Private lender vs non-bank lender: what's the difference?

Once a bank says no, or says “not yet”, business owners quickly discover a second tier of lenders. Some call themselves non-bank lenders. Some call themselves private lenders. Brokers, accountants and websites often use the two labels interchangeably, which makes it hard to know what you’re actually comparing.

The difference is real, and it isn’t just branding. It comes down to where the lender’s money comes from, and that one fact shapes the loan term, how your application is assessed, what the loan costs and how quickly it can settle. This guide explains both types in plain terms so you can tell which one suits the problem in front of you. If you’re still deciding between a bank and a private lender, start with our private lender versus bank guide instead; this one picks up where that leaves off.

Key terms at a glance

• ADI (authorised deposit-taking institution) — a bank, building society or credit union licensed by APRA to take deposits.
• Non-bank lender — a lender that is not an ADI and so cannot take deposits; it funds loans from wholesale sources instead.
• Securitisation — bundling loans into a pool and selling securities backed by that pool to investors.
• Warehouse facility — a line of credit, secured by newly written loans, that funds a lender until the loans are securitised.
• Registered financial corporation (RFC) — a non-bank lender above a size threshold that must register with APRA and report data.
• Private lender — a non-bank that lends private capital, typically short-term and secured on property, assessing each deal individually.

What is a non-bank lender in Australia?

Any lender that is not an authorised deposit-taking institution is, strictly speaking, a non-bank. APRA keeps the register of ADIs, which it describes as institutions licensed by APRA and regulated in accordance with the Banking Act 1959. If a lender isn’t on that list, it can’t take deposits.

That inability to take deposits defines how non-banks operate. In a December 2024 speech on securitisation, the Reserve Bank noted that securitisation is “a particularly important source of funding for non-bank lenders, given they can’t raise deposits”, and estimated that residential mortgage-backed securities make up about three-quarters of funding for Australian non-bank mortgage lenders. While loans are being written, they are typically funded through warehouse facilities, which the RBA describes as acting like a line of credit secured by the lender’s newly originated loans.

Non-banks over a certain size have a regulatory footprint, but a lighter one. APRA requires corporations with assets of more than $50 million that borrow money and provide finance to register as registered financial corporations and report data. APRA is explicit, though, that RFCs are “not subject to supervisory oversight” in the way banks are.

What makes a private lender different?

A private lender is a particular kind of non-bank. It also doesn’t take deposits, but instead of pooling loans for securitisation, it lends capital supplied by private investors, private credit funds or its own balance sheet. The loans are typically short-term, secured on real estate, and approved one at a time by people who look at the property and the plan.

The Reserve Bank’s April 2024 Bulletin grouped registered financial corporations and private credit providers together when estimating that non-bank lenders hold less than one-fifth of direct commercial real estate lending in Australia. It also observed that debt funds are not captured in regulatory reporting, which is one reason the private end of the market is less visible than the banks, even though it is a significant source of property-backed business finance.

For a fuller primer on private lending itself, see what private lending is in Australia.

How do banks, non-banks and private lenders compare?

Feature	Bank (ADI)	Non-bank lender	Private lender
Main funding source	Customer deposits	Warehouse lines and securitisation	Private investors, credit funds, own capital
APRA supervision	Yes, under the Banking Act	No; larger ones register and report as RFCs	No
Typical term	Long, often decades	Long, often decades	Short: private first mortgages 1 to 24 months
How deals are assessed	Serviceability and full financials	Set eligibility criteria, often with alternative income evidence	Property, equity and exit, deal by deal
Comfort with ATO debt or defaults	Low	Moderate, within criteria	Considered case by case
Typical speed	Weeks	Days to weeks	Possible within 24–48 hours for up to $5m once documents are in
Best suited to	Long-term needs with clean financials	Long-term needs that sit just outside bank policy	Short, urgent or unusual needs with equity and a clear exit

Why does the funding source change how you’re assessed?

This is the part most comparisons skip, and it’s the most useful thing to understand.

When a loan is destined for a securitised pool, it generally has to satisfy that pool’s eligibility criteria: property types, borrower profiles, documentation standards and so on. That’s how investors in the pool know what they are buying. The result is a process that is more flexible than a bank’s but still built around a box. If your deal fits the box, a non-bank can be an excellent long-term option. If it falls outside, perhaps because the property is a mixed-use building in a small town, or you need funds for eight months rather than thirty years, the answer is often no, however strong the equity.

A private lender isn’t feeding a pool with fixed criteria. Its investors are backing the lender’s judgment on individual, property-secured loans. That allows an assessor to say yes to a caveat loan that clears an ATO debt, a low-doc private first mortgage where the financials are a year behind, or a second mortgage behind an existing bank loan, provided the property and the exit stack up. The cost of that flexibility is a higher price and a shorter term.

Which one should a business owner use?

Match the lender to the job:

• Buying long-term premises with steady, documented income? A bank, or a non-bank if the bank’s policy is too tight.
• Self-employed with good income but unusual paperwork, needing a long-term loan? A non-bank lender is often the natural fit.
• Need funds within days, have equity, and can repay within a year or two? A private lender.
• Have ATO debt, a recent default or a property a mainstream funder won’t touch? A private lender, considered case by case.
• Need to keep an existing bank loan in place and add funds behind it? A private second mortgage or caveat loan, which most mainstream funders don’t offer.

Can you move from a private lender to a non-bank or a bank?

Yes, and this is how private lending is meant to be used. The private loan solves an immediate problem; the time it buys is used to get the file into a shape a mainstream lender will accept; then a non-bank or bank refinance repays the private loan. That refinance becomes the exit, and it should be mapped out on day one, as covered in our guide to exit strategies for short-term mortgages.

The same path also runs in reverse. If a bank or non-bank wants you out, a private first mortgage can refinance the existing lender and give you a defined window to sell or rearrange your finances.

Illustrative example: A Newcastle transport operator owns a depot worth around $2.4m with $900k owing to a non-bank lender. The business has fallen behind on BAS and owes the ATO $350k, and the non-bank’s criteria don’t allow a top-up while tax lodgements are overdue. A private lender refinances the non-bank and clears the ATO debt in one settlement: a first mortgage of about $1.3m, roughly 54% of the depot’s worth, for 12 months with interest capitalised. Over the following nine months the operator lodges the outstanding returns and returns to a mainstream lender, which refinances the depot and repays the private loan. The private stage cost more for those months, but it was the only way to get from a stalled position back to long-term funding.

If your situation sounds similar, you can check your options in about a minute without a credit check.

How can you tell what kind of lender you’re talking to?

Ask direct questions and listen for direct answers:

1. Where does your lending money come from? Deposits, securitisation or private capital?
2. What is the longest and shortest term you offer? Decades suggests a bank or non-bank; months suggests a private lender.
3. Do you assess the property yourselves? A private lender that does will tell you there is no formal valuation required.
4. Is my file going to you, or to a panel of funders? You want to know who will actually decide.
5. Who settles the loan? Genuine lenders of every kind settle through solicitors, with documents registered on title. Our guide on how to check a private lender covers the verification steps.

Not sure which lender fits? Start with the property

If your need is short, your equity is solid and you can name the event that will repay the loan, a private lender is likely the faster route. If you need decades of funding at the lowest possible price, a bank or non-bank will serve you better, and we’ll say so.

Send us your details and a specialist from our lending partner fundU will review the property and your plan personally. There’s no credit check to enquire, your information isn’t shared across a list of lenders, and the answer you get back is only as good as the numbers you give us, so be precise about the property and what’s owing on it.