Private Lending Australia: How It Works, Who Uses It & What You Need to Apply
Last updated: October 2026
Private lending can provide businesses with a faster, more flexible alternative when a traditional bank cannot meet the timing, structure or circumstances of a transaction. This guide explains how private lending works in Australia, who uses it, what it costs, and what information is needed to assess an enquiry.
What is private lending?
Private lending, also commonly referred to as private credit, non-bank lending or property-secured business lending, provides an alternative source of finance when a traditional bank may not suit the timing, structure or circumstances of a transaction.
For the type of private lending discussed on this page, the finance is generally for a business or commercial purpose and the borrower operates under an ABN, such as a company, trust or sole trader.
Private lending is commonly secured by residential, commercial or industrial property and is typically structured as short-term finance with a clearly identified repayment or exit strategy.
It is not simply finance for borrowers who have been rejected by banks. In many cases, the borrower or transaction is viable, but a bank cannot provide the required funding within the necessary timeframe or under its standard lending policy.
What information do I need to assess a private lending enquiry?
One of the advantages of private lending is that an initial assessment can often be made relatively quickly. You do not necessarily need to provide a complete bank-style application before determining whether a transaction is worth pursuing.
As a starting point, PPM Finance generally needs five pieces of information:
- Assets and liabilities: What property and other assets are owned, what debts are currently secured against them, and approximate values.
- Loan amount required: How much funding is needed.
- Purpose of the loan: Exactly what the funds will be used for.
- Borrower details: Who is borrowing, including the company, trust or business entity involved.
- Exit strategy or capacity to service: How the loan will ultimately be repaid, or how ongoing repayments will be met.
This short summary gives your broker and potential lenders enough information to understand the basic transaction and quickly determine whether a private lending solution may be feasible.
What is an exit strategy?
The exit strategy is one of the most important parts of a private lending application. Because many private loans are deliberately short term, the lender needs to understand how the debt will be repaid at the end of the facility.
Common exit strategies include refinancing to a bank or mainstream commercial lender, selling the security property, selling another property or asset, completion and sale of a property development, repayment from an expected business transaction or settlement, reducing debt through staged property sales, or refinancing once updated financial statements or trading results become available.
A good exit strategy needs to be specific, achievable and realistic within the loan term. “I will refinance later” is not enough by itself; the lender needs to understand why that refinance should be achievable and what needs to happen first.
Who uses private lending?
Private lending is used by a wide range of Australian businesses and commercial borrowers. Common users include property developers and builders, established business owners, investors, and borrowers facing a time-critical settlement or refinance.
Property developers may use private finance for site acquisition, development funding, construction funding, residual stock, completion funding or to bridge between project stages.
Business owners may use it for working capital, supplier payments, acquisitions, ATO or tax liabilities, refinancing existing business debt, releasing property equity for business purposes or taking advantage of a time-sensitive commercial opportunity.
Sometimes the issue is simply timing. A sound transaction may require funding faster than a bank can complete its credit process.
What types of private lending are available?
Private lending is not one particular loan product. Depending on the transaction, security and lender, structures can include first mortgage loans, second mortgage loans, bridging finance, caveat or other property-secured lending, and development or construction finance.
Different private lenders have very different appetites for property type, location, loan-to-value ratio, loan size, mortgage ranking, borrower profile and exit strategy.
Why would a business use private lending instead of a bank?
Private lending is generally not chosen because it is cheaper than bank finance. It is used because of what it can achieve.
Speed: Private lenders can often assess straightforward scenarios more quickly because the initial decision centres on the transaction, security and exit strategy.
Flexibility: Private lenders may have more discretion than banks to consider irregular income, complex structures, incomplete financial statements, unusual security or a time-critical requirement.
Short-term solutions: Private lending can be effective where the problem itself is temporary—for example, while a property is sold, a development is completed, updated financial statements become available, or permanent bank finance is arranged.
Capitalised interest: Some private facilities allow interest to be added to the loan balance rather than paid monthly. This can preserve cash flow during the loan term, although it increases the balance that must ultimately be repaid and requires sufficient equity.
What does private lending cost?
