Quick answer
A private lender is a business funder that lends money from private investors, a managed fund or its own capital, rather than from customer deposits like a bank. Private lenders usually secure loans against property and focus on the security's value and your exit plan more than tax returns. They're faster and more flexible than banks, cost more, and usually lend for months rather than decades.
Key points
- Funded by investors or a fund, not by deposits, so not prudentially supervised like banks
- Lends mainly against property, assessing the security and the exit strategy first
- Typical terms run from a few weeks to about two years
- ASIC put Australia's private credit sector at about $200 billion in 2025
Banks lend out money their customers have deposited. A private lender doesn’t take deposits at all. Its money comes from somewhere else: wealthy individuals, a pooled mortgage fund, superannuation and institutional investors buying into a credit fund, or the lender’s own balance sheet. That one difference in funding explains almost everything about how private lenders behave.
Where the money comes from changes the rules
Because they don’t hold deposits, private lenders aren’t authorised deposit-taking institutions and sit outside APRA’s prudential regime. They don’t have to hold capital the way banks do, and they set their own credit policies. Investors in their funds accept higher risk in return for a higher return, so the lender can say yes to loans a bank’s credit policy won’t allow.
The sector has grown quickly. In 2025 ASIC described Australian private credit as a rapidly expanding market valued at roughly $200 billion, and its accompanying report (REP 814) called on the industry to improve fee transparency, valuation practices and how terms are disclosed. The practical takeaway for a borrower: most private lenders are professional operators, but read every fee line.
Business loans have one more regulatory wrinkle. Lending that’s predominantly for business purposes generally sits outside the consumer credit laws, so private lenders will ask you to sign a business purpose declaration. Read it properly; it’s a meaningful document, not a formality.
How a private lender decides
A bank starts with your financials and asks whether the business can service the debt over many years. A private lender usually starts at the other end.
| Assessment point | A typical bank | A typical private funder |
|---|---|---|
| Opening question | Can the business carry these repayments for years? | How much is the security worth, and where does the payout come from? |
| Documents | Two years of financials, tax returns, BAS | Valuation, ID, bank statements, a clear exit |
| Credit history | Major factor | Considered, but rarely the deciding factor |
| Speed | Weeks | Days, sometimes the same week |
| Term | Years to decades | Weeks to about two years |
| Cost | Usually the lowest | Noticeably higher in total dollars |
That’s why the exit strategy matters so much. A private lender wants to see a sale, a refinance to a bank or a confirmed incoming payment that will clear the loan when the term ends. Security is normally a mortgage, ranking first or second, or for very short loans a caveat, with the amount capped by the loan-to-value ratio.
An example from Western Sydney
A family-owned joinery business in Penrith is owed $420k on a large commercial job and has a $260k supplier bill and an ATO instalment due now. Its bank is supportive but needs six weeks to assess an increased facility. The directors own an investment unit with plenty of equity.
A private lender values the unit, lends $300k on a second mortgage for six months with interest prepaid, and settles in under a week. The joinery pays the supplier and the ATO, collects on the job, then refinances the balance to the bank once the new facility is approved. Total cost is higher than the bank’s, but the business avoided a supplier stop and an ATO default. If your timing looks similar, tell us what’s due and when.
Bank first, private lender second
If your bank can say yes in the time you have, take that offer seriously; banks are usually the cheapest money available. Private lenders earn their place when the bank has said no, wants more than you have, or simply can’t move fast enough. Our guides to being declined by the bank and private business loans go further, and the private lender vs bank comparison sets the two side by side.
Before signing with any private lender, ask: what is the total dollar cost, including fees on exit? Is interest prepaid or capitalised? What happens if my exit runs late? Can I repay early without penalty?
Related terms
Non-bank lender, caveat, second mortgage, bridging loan and funder.
Bank said no, or said “wait”?
That’s precisely the gap private lending fills, and choosing the right private funder is half the job. Describe the situation in our quick form; it’s about sixty seconds and simply asking won’t show up as a credit enquiry. Nobody else gets your enquiry to bid on. A person who understands property-backed lending reads it and rings you back. Give us honest figures on the property, what’s owed against it and your exit, and the first lender we suggest should be the one that fits.
Frequently asked questions
Are private lenders regulated in Australia?
Partly. They aren't banks, so APRA doesn't supervise them the way it supervises deposit-takers. Loans made wholly or mainly for business purposes generally fall outside the consumer credit rules, which is why lenders ask you to sign a business purpose declaration. Funds that raise money from investors are subject to ASIC's financial services laws.
Why would a business use a private lender instead of a bank?
Usually for speed, flexibility or because the bank has declined. Private lenders can settle in days, accept recent tax debts or credit issues, and lend on a property where the business numbers alone wouldn't satisfy a bank. The trade-off is a higher total cost and a shorter term.
Is a private lender the same as a non-bank lender?
They overlap but aren't identical. Non-bank lender is the broad term for anyone lending without a banking licence, including large fintechs and wholesale-funded lenders. Private lender usually refers to smaller, investor-funded lenders making property-secured, short-term loans.
What fees do private lenders charge?
Common ones are an establishment fee, legal and valuation costs, a monthly or line fee on some facilities, and sometimes an exit fee. Interest is often prepaid or capitalised. Ask for the total dollar cost across the whole term so you can compare offers fairly.
Does a private lender check my credit?
Most do run a credit check before approving, but a past default or a tax debt is less likely to be a deal-breaker than at a bank, because the decision leans on the property and how you plan to repay.