Private business lenders: who they are and when they say yes

When banks and mainstream non-banks have said no, private lenders are often the ones who say yes. They’re a big part of the Australian business lending market that most owners never hear about until they need it. Here’s what private lenders are, how they think, what they cost and how to work with them well.

Who are private lenders?

Private lenders are non-bank lenders that use money from private investors, family offices, wholesale funds and their own capital, rather than customer deposits. Some are small and specialised; others manage large funds. Most focus on business lending secured by property.

Because they’re not running a scorecard built for retail banking, they can assess each file on its merits. A credit manager, sometimes the lender’s principal, looks at the property, the purpose and the exit, and makes a decision.

What private lenders offer

Product	What it is	Typical use
Caveat loan	Short-term, secured by a caveat on title	Urgent needs, fast settlement
Second mortgage	Registered behind an existing first mortgage	Business needs without refinancing the home loan
Private first mortgage	Registered first over unencumbered or refinanced property	Larger or longer business needs
Bridging loan	Short-term until a sale or refinance	Timing gaps between deals

Loans typically range from $20,000 to $5,000,000 for business purposes.

How private lenders decide

1. Security first. What is the property worth, what’s owed against it, and how easily could it be sold?
2. Exit second. How will the loan be repaid at the end of the term? Sale, refinance, contract payment or business income?
3. Story third. What’s the money for, and does it make sense? What caused any credit problems, and are they behind you?
4. Credit and income fourth. Considered, but rarely the deciding factor on their own.

That order is the opposite of a bank, which is why files that fail bank policy can succeed here.

Why use a private lender?

• You’ve been declined by banks and non-banks
• You need money faster than a bank can provide
• Your credit file has defaults, judgments or a past insolvency
• You have ATO debt or overdue lodgements
• Your property type or location doesn’t suit bank policy
• You need a short-term bridge to a clear exit

The trade-offs

Private money usually costs more than bank money, and terms are shorter, often between a few months and a few years. Fees can include establishment, legal, valuation and ongoing fees. Some loans charge interest upfront or capitalise it. The right way to use private lending is to solve the problem in front of you, then plan to refinance to cheaper money as your file improves.

Choosing well

Private lending is a varied market. To protect yourself:

• Get every cost in writing and add it up in dollars
• Ask what happens if you repay early, or need to extend
• Check the default terms and what triggers them
• Use your own lawyer to review the documents
• Never pay an upfront fee to someone promising guaranteed approval
• Know your rights: small businesses have unfair contract term protections, and many lenders are members of an external dispute resolution scheme

An illustrative example

A Gold Coast marine services business (illustrative only) needed $600,000 to buy out a retiring partner by a fixed date in the partnership agreement. The bank wanted two more years of financials after a messy restructure. The remaining owner had an unencumbered industrial unit. A private lender approved an eighteen-month first mortgage over the unit, which settled the buy-out on time. The owner refinanced to a bank once the new structure had a full year of results.

What a private lender will ask for

Private lenders keep paperwork light, but expect to provide:

• Photo ID for every borrower, director and guarantor
• The property address, a recent rates notice and any existing mortgage statement
• A short explanation of what the money is for and how it will be repaid
• Basic business details: ABN, ACN and structure
• Evidence of the exit, such as a contract of sale, a refinance pre-approval or a signed contract
• Bank statements if repayments will come from trading income

A valuation is usually ordered by the lender. The faster you supply the rest, the faster the deal moves.

Banks are great, until they aren’t

We say it often: banks are great for straightforward loans, and if a bank will fund you on good terms, take it. Private lenders are for when the bank can’t, won’t or can’t do it in time. Our guide on banks versus alternative lenders explains how to tell which you need.

Find the private lender that fits

If the bank has said no and you own property, start a 60-second enquiry. There’s no credit check when you first enquire, we won’t hawk your file to every private lender in the country, and a real person will match you with the one most likely to approve on fair terms. Please be accurate about your property, debts and deadline on the form; it’s how we get it right the first time. See if you qualify.