Your private loan is expiring and the lender won't extend: what to do next

Private loans are short by design, usually somewhere between 6 and 24 months, and they're priced on the basis that they'll be repaid on time. Most borrowers assume that if the exit runs late the lender will roll the loan for a few more months, and often it does. But not always, because private lenders are funded by investors and warehouse lines with their own rules, and a fund that's winding down, full on a particular property type or simply changing its appetite may decline an extension that it would have approved a year earlier.

If that's where you are, the important thing is time, because the options narrow quickly once the expiry date passes.

Your options, roughly in order of cost

1. Negotiate a shorter extension. A lender that won't extend for six months will sometimes extend for two, particularly if there's a signed contract of sale or a bank approval on the way. Ask for any extension offer in writing, including the fee and any new valuation it requires.
2. Refinance to a bank or a cheaper lender. If the original exit was a bank refinance and it's nearly there, a short extension or a short private bridge to cover the gap is usually the cheapest path. We explain how to set that up in bridging a bank refinance that isn't ready yet.
3. Refinance to another private lender. This is the most common answer when the exit needs another three to twelve months. We cover the full process in refinancing a private loan to another private lender.
4. Sell the property. If the exit was always a sale, selling on your own timeline is very different from selling because the lender is forcing the issue, which is the whole reason it's worth refinancing while you still can.

Why the timing matters so much

While a loan is current you're a borrower with a refinance to arrange. Once it's past maturity you're a borrower in default, and the numbers change. Most private loan agreements charge a higher default rate from the day after expiry, the lender can start adding its legal and enforcement costs to the balance, and a formal default notice starts a statutory clock that eventually ends with the lender's right to take possession and sell.

All of that can still be refinanced (we've written about it in refinancing a private loan that's already in default), but every extra dollar of default interest and costs comes out of your equity, and a smaller equity buffer makes the next lender's decision harder.

How much time you need

Work backwards from the expiry date.

• Valuation: about one to two weeks to complete, longer for specialised commercial property
• Indicative terms and credit approval: a few days if the scenario is clear and the documents are ready
• Loan documents, payout figure and discharge: about one to two weeks, and the outgoing lender's notice period sits inside this
• Buffer: at least two weeks for anything that goes wrong, because something usually does

So, realistically, you want to start the conversation with a new lender six to eight weeks before expiry. Starting at two weeks can still work, but it leaves no room for a lower-than-expected valuation or a slow payout letter.

What to send a new lender

• The address, property type and a recent estimate of value
• The current lender's payout figure, or the most recent statement if the payout isn't available yet
• A copy of the existing loan agreement, so the new lender can see the default rate and any fees on exit
• Why the current lender isn't extending, in a sentence or two
• How much extra time you need and how the new loan will be repaid
• Whether you need any money on top of the payout, and what it's for

An example

This is an illustrative example of the kind of scenario this applies to. A company has a 12 month private loan of $2,800,000 over a commercial building valued at $5,000,000, and the exit is the sale of a separate property. The sale contract has been signed, but settlement is set for four months after the private loan expires, and the existing lender isn't extending because its fund is closing to new commitments. A new loan of about $3,050,000 covers the payout, the costs and six months of interest, which is 61% of the building's value, and the signed contract makes the exit easy to see, so the refinance is a simple one.

How we do it

Vía Private lends $1M to $20M for business and investment purposes, to companies and trusts, secured by property on the East Coast, for terms of 6 to 36 months. We can usually give indicative terms within 24 hours and settle in 5 to 10 business days once the valuation is in, and we set out the total interest, every fee and the exact payout at the end before you sign.

If your loan is expiring and the extension isn't coming, send us the scenario now rather than in the last week.

Hypothetical example only, not a transaction Vía Private has funded. Vía Private is an Australian non-bank private credit lender providing property-secured commercial loans to companies and trusts for business and investment purposes. All lending is subject to credit approval and valuation. General information only, not financial or credit advice.