Quick answer
Both lend without taking deposits, but they work differently. A non-bank lender funds itself through warehouse lines and securitisation, so it follows a written credit policy and offers longer terms, often years. A private lender uses investors' money, judges each deal on the property and the exit, and lends short, usually weeks to a couple of years. Non-banks tend to cost less; private lenders bend further and move faster.
Key points
- Every private lender is technically a non-bank, but the industry uses the two labels for very different businesses
- Non-banks run on a credit policy set by their funders; private lenders decide loan by loan on equity and exit
- Non-banks suit borrowing you'll hold for years; private lenders suit short, urgent or awkward deals
- Business-only lenders aren't required to join AFCA, so ask about membership before you sign
- Ask any private lender who keeps the upfront and default fees, a point ASIC flagged in 2025
- Non-bank funding
- Warehouse lines, securitisation
- Private lender funding
- Investor pools, syndicates, funds
- Non-bank terms
- Often several years or more
- Private lender terms
- Weeks to about two years
Here’s a small puzzle that confuses a lot of owners. The federal business.gov.au site defines a non-bank lender simply as a finance company lacking a banking licence. On that definition, every private lender is a non-bank too. Yet when a broker says “we’ll try a non-bank” and later “we may need to go private”, they mean two quite different doors, with different prices, paperwork and timeframes behind each.
The difference isn’t the licence. It’s the source of the money, and that single detail drives almost everything you’ll experience as a borrower.
Why do two kinds of non-bank behave so differently?
A non-bank lender, in the everyday sense, raises money at scale. It borrows from a big bank through a warehouse facility, writes loans, then bundles them into securities sold to institutional investors. Those funders set rules about which loans can go into the pool: maximum loan-to-value ratios, acceptable industries, documentation standards, credit scores. The lender’s credit policy is largely a reflection of those rules. That’s why non-banks feel like a more flexible bank: there’s still a policy, it’s just wider.
A private lender raises money from investors who back a fund, a syndicate or an individual loan. There’s usually no securitisation pool to satisfy, so the lender’s own credit team decides, file by file, whether the security and the exit stack up. That’s why a private lender can say yes to a deal that fits no policy at all, and why the loans are short: investors want their capital back and redeployed.
The Reserve Bank put the sizes in perspective in March 2026. Non-bank lenders held about 6 per cent of financial system assets, and private credit less than 2 per cent. It also noted that wholesale funding conditions tightened that March as markets became volatile, a reminder that a non-bank’s appetite can change when its funders get nervous.
Head-to-head comparison
| Non-bank lender | Private lender | |
|---|---|---|
| Where the money comes from | Warehouse lines from banks, securitisation, institutional investors | Investor funds, syndicates, high-net-worth individuals |
| How decisions are made | Against a written credit policy | Case by case, by a small credit team |
| Typical security | Residential or commercial property; some unsecured and asset lending | Almost always property: first mortgage, second mortgage or caveat |
| Typical term | Several years, longer still on some property loans | A few weeks to about two years |
| Repayments | Usually principal and interest, monthly | Often interest-only, prepaid or capitalised |
| Speed | One to three weeks is common | Days, sometimes within a day or two |
| Cost per month | Lower | Higher |
| Documents | Full doc or low doc with an accountant’s letter or BAS | Light: ID, title, valuation, a clear exit |
| Credit history | Matters, though less than at a bank | Matters least; equity and exit carry the decision |
When does a non-bank win?
Pick the non-bank when the money needs to stay out for a long time and your file can meet a policy, even a relaxed one.
- You’re refinancing for the long haul. Swapping a costly short-term loan for a multi-year facility can cut the monthly bill sharply.
- You’re buying commercial property. Specialist non-banks such as La Trobe Financial and Pepper Money write commercial loans over long terms.
- You’re self-employed with lodged BAS but not full financials. Low doc policies were built for this. Our low doc vs full doc comparison covers what each asks for.
- Your credit is imperfect but explainable. An old paid default or a short trading history often fits a non-bank’s specialist tier.
The catch: a non-bank still has to tick its funders’ boxes. If your file has an unexplained gap, an unpaid tax debt or a disappointing valuation, the policy can say no just as firmly as a bank’s.
When does a private lender win?
Choose the private lender when the deal is short, urgent or simply doesn’t fit anybody’s policy.
- There’s a hard deadline. A settlement, a garnishee, payroll on Thursday. A single credit team can approve and settle in days.
- The repayment date is visible. A property sale, a refinance underway, a large receivable due. Private lenders price for a defined exit and are comfortable with one.
- The file is messy. Overdue lodgements, a recent default, a declined bank application. With enough equity, these become talking points rather than deal-breakers.
- The security is unusual. Vacant land, a mixed-use building, a rural block. Private lenders take a view where a pool’s eligibility rules can’t.
Our own lenders work in this space: HomeSec Business Finance and EquityTap both lend to businesses against property equity, including caveat and second mortgage loans.