Private lending generally costs more than mainstream bank finance. Costs can include interest, establishment fees, valuation fees, legal fees, lender due-diligence costs, mortgage registration or discharge costs, and extension or default costs if the facility runs beyond its agreed term.
For this reason, comparing only the headline interest rate can be misleading. A better comparison is the total dollar cost of the facility over the expected loan term, weighed against the commercial benefit of obtaining the funding.
What security do private lenders accept?
Property is the most common security for the type of private lending covered on this page. Depending on the lender, this may include residential property, commercial property, industrial property, development sites, vacant land and, in selected circumstances, rural or specialised property.
The acceptable loan-to-value ratio (LVR) varies significantly between lenders and depends on the property, location, mortgage ranking and overall transaction. There is no single private lending LVR that applies across the market.
Is private lending only for distressed borrowers?
No. Private lending can be used in restructuring or turnaround situations, but it is also commonly used by otherwise sound businesses that need speed, flexibility, a short-term bridge, access to property equity or a lender willing to assess a transaction on its individual merits.
When does private lending make sense?
Private lending is generally strongest when four things are present: a clear purpose, adequate security, a realistic timeframe and a credible exit strategy.
If one of those elements is missing, the transaction needs considerably more scrutiny.
When might private lending not be appropriate?
Private lending may not be suitable where there is no realistic exit strategy, insufficient equity, the loan simply delays an ongoing cash-flow problem, repayment relies on an unrealistic property valuation, the exit depends on uncertain future events, or the total cost outweighs the commercial benefit.
Why use a commercial finance broker for private lending?
The Australian private lending market is highly fragmented. Different lenders have different appetites for property types, locations, LVRs, loan sizes, first and second mortgages, construction and development, impaired credit, ATO debt, capitalised interest, loan terms and exit strategies.
That means the first lender approached is not necessarily the right lender.
At PPM Finance, the first step is to understand the transaction and determine what type of funding is appropriate. That includes assessing whether mainstream bank finance is realistically available before moving to a private lender.
If private lending is appropriate, PPM Finance can present the transaction clearly to suitable lenders, compare the structure and total cost, and work with the lender, valuer and solicitors through to settlement.
Frequently asked questions about private lending in Australia
What is private lending?
Private lending is finance provided outside traditional bank lending channels, usually by specialist lenders, investment funds, family offices or private investors. In business finance it is commonly secured by property and used for short-term or specialised transactions.
Is private lending the same as private credit?
The terms are frequently used interchangeably. Private credit is the broader market term for privately originated debt that is not generally traded on public markets, while private lending often refers to individual loan transactions.
Do I need an ABN for private lending?
For the business-purpose private lending discussed on this page, borrowers generally operate under an ABN and the funds are used for a commercial or business purpose.
How quickly can a private loan settle?
Private lending can often move more quickly than bank finance, but settlement time depends on valuation, legal documentation, security, due diligence and the complexity of the transaction.
Do private lenders require financial statements?
Sometimes, but not always in the same way as a bank. Requirements depend on the lender and transaction. For asset-backed short-term lending, the security and exit strategy can be particularly important.
Can interest be capitalised?
Yes. Some private lenders allow interest to be capitalised and paid when the facility is repaid rather than monthly, subject to lender policy, available equity and the strength of the exit strategy.
Are private lenders more expensive than banks?
Generally, yes. Private lending usually carries higher interest rates and fees because it often involves shorter terms, specialised transactions, faster assessment or risks that do not fit standard bank policies.
What is the most important part of a private lending application?
There is no single factor, but security and exit strategy are usually critical. The lender needs to understand how its capital is protected and how it will be repaid.
Need a private lending scenario assessed?
Start with the five basics: your assets and liabilities, the amount required, the purpose of the loan, the borrower entity and the proposed exit strategy. From there, PPM Finance can determine whether a private lending solution is worth exploring and which lenders may be appropriate.
Sources and further reading
Reserve Bank of Australia — private credit and financial stability publications; Semper Secured — commercial lending assessment guidance; and relevant specialist private lending industry material. Tax, legal and accounting matters should be discussed with the appropriate professional adviser.