What is private lending in Australia?

Ask ten business owners what “private lending” means and you will hear ten different answers. Some picture a wealthy individual writing a cheque. Others think of an online lender approving unsecured loans by algorithm. Neither is quite right for the kind of private lending this site is about.

In the Australian market, private lending for business owners almost always means short-term finance secured on real estate, provided by a lender that answers to its investors rather than to depositors. It fills the space between what a bank will do and what a business actually needs, usually for a matter of months rather than decades. This guide explains who these lenders are, where the money comes from, how the loans are structured and, just as importantly, when private lending is the wrong tool.

What does “private lending” actually mean in Australia?

A private lender is a business that lends money it has raised privately, from investors, wholesale funds or its own balance sheet, instead of from customer deposits. Because it isn’t spending depositors’ savings, it isn’t bound by the same prudential framework as a bank, and it can set its own criteria for each loan.

The sector is no longer niche. In September 2025, ASIC referred to Australia’s “rapidly expanding” private credit sector as being worth around $200 billion. The Reserve Bank’s April 2024 Bulletin estimated that non-bank lenders, including registered financial corporations and private credit providers, hold less than one-fifth of direct commercial real estate lending, with banks providing the rest. In other words, private money is a meaningful second source of property-backed finance, sitting alongside the banks rather than replacing them.

For a business owner, the practical upshot is simple. A private lender can look at a deal the way an experienced property investor would: what is the asset, what would it realistically sell for now, what is already owing against it, and how will this money be paid back?

Key terms at a glance

• Security — the property the loan is secured against, recorded on its title.
• Private first mortgage — a registered mortgage that ranks ahead of every other lender on the title.
• Second mortgage — a registered mortgage that ranks behind an existing first mortgage.
• Caveat loan — a loan protected by a caveat noted on the title, usually quicker to put in place and later convertible to a registered second mortgage.
• LVR — loan-to-value ratio: total debt secured on a property compared with what the property is worth.
• Exit — the specific event that repays the loan, such as a sale, a bank refinance or incoming business cash.
• Letter of Offer — the lender’s written, conditional offer setting out the amount, term, security, fees and conditions.

Where does a private lender’s money come from?

Banks lend money that customers have deposited with them. That is why banks are authorised deposit-taking institutions supervised by APRA, and why their lending rules are so standardised.

Private lenders draw on different pools of money:

• Investor capital — wholesale and sophisticated investors who fund individual loans or a pooled mortgage fund in exchange for a return.
• Private credit funds — larger pools of capital that invest in loans, often secured by property.
• The lender’s own funds — retained earnings or capital put in by the owners.

Because that money is committed by investors who understand short-term secured lending, the lender can approve a caveat loan for an owner with an ATO debt, or a first mortgage over an unusual commercial building, without forcing the deal through a bank-style credit model. The trade-off is cost: investor capital expects a higher return than a term deposit pays.

Private lenders are also not the same as the large non-bank lenders that fund long-term mortgages through securitisation. Our guide to private lenders versus non-bank lenders unpacks that difference.

Is business-purpose private lending regulated like a home loan?

Not in the same way. ASIC explains that the National Credit Code applies where the borrower is a natural person or strata corporation and the credit is for purposes that are wholly or mainly personal, domestic or household, or to buy, renovate or improve residential property for investment. Loans made predominantly for business purposes fall outside that Code.

That doesn’t make a business loan a free-for-all. The loan is still a binding contract, the mortgage is still registered under each state’s land titles system, settlement still runs through solicitors, and ASIC notes that unfair contract term protections cover standard-form small business loan contracts where the upfront price is no more than $5m. In practice, a business-purpose private loan asks you to confirm what the money is for, and it asks your solicitor to read the documents properly.

What can private lending be used for?

Private property-secured lending is a tool for specific, time-bound jobs. The table below matches common situations with the structure that usually fits and the exit that repays it.

Business situation	Structure that often fits	Typical exit
ATO debt growing interest every month	Second mortgage or caveat loan	Refinance to a bank once lodgements are current, or business cash flow
Deposit needed on a new site by Friday	Caveat loan or second mortgage over existing property	Settlement of the purchase with long-term finance
Bank wants out, or won’t extend a facility	Private first mortgage refinancing the bank	Sale or bank refinance within 24 months
Debt-free commercial property, funds needed this week	Private first mortgage	Sale, refinance or contract income
Completed units unsold when construction finance expires	Private first mortgage over the stock	Sales as each unit settles
Working capital for a builder between progress claims	Second mortgage over the builder’s home or yard	Progress payments and job completion

Each of these has a clear end date. That is the common thread. If you are weighing up which structure suits your property, the first, second or caveat comparison sets them side by side, and our 60-second loan quiz gives you a starting point.