Two owners, two right answers
These are illustrative examples, not real clients.
Mai runs a freight business in Western Sydney. She has two years of lodged BAS, a clean credit file and wants $650k against her depot to refinance three expensive equipment and unsecured loans. Speed isn’t critical; she wants the lowest monthly outlay for five years or more. A non-bank fits: the policy matches her file, and spreading the debt over a long term trims her monthly repayments substantially.
Daniel owns a joinery in Geelong. The ATO has issued a garnishee over his business account for $140k, his latest tax return is overdue and a non-bank has already declined him. His house has plenty of equity, and a large commercial job pays out in five months. A private lender fits: it can lodge a caveat or second mortgage within days and is relaxed about a five-month exit tied to that payment. The higher monthly cost matters less over five months than losing control of the business account.
If your situation looks more like one of these than the other, tell us which and we’ll check the fit. It’s a short form, and asking leaves your credit file untouched.
What does each cost, in dollars?
We don’t publish rates, but the shape of the costs is predictable.
- Non-bank: an establishment fee, a valuation, legal costs and, for property loans, registration. The monthly cost is lower, and principal reduces as you pay. Watch for early repayment or break costs in the first few years.
- Private lender: a larger establishment fee, legal and valuation costs, and a higher monthly cost, often deducted upfront as prepaid interest. Many have a minimum interest period, so repaying in week three might still cost you two months.
What matters is the dollar bill across the period the funds are actually out. Three months of private money can come to less overall than a non-bank loan held for five years, and a private loan rolled over and over almost never does. Put both scenarios into the loan cost comparison calculator before deciding.
Two checks worth making before you sign
Is the lender an AFCA member? The Australian Financial Complaints Authority said in November 2025 that small businesses lodged 4,648 complaints in 2024–25, and that some lenders serving only business customers aren’t required to join its scheme. It closed about a fifth of small business finance complaints as outside its rules. Membership doesn’t make a lender better, but it does give you an independent place to go if something goes wrong.
Who keeps the fees? ASIC’s September 2025 review of private credit flagged opaque fee arrangements, including fund managers retaining upfront loan fees and default interest paid by borrowers. Ask a private lender plainly: “Who receives the establishment fee and any default interest, and who decides if I need an extension?” A good lender will answer without hesitation.
For larger non-banks, APRA keeps a public list of registered financial corporations, which is a quick way to confirm you’re dealing with an established entity.
And the banks?
Banks usually lend for less than either option, and when your business fits their criteria, a bank offer deserves serious attention. Where the bank has declined, or simply can’t meet your timing, the non-bank and private routes above are where most owners land next. Our bank vs non-bank comparison and private lender vs bank comparison cover those first steps.
A quick decision checklist
- How long, honestly, will you need the money: weeks, months or years?
- Can you produce the documents a policy-based lender will ask for?
- Is there property equity to secure a private loan, and how much?
- What is your exit for a short loan, and how certain is the date?
- Is the lender an AFCA member, and who keeps the fees?
- Added up in dollars, what will each choice cost across the term you expect?
Not sure which door to knock on?
Working out whether your file belongs with a non-bank or a private lender is precisely the sorting we do every day, often for owners who have just been turned down elsewhere. Give us the outline (what the money is for, what security you have, the date you need it by and your way out) and we’ll steer you to the lender type that fits. Filling it in is about a sixty-second job, and nobody runs your credit for an enquiry. We keep your file in-house instead of shopping it to every funder in town, and an actual specialist reads it, then rings you. The more accurate your figures, the more likely the first lender we suggest is the one that says yes.
Frequently asked questions
Is a private lender the same as a non-bank lender?
Strictly, yes: neither holds a banking licence or takes deposits. In practice the industry uses 'non-bank' for larger lenders funded by securitisation and wholesale lines, with set credit policies and long terms, and 'private lender' for investor-funded lenders that make short, case-by-case decisions secured mostly by property.
Which is cheaper, a non-bank or a private lender?
For the same borrower and amount, a non-bank usually costs fewer dollars per month because its funding is cheaper and its loans run longer. A private loan can still cost less in total when it's only needed for a few weeks, so compare the full dollar cost over the time you'll actually hold the money.
Can a private lender help if a non-bank has declined me?
Often. Non-banks still have to fit their funders' rules on credit history, documents and serviceability. A private lender mainly looks at the security and how you'll repay, so a recent default, an ATO debt or a missing tax return matters less if there's solid equity and a believable exit.
Are non-banks and private lenders regulated?
Both must follow general law, including the small business unfair contract terms rules enforced by ASIC. Larger non-banks report to APRA as registered financial corporations. Lending only for business purposes generally sits outside the consumer credit rules, so check whether the lender is an AFCA member and how disputes would be handled.
How quickly can each one fund a business loan?
Private lenders can often settle within days, and sometimes a day or two for caveat loans, because one credit team decides. Non-banks usually take one to three weeks, since the file has to meet policy and often a formal valuation. Both are typically faster than a bank on a complicated application.