Private Lending in Australia: What It Is and Why It Exists

Private lending in Australia is finance provided by non-bank lenders — typically funded by private credit funds, family offices or wholesale investors — secured against an asset (most commonly commercial property). It exists because the banks, by design and by regulation, only fund deals that fit a narrow box. Plenty of genuinely creditworthy borrowers and assets sit just outside that box: large commercial loans, construction with no presales, second mortgages, special-purpose assets, regional locations, or deals that have to settle in days, not months. Private lending is how those deals get done — usually shorter in tenor, faster to settle, and priced for the risk and the speed.

This is a foundational explainer. For the mechanics of a specific commercial transaction, read the commercial property finance pillar. For the broker-facing view of placing a deal banks declined, see the broker's guide to placing a deal the banks declined.

What private lending actually is

A private lender writes a loan against an asset on commercial terms agreed directly with the borrower. The defining features:

Non-bank. Funded from private capital — a private credit fund, mortgage fund, family office or wholesale investor pool — not from retail deposits.
Secured. Almost always against real property (first or second mortgage, sometimes caveat), occasionally against business cashflow with property as additional security.
Wholesale, not consumer. Most private commercial property lending sits outside the NCCP Act because it is for business or investment purposes, not for owner-occupied residential consumer finance. That changes who the lender can lend to and on what terms.
Shorter and more flexible. Typical tenors are 3 to 36 months, with structures (interest capitalisation, no-presales construction, bridge-to-stabilise, mezzanine behind a senior bank) that the major banks generally don't offer.

What it is not: it's not a bank, not a broker, and not a financial or tax adviser. A good private lender is a credit team that underwrites the deal directly and funds from its own (or its investors') balance sheet.

Why the market exists — the "decline gap"

Australian banks are constrained in ways most borrowers don't fully see. APRA's capital and risk-weighting rules, internal credit policies that have tightened materially since 2018, and the structural cost of running a deposit-funded balance sheet all push the banks toward a narrower set of deals: stabilised income, long WALE, strong covenants, vanilla asset classes, conservative LVRs, and timelines measured in months.

That leaves a genuine gap. Examples of perfectly fundable transactions banks routinely decline or can't move fast enough on:

Large commercial loans (>$5–10M) where the bank's appetite or single-borrower concentration is the binding constraint, not the deal.
Construction and development, especially with no or low presales, where bank policy now requires substantial qualifying presales before drawdown.
Second mortgages and mezzanine, used to top up senior debt for value-add or working capital.
Special-purpose and specialised assets — childcare (especially leasehold), service stations, pubs with gaming, lab and life-sciences fit-out, large industrial with vacant possession.
Regional locations outside major metro postcodes where bank policy applies a steep LVR haircut.
Time-critical deals — an auction, a vendor deadline, an unconditional contract running down — where a 60–90 day bank process is the deal-killer.

Private credit didn't appear because it's cheaper than the bank (it isn't). It exists because banks consciously priced themselves out of, or policied themselves out of, large parts of the market. Globally, this is the same dynamic that has grown private credit into a multi-trillion-dollar asset class [VERIFY: most recent figure — IMF or Reserve Bank of Australia private credit chapter].

How a private lender thinks differently

The first thing to understand is that private credit isn't a softer bank — it's a different question. A bank credit team is asking: does this deal fit our policy? A private lender is asking: is this asset, this sponsor and this exit underwriteable on its own merits? That changes what matters.

A serious private lender will spend more time on:

The exit. Refinance to a bank? Sale of stock? Lease-up to a sale yield? The exit is the loan.
The security. Lendable value on the real re-let or as-is basis, not a tick-box.
The sponsor. Track record on this asset class, not just on this transaction.

And less time on the things a bank weights heavily: long PAYG income history, tax-return-based serviceability for an investment deal, postcode-based policy haircuts. The trade-off is honest: rates are higher than a bank, the tenor is shorter, and the lender expects a clear, evidenced exit.

What it typically costs and why

Private commercial property loans in Australia are usually priced as an interest rate plus an establishment fee, with potential exit or line fees depending on the structure. Pricing is a function of LVR, asset type, sponsor strength, tenor and how much speed or complexity is involved. As at May 2026, indicative pricing for first-mortgage commercial private credit commonly sits well above current bank business rates, with second mortgages and mezzanine priced wider again [VERIFY: current bank business lending rate vs private credit pricing — RBA business lending data and lender rate cards].

The right comparison is not "private credit vs bank rate" — it is "private credit vs the cost of not doing the deal" (a lost contract, a vendor walk-away, an unfinished build, a missed acquisition). When the math works on that basis, private credit makes sense. When it doesn't, the bank route is the right one even if it's slower.

Illustrative worked example (illustrative, not a quote)

A developer holds a completed 18-unit residual stock portfolio with $5.2M of remaining bank debt expiring in 30 days. The bank won't extend. Comparable sales support an as-is value of ~$8.0M. A private lender refinances the senior at ~$5.4M (≈68% LVR), interest serviced from sales proceeds as units settle, 12-month tenor with a clear sell-down plan as the exit. The bank refinance the developer eventually wanted was always going to take 90+ days; private credit bridged the gap so the asset wasn't fire-sold.

The trade-offs to be honest about

Private lending isn't a fit for every borrower. It's expensive relative to a bank, the loan is short, and the exit must be credible. It works when:

The deal is genuinely fundable but doesn't fit a bank's box today.
Speed or certainty of execution is itself part of the value.
The borrower has a clear plan for the next stage of finance.

It is not a substitute for a bank when a bank will say yes — it's the answer when a bank won't, or won't in time.

FAQ

Is private lending regulated in Australia? Most commercial private lending is wholesale/business-purpose lending outside the NCCP Act. Lenders themselves are typically governed by ASIC, Corporations Act and AFSL requirements, and the funds behind them by their own wholesale-investor rules.

How is it different from a non-bank lender like Pepper or Liberty? Non-bank lenders are still largely warehouse- or securitisation-funded and operate to policies close to a bank's. Private credit is funded by direct investor capital and underwrites bespoke deals case-by-case.

Who actually lends the money? Private credit funds, mortgage funds, family offices and wholesale investors — pooled in a fund that underwrites and manages the loan book.

What sort of borrowers use private lending? Commercial property investors, developers, business owners using property security, and brokers placing deals their bank panel has declined.

Can a private loan settle in days? Yes — where the security, sponsor and exit are clear, genuine 48–72 hour settlements are achievable. It's not a generic promise; it depends on the deal.

This is general information only and not financial, tax or legal advice — get advice specific to your circumstances.

If your scenario doesn't fit a bank's box — size, asset type, timing or structure — it may still be fundable. Talk to Via Private about your scenario.