Private lenders: property first, paperwork second

A private lender asks two questions before anything else: what is the property worth, and how will I be repaid? If both answers are solid, a lot of things that would stop a bank — an untidy credit file, tax returns not lodged, a young ABN — matter much less. That’s why private lending exists, and why it’s priced the way it is.

Where does private lending money come from?

Private lenders pool money from individual investors, family offices or managed funds and lend it, usually against real estate. Investors accept the risk of a business loan because the property stands behind it. For you, that means the lender’s comfort depends mainly on the security and the plan to repay, not on a scoring model.

Property already plays a big role in small business lending generally. The RBA’s October 2025 Bulletin showed that new SME loans backed by a home tend to be roughly four and a half times larger than loans secured any other way. Private lenders take that link between property and business credit to its logical end.

What do private lenders typically fund?

• Clearing an ATO debt before it escalates, while a longer-term solution is arranged.
• Bridging finance between buying and selling property, or until a refinance completes.
• Meeting a settlement or contract deadline that a bank can’t hit.
• Buying stock, equipment or a business quickly when an opportunity has a short window.
• Consolidating short-term debts that are straining cash flow.
• Releasing equity when the business’s financial records aren’t ready for a bank.

How does a private lender assess a deal?

Factor	What the lender looks at
Security	Property type, location, value, existing mortgages, whether it’s residential or commercial
Equity	How much room there is after existing debt and the new loan
Exit	Refinance, sale, incoming payment — and how believable the timing is
Purpose	Business purpose, explained clearly
Borrower	ID, ABN, the story behind any credit or tax issues
Serviceability	Sometimes capitalised or prepaid interest rather than monthly repayments

The paperwork is lighter than a bank’s, but the valuation and legal work are just as real. Owners are often surprised that “low doc” doesn’t mean “no process”.

Who is a private lender right for?

Owners who have property equity and a problem with a time limit or a paperwork gap. Typical examples include a contractor who needs to clear a tax debt now and refinance to a non-bank once returns are lodged, or a business owner selling an investment property in a few months who needs working capital until settlement.

Private lending is usually the wrong tool for long-term funding of an ongoing shortfall. If the business needs money permanently rather than temporarily, a short-term loan only delays the problem.

Unsure whether your equity and exit stack up? Ask a specialist — we’ll run through it on the phone before anything is lodged, and asking doesn’t touch your credit file.

Why do private lenders say no?

• Not enough equity. Once existing mortgages and the lender’s own limits are applied, the numbers don’t work.
• No clear exit. “We’ll sort it out later” isn’t an exit.
• Hard-to-value security. Specialised or remote properties can fall outside policy.
• Owners not on board. Every registered owner must consent, and guarantors usually need independent advice.
• Personal purpose. Business lenders won’t fund what’s really personal spending.

What should you ask a private lender before signing?

1. What’s the total cost in dollars over the expected term, including establishment, legal, valuation and any line fees?
2. Is interest paid monthly, prepaid or capitalised?
3. What happens if the exit takes longer — is there an extension fee or default rate?
4. What does early repayment cost?
5. Will the lender register a first mortgage, a second mortgage or a caveat?

Commercial lenders don’t all belong to an external dispute scheme. ASIC’s guidance notes that lenders providing only commercial loans aren’t legally required to hold a credit licence or be members of AFCA, so check a lender’s membership and read the contract carefully. Our guide to checking a lender is legitimate walks through it.

Private lending often sits alongside caveat and second-mortgage lenders, who work behind an existing home loan. If your purpose is a tax debt, see who lends to clear ATO debt.

An illustrative example

An invented case for illustration only: a wholesale business has a supplier offering a large discount for bulk stock if paid within ten days. The bank needs weeks. The owner has an investment property with plenty of equity and a firm buyer for that property settling in four months. A private lender advances the funds on a short term against the investment property, with the property sale as the exit. The stock is bought at the discount, sold through the business’s normal channels, and the private loan is repaid at settlement.

Quick checklist before you approach a private lender

• Property address, estimated value and current mortgage balance.
• A written exit plan with realistic timing.
• ID for every borrower and guarantor.

How private lenders price and structure a loan

Private lending is priced for risk and speed, and the structure tends to be simple: a short term, property security in first or second position, and repayment through a sale, a refinance or incoming funds. Many private loans capitalise or prepay the interest for part or all of the term, which means no monthly repayments but a larger amount owing at the end. That can help a business with no spare monthly cash flow, but it raises the stakes on the exit. Ask for every cost in dollars — establishment, legal, valuation, line or monthly fees, default charges and any exit fee — and total them before you compare.

What makes a good private lending exit?

The exit is the single most important part of a private lending application. Lenders want to see that the loan will be repaid on time from a source that doesn’t depend on hope.

• A refinance to a longer-term lender, with a realistic plan for meeting that lender’s criteria — lodged returns, cleared defaults or improved trading.
• The sale of a property or asset, ideally already listed, with a believable price.
• Incoming funds, such as a contract payment, an insurance claim or a settlement, with evidence.

If the exit is vague, the lender will either decline or price the uncertainty heavily. If it’s clear and documented, a private loan can be a practical tool rather than a last resort. Our guides to caveat loans and bridging finance cover two of the most common private lending structures, and a specialist can help you present the exit before any lender sees the file.

Could property equity solve your business problem?

If you have equity and a clear way to repay, there’s a good chance a lender will listen. Send a short enquiry with the property, the amount and the purpose, and someone who works with these lenders daily will say plainly whether a private lender, a non-bank or a bank is the better route. No credit check to ask, no spraying your details around the market, and accurate form answers mean we can line up the right lender on the first attempt.