Quick answer
A private lender is a non-bank that lends mainly against property or other security, funded by investors, a managed fund or its own capital rather than deposits. It decides on the asset, the loan-to-value ratio and your plan to repay, more than on years of financials. That makes it fast and flexible, and generally more expensive than a bank, so it suits short-term needs with a clear exit.
Key points
- Private lenders are funded by investors, funds or their own capital, not by savers' deposits
- The decision rests on the security, the loan-to-value ratio and the exit plan
- Typical uses are bridging, ATO debt, urgent settlements and loans the banks can't do in time
- The RBA estimates private credit in Australia at roughly $50 billion outstanding as at December 2025, and ASIC has called for higher industry standards
- The real risk for a borrower is not the lender type but a loan with no workable way out
Say the words “private lender” to three people and you may get three pictures: a family-run mortgage broker’s friend with spare capital, a large managed fund with hundreds of millions to deploy, or something dodgy. All three pictures contain a grain of truth, which is why the term causes so much confusion.
This guide describes the part of the market that matters to a business owner: lenders that fund loans against property and other security, outside the banking system, and move on timelines banks can’t match.
What counts as a private lender?
There is no single legal definition. In practice a private lender is a non-bank that lends from capital supplied by investors, a managed investment scheme, a private fund or the owners’ own money, and that makes its decision mainly on security and exit rather than on a long record of trading profit.
Their products tend to look like this:
- First and second mortgage loans over residential, commercial or rural property.
- Caveat loans, a short-term structure secured by a caveat on the title. Our plain-English caveat guide covers how it works.
- Bridging loans, to span the gap between buying one asset and selling another.
- Construction and development funding, in stages.
- Funding to clear tax debts or settle other urgent obligations.
The market’s size is hard to pin down because definitions differ. The RBA estimated about $40 billion of private credit outstanding in its October 2024 Bulletin, roughly 2½ per cent of total business debt. By its February 2026 Bulletin it put the figure at about $50 billion as at December 2025, while noting data gaps and that other estimates run far higher. ASIC’s Report 814, released in September 2025, looked at the sector from a standards perspective. Whatever the number, it is a minority of business lending, but a fast-growing and increasingly scrutinised one.
Where does a private lender’s money come from?
Understanding the funding explains the pricing and the behaviour.
| Funding source | How it works | What it means for you |
|---|---|---|
| Own capital | The lender’s principals lend from their own balance sheet | Decisions can be made quickly by people who can say yes |
| Investor syndicates | Investors fund individual loans, often through a manager | Each loan may need an investor’s approval and a clean paper trail |
| Pooled funds or trusts | A manager lends from a fund with a defined investment policy | Policy limits (maximum loan-to-value ratio, location, loan size) are firm |
| Warehouse or institutional capital | A larger lender borrows from institutions to relend | More standardised criteria, more documentation |
Investors expect a return, and they take the risk that you won’t repay. That is the reason private loans cost more than bank loans, and it is also why lenders insist on strong security and an exit.
How do private lenders decide?
Banks begin with your income and ask whether the business can service the loan. Private lenders begin with the asset and ask what happens if you can’t.
The security
They look for a registered first or second mortgage, or a caveat, over property with enough equity. Our guides on LVR and calculating usable equity explain the arithmetic. A lender comfortable lending at 60% of an independently assessed value has a very different risk from one lending at 75%.
The valuation
Valuation is the step that most often sets the timeline. Lenders may use a desktop estimate, a kerbside valuation or a full inspection, depending on loan size and property type. Our guide on how valuations work for business loans shows what to expect.
The exit
“How does this loan get repaid?” is the key question. Acceptable answers are specific: the sale of a named property with a signed contract, a refinance to a bank with evidence of how the file will qualify, a tax refund or a settlement due on a date. “I’ll sort something out” is not an exit. Our guide to exit strategies for short-term loans goes through acceptable and unacceptable ones.
The borrower
Credit history and trading performance still count, but they are weighed differently. A recent default or tax debt may raise the price or lower the loan-to-value ratio rather than ending the conversation.
What does a private loan cost, in dollars?
We don’t quote rates, and the figure that matters is total cost in dollars anyway. Expect these components:
- An establishment or lender fee.
- Interest or a loan charge over the term, sometimes pre-paid or capitalised.
