Quick answer
Private business lending is finance from non-bank lenders and private funds rather than the major banks. Private lenders usually focus on the security, most often property, and on a clear exit, rather than on years of tax returns. That can make them faster and more flexible, especially for complex or urgent deals, though they typically cost more and suit shorter terms.
Key points
- Private lenders assess the asset and the exit first.
- They can say yes where a bank's policy says no.
- Speed and flexibility come at a higher cost.
- Best for short terms with a defined way out.
- Who lends
- Non-bank lenders, private credit funds, private investors
- Typical security
- Residential or commercial property
- Typical term
- Months to a few years
- Credit check to enquire
- None
Australia’s major banks write most business loans, but they are not built for every company or every deadline. When a deal is urgent, the paperwork is messy or the borrower has a recent blemish, a bank’s credit policy can stop it cold, however strong the property behind it. That is where private business lending comes in.
Who private lenders are
“Private lender” is a broad label. It covers non-bank lenders that specialise in business and property loans, private credit funds that pool money from investors, and in some cases individual investors who lend through a manager. What they share is independence from the deposit-taking banks, which means they set their own appetite and move without the same layers of committee and policy.
The good ones are run professionally. They use proper loan agreements, independent valuations and solicitors on both sides. Their difference is in what they’re willing to accept, not in how seriously they take the loan.
How a private lender looks at a deal
A bank typically starts with your financials and asks whether your income comfortably supports the debt for years. A private lender often flips the order. The first questions tend to be:
- What is the security worth, and how easily could it be sold?
- How much is already owed against it?
- How and when will this loan be repaid?
- Does the borrower’s story hold together?
Income still matters, and many private lenders want to see that the interest can be met. But because the security and the exit strategy carry so much weight, a private lender can often approve deals a bank won’t touch, such as a company with an ATO payment plan, a business less than a year old with strong property behind it, or an owner whose recent tax returns are not yet lodged.
Where private lending fits best
Private loans are a tool for specific situations. They work well when time is short, for example when a settlement date, a tax deadline or a supplier opportunity won’t wait for a bank’s timeline. They also suit borrowers who have been declined by the bank for policy reasons rather than for weak fundamentals, and deals with an unusual property or ownership structure.
They are a weaker fit for long-term funding of a business that can’t comfortably service debt. Private money is usually more expensive, and keeping it for years can drain cash flow. Think of it as a bridge from where you are to where a cheaper lender will have you.
Common private loan structures
The most common structures are first mortgages, where the private lender takes the top position on title; second mortgages, which sit behind an existing loan; and caveat loans, which are the fastest and shortest of the three. Some private lenders also offer facilities secured by several properties, or by a mix of property and business assets.
Interest is sometimes prepaid or capitalised, meaning it is deducted upfront or added to the balance rather than paid monthly. That can ease cash flow during the term, but it increases the amount you need to repay at the end, so look at the numbers carefully.
Costs to compare
When comparing private offers, look beyond the headline. Ask about establishment fees, valuation and legal costs, any line fee or monthly fee, the cost of extending if your exit runs late, and default charges. The best way to compare offers is the total dollar cost over the term you realistically expect to need, which our guide on the total cost of a business loan walks through step by step.
Small business loan contracts are also covered by protections against unfair terms. ASIC publishes guidance on what that means, and if a dispute arises, many lenders are members of the Australian Financial Complaints Authority, which handles small business complaints.
Questions to ask before you sign
- What happens if my exit takes longer than expected?
- Are there any penalties for repaying early?
- Is interest paid monthly, prepaid or capitalised?
- Which properties and guarantees are being taken as security?
- What would cause a default, besides missing a payment?
Clear answers to those five questions tell you a lot about whether a lender is right for you.
Talk to someone who knows the private market
If your deal doesn’t fit a bank’s box, tell us about it through our quick enquiry form. There is no credit check to enquire, your details stay with one team, and a real person will tell you plainly whether private lending suits your situation or whether a cheaper option is within reach. Tell us about your deal.
Frequently asked questions
Is private lending the same as a loan shark?
No. Reputable private lenders are established businesses with proper loan documents, solicitors and valuations. What separates them from banks is policy and appetite, not legitimacy. Always read the contract and get independent advice.
Why would I pay more for a private loan?
Because it solves a problem a bank can't, such as speed, a tax debt, a recent credit issue or an unusual property. The extra cost is worth it only if the loan is short and the exit is solid.
Do private lenders check credit?
Usually, yes, at the formal application stage, but they tend to weigh the property and the exit plan more heavily than the score. Enquiring with us involves no credit check.
Can a private loan be refinanced to a bank later?
That's one of the most common exits. Many businesses use a private loan to get through a rough patch, tidy up their records, then refinance to a cheaper lender once they fit standard policy.