How does a private secured loan work from start to finish?

The process is shorter than a bank’s, but it still has defined stages:

1. Enquiry. You describe the property, what is owing on it, how much you need, what for, and how you will repay it.
2. Assessment. A specialist reviews the property directly, checks the title and the numbers, and tests the exit. No formal valuation required.
3. Letter of Offer. If the deal stacks up, you receive written terms: amount, term, security, interest structure, the assessment fee and the conditions to be met.
4. Loan documents. Once you accept, solicitors prepare the loan agreement, mortgage or caveat, and any guarantees.
5. Settlement. Documents are signed, identities verified, any payout figures obtained, and funds are released as directed.

Funding is possible within 24–48 hours for up to $5m once documents are in, and smaller property-secured amounts from $20k to $250k are possible the same day. The how it works page shows the steps from our side, and our guide on how private lenders assess a loan explains what happens during stage two.

If you’d like a quick read on whether your property and plan fit, you can send a 60-second enquiry without a credit check.

How much does private lending cost?

More than a bank, and anyone who tells you otherwise is not being straight with you. Pricing is set on each deal’s security, LVR, term and exit, with the aim of the sharpest price that situation allows. A second mortgage or caveat generally costs more than a first mortgage, because the lender ranks behind another creditor and carries more risk.

Beyond interest, expect a small assessment fee (it varies per loan and is shown on the Letter of Offer), legal costs, land registry and settlement fees, and discharge costs when the loan is repaid. Interest can be prepaid or capitalised, so there may be no monthly repayments during the term. The full breakdown is in our private mortgage costs guide.

The fairest way to judge the cost is against the alternative. Paying more for six months of private funding can be cheaper overall than losing a deposit, letting a tax debt compound or selling an asset in a hurry.

Illustrative example: A Brisbane café owner also owns a rental unit worth about $700k with $300k owing to a bank. The business has a $120k tax debt and a lease renewal that requires a $60k fit-out. The bank wants two years of updated financials before it will lend. A private second mortgage of $180k behind the bank takes total debt on the unit to $480k, around 69% of its worth, with interest capitalised so the café’s cash flow isn’t stretched further. Over the following ten months the owner brings lodgements up to date, and the bank refinances the unit, repaying the private loan. The private funding cost more than bank money, but it stopped the tax debt compounding and saved the lease.

When is private lending the wrong answer?

Private lending is a strong tool used well and an expensive one used badly. It is usually the wrong fit when:

• The need is permanent. Buying premises you’ll own for fifteen years calls for long-term finance, not a 12-month facility.
• There is no believable exit. If you can’t say what event will repay the loan and roughly when, a short-term loan simply moves the problem forward.
• There is no equity. Private lending is secured lending. Without property equity, there is nothing to lend against.
• The purpose is personal. Business-purpose private loans are not a substitute for a home loan or a consumer product.
• A bank will do it in time. If your financials are tidy and the deadline is months away, the bank’s lower price is worth the wait. Our private lender versus bank guide helps you call it.

How do you know you’re dealing with a genuine private lender?

Because private lenders sit outside the bank system, borrowers sensibly want to know who they are dealing with. A genuine lender has a verifiable ABN and company record, a physical address and phone number that match across sources, documents prepared and explained through solicitors, and fees that appear in a written Letter of Offer rather than as a demand for money up front. The government’s business.gov.au guidance also warns that real lenders don’t contact a business to say it has been approved for a loan it never applied for. Our step-by-step guide on how to check a private lender walks through each check.

Is private lending right for your situation? Find out quickly

If you own property with equity, need business funds for a defined job and can see how the loan will be repaid within a year or two, private lending is worth a serious look. The private first mortgage business loans page covers the core product in detail.

The next step costs you nothing and doesn’t touch your credit file. Start a short enquiry and it goes to one place only: a specialist at our lending partner fundU who reads it personally, rather than a list of lenders bidding for your file. Be exact about the property, what you owe against it and what the money is for. Clear, accurate answers are what turn a first conversation into a real answer.