose only. It is not consumer credit and is not available for owner-occupied home loans or personal borrowing.
What security do private lenders typically take? Usually a registered first or second mortgage over property. In some short-term cases a caveat is used. The security position, including its ranking, is a key driver of both lender appetite and pricing.
How quickly can non-bank funding settle? Often faster than a bank because the credit decision sits closer to the deal. Actual timing depends on valuation, legals and the security position, so it is best assessed against your specific timeline and lender.
Is non-bank lending more expensive than a bank loan? Generally yes, because it carries more risk and more flexibility. The relevant question is whether the structure improves your return on equity and lets your capital do more work across deals, not the rate in isolation.
What types of assets can secure a private loan? Residential, commercial, industrial, specialised assets, childcare, and rural and agribusiness properties are all asset classes that non-bank lenders may consider, subject to the deal and security stacking up.
What is mezzanine finance and how does it fit in the capital stack? Mezzanine finance is a subordinated layer of debt that sits behind the senior lender and ahead of equity in the capital stack. It is used to increase leverage on a development project where the senior lender will not advance the full amount required.
This guide covers how non-bank private lending works in Australia, when it applies to commercial and asset-backed borrowers, how deals are priced and structured, and how it compares to mainstream bank debt.