- Valuation, legal and title search costs, which are often payable even if the loan does not proceed.
- Possible exit or extension fees.
An illustration. You borrow $300k for six months against a commercial property to clear a tax balance. The all-in cost might include a fee, six months of charges and legal costs, say a total of $27k. If clearing that balance stops a garnishee notice and frees you to refinance with a bank, the cost buys a result. If the exit is vague and you need a second six months, the cost doubles and the loan starts to eat the equity. Use the bridging loan calculator or the second mortgage calculator to model the dollars before you commit.
What are the risks?
Private lending serves a real need, but the risks are real.
- Equity erosion. Short-term loans that roll over repeatedly can use up the equity they were secured on.
- Enforcement. If you default, the lender can act against the security, which may be your home or business premises.
- Opaque fees. ASIC’s Report 814 flagged weaknesses across the wider private credit sector in areas such as fee disclosure, valuation practices and conflicts of interest, particularly in real estate funds. Much of that report concerns investors in funds, but borrowers benefit from the same discipline: ask for every fee in writing.
- Unclear contracts. Business-only loans sit outside consumer credit protections, so the contract is the protection.
Mitigate these by borrowing for the shortest sensible term, insisting on a written fee schedule, taking independent legal advice on any security that includes your home, and reading what happens if a business loan defaults before you sign.
When is a private lender the right choice?
Private lending tends to suit:
- Short, deadline-driven needs where a bank can’t move in time: a settlement, a tax notice, an auction.
- Files with something awkward such as a recent default, an ATO balance or an irregular income year, backed by solid property equity.
- Transitional borrowing with a documented plan to refinance or sell.
It rarely suits long-term working capital, for which a bank or a non-bank term loan is cheaper, or businesses with no property or other security to offer. If you have both a bank option and a private option, our private lender versus bank comparison sets out the trade-offs, and our guide to banks versus non-bank lenders covers the wider picture.
Our own brands operate in this space: HomeSec Business Finance funds property-secured business loans, and EquityTap is another partner brand. You’ll find independent profiles of other private lenders in our lender directory.
How do I check a private lender before I sign?
- Search the company and ABN on ASIC’s registers and ABN Lookup.
- Ask who funds the loan (own capital, investors, a fund) and whether approval needs a second party.
- Request the full fee schedule, including extension and default charges.
- Ask what happens at maturity if the sale or refinance is a few weeks late.
- Have your own solicitor read the loan and security documents if property is involved.
- Walk away from anyone who asks for fees before approval or contacts you unprompted. Our guide on spotting a business loan scam lists the signs.
Wondering whether private funding fits your situation?
Private lending is a tool: very good in the right place and expensive in the wrong one. The aim is to use it briefly, with an exit already written down.
If you have property and a deadline, tell us the details. It takes about a minute, and nobody pulls your credit file just because you asked. Your details won’t go out to a crowd of lenders, and a real person from our team reads your situation and calls you. Answer accurately, particularly on the property, existing mortgages and what you plan to do at the end, so we can point you at the right option the first time.
Frequently asked questions
Is a private lender the same as a loan shark?
No. Private lenders in this market are registered businesses, usually with documented products, written contracts and defined security. The warning signs of a scam are different: unsolicited approaches, requests for upfront fees before funds are released, and vague contract terms. Check any lender on ASIC's registers.
Do private lenders do credit checks?
Practices vary. Many focus on the property and the plan, and some will look at your credit file as part of a final assessment. Ask what is checked and when, and whether enquiring alone leaves a mark.
How quickly can a private lender fund?
It depends on the security. A straightforward residential property with a quick valuation can be done in days, while commercial property, rural land or complex ownership takes longer. Valuation, title searches and legal documents set the timetable, not just the lender's decision.
What is a caveat loan?
A caveat loan is a short-term loan where the lender lodges a caveat on a property title to protect its interest, rather than registering a full mortgage. It's often faster and cheaper to set up, which suits urgent short-term needs.
What happens if I can't repay on the due date?
The usual options are repaying from the sale or refinance you planned, negotiating an extension (which normally costs more), or the lender enforcing its security. Talk to the lender early, before the due date, rather than after it.
Can I use a private lender to get back to a bank?
Yes. Many borrowers use a private loan to clear a tax balance or bridge a gap, then refinance to a bank once the trading record, tax position or credit file has improved.