How Innovate Funding Structured a Growth Solution at 9% With a Non-Bank Loan

This is a real Australian non-bank lending case study from late 2024. An established Sydney services business needed $475,000 to fund a competitor acquisition with a 28-day settlement deadline. The bank could approve the deal, but only over 8 to 10 weeks. The vendor had a competing offer and was not willing to wait. Innovate Funding structured a private first mortgage at 9% p.a. against the directors' unencumbered commercial premises, settled in 8 business days, and the acquisition completed cleanly inside the deadline.

This guide walks through the full deal: the borrower's situation, why the bank could not help inside the window, the structure that made the acquisition viable, the numbers in detail, the timeline from enquiry to settlement, and the eventual exit. Identifying details have been generalised. The financials, structure, and outcome are real. Use it as a reference for understanding how a sub-$500K non-bank loan at single-digit rates is built and priced for an Australian business acquisition.

The Borrower's Situation

The borrower was an established services business in outer metropolitan Sydney, generating $2.4 million in annual revenue with healthy operating margins. The directors had identified an opportunity to acquire a smaller direct competitor: a deal that would add $800,000 of contracted annual revenue, consolidate market share in their region, and bring two senior staff with established client relationships into the merged business.

The acquisition price was $650,000, inclusive of plant, equipment, vehicle fleet, transferring client contracts, and goodwill. Directors held $175,000 in available business cash and were prepared to commit it to the deal. The funding gap was $475,000, needed within 28 days to clear settlement under the asset purchase agreement.

Why the Bank Could Not Help

The directors approached their existing major bank first. The bank's commercial credit process is governed by responsible lending standards under ASIC credit licence rules and internal serviceability frameworks. The bank's response was technically positive but practically unworkable on three fronts:

• Credit timeline: The bank's full commercial credit assessment for an acquisition file required 8 to 10 weeks. The vendor's settlement deadline was 28 days. The two timelines could not be reconciled.

• Documentation requirements: The bank required a full business valuation of the target (4–6 weeks), 12 months of combined financial projections for the merged entity, and a revised serviceability model. None could be produced inside the window.

• Competing buyer: The vendor had a confirmed competing offer at the same price from another buyer with cash funding. Any delay risked losing the deal entirely. The bank's process did not flex on the timeline.

The directors' broker recommended pivoting to a non-bank private first mortgage against the directors' unencumbered commercial premises, with a planned exit through a bank refinance once the merged entity built 12 months of trading evidence.

Why a Non-Bank Loan Was the Right Structure

The structure made sense for four reasons:

• Speed-to-settlement: Indicative offer in 24 hours, full settlement target inside 14 business days. Comfortably ahead of the vendor's 28-day deadline.

• Strong security: Directors' commercial premises valued at $950,000 unencumbered. The $475,000 facility represented a 50% LVR, which sat at the lower end of any private lender's risk band and supported the lowest available rate.

• Single-digit rate: At 50% LVR on commercial security with clean borrower credit, Innovate Funding priced the facility at 9% p.a. on an interest-only structure, materially below the typical 9.95%–11.0% p.a. range for similar files.

• Clean exit path: The 18-month term gave the merged business 12+ months of trading evidence, sufficient to support a major bank commercial loan refinance at the standard variable around 7.50%–8.50% p.a.

A second mortgage alternative was considered but ruled out because the commercial premises were already unencumbered, making a clean first mortgage the simpler structure. A caveat loan was too short for the 18-month bank refinance timeline.

How We Structured the $475K Facility

The deal moved through five sequential stages:

1. Indicative offer issued (Day 1). Innovate Funding issued a letter of offer at 9% p.a., interest-only, over 18 months at 50% LVR. Establishment 1.50% ($7,125). Conditions precedent: short-form valuation, identity verification, business purpose declaration, and clean ATO portal.

2. Property valuation ordered and delivered (Day 2 to Day 5). Panel commercial valuer attended the directors' premises Day 2. Short-form valuation issued Day 5 at $945,000, marginally below the directors' estimate. LVR re-confirmed at 50.3%. Cost $850.

3. Loan documents and acquisition contract review (Day 4 to Day 7). Loan documents drawn Day 4. Acquisition contract reviewed by lender's solicitor in parallel. Borrower signed Day 7.

4. Identity verification and business purpose declaration (Day 5). AML checks and self-declaration of business purpose completed. Trust and company structure verified.

5. Settlement and registration (Day 8). First mortgage registered with NSW Land Registry Services Day 8. Net funds of $466,375 advanced to the borrower's solicitor's trust account same day, with $7,125 establishment, $850 valuation, and approximately $1,650 in legals deducted. Acquisition settlement followed at Day 19.

The Numbers in Detail

Transparent breakdown of the $475K facility:

• Gross facility: $475,000.

• Rate: 9% p.a., interest-only servicing, monthly payments of approximately $3,562.50.

• Term: 18 months, with extension option.

• Total interest at month 18: Approximately $64,125 across the full term.

• Establishment fee: $7,125 (1.50%).

• Valuation: $850.

• Legal fees: Approximately $1,650.

• Net cash to settlement: Approximately $466,375.

• Estimated total cost over 18 months: Approximately $73,750, equating to 15.5% of the gross facility across the term.

• LVR: 50.3% at settlement.

On the broader deal: the $475,000 facility unlocked an $800,000 annual contracted revenue stream, with operating margins above 25%. The first 12 months of additional gross profit alone exceeded the $73,750 all-in cost of the loan by an order of magnitude. The maths supported the rate premium of private finance over a deal-killing bank wait.

How the Borrower Used the Funds

The $466,375 net advance was deployed across four uses:

• Asset purchase settlement: $427,500 toward the cash component of the $650,000 acquisition price (combined with the directors' $175,000 own cash and $47,500 vendor finance from the seller).

• Stamp duty and legal fees: $22,000 for asset transfer stamp duty and acquisition legal costs.

• Senior staff retention payments: $10,000 in retention bonuses for two senior staff members transitioning into the merged business.

• Working capital buffer: $6,875 retained as working capital insurance against integration costs in the first 60 days.

The Exit and the Outcome

The exit strategy at offer was a major bank commercial loan refinance once the merged entity reached 12 months of clean combined trading. The actual outcome:

• Acquisition delivery: Settled cleanly inside the 28-day deadline. Vendor's competing buyer dropped out at Day 22.

• Revenue integration: Combined revenue reached $3.1 million annualised by month 6, slightly below the $3.2M target, with margins maintained.

• Trading evidence built: 12 months of combined BAS lodgements completed by month 14.

• Bank commercial refinance: Major bank approved a $475,000 commercial loan against the same premises at 7.95% p.a. variable, settled at month 16.

• Final private loan payout: Approximately $487,500 (including final month interest and discharge fee).

• Net business outcome: Acquisition retained, merged business added $800K of contracted revenue, margins maintained, and senior staff retained. Total cost of capital across the private bridging period (16 months): approximately $66,500, against $200,000+ of additional gross profit generated.

Lessons for Other Borrowers

Generalisable takeaways:

• Speed beats rate when the deal is real: The 9% p.a. private rate was higher than a bank loan at 7.50%, but the bank's 8 to 10 week timeline would have lost the deal entirely.

• Low LVR unlocks low rates: At 50% LVR on commercial security with clean credit, a single-digit private rate was achievable. Higher LVR or weaker credit would have priced this file at 11%–13% p.a.

• Plan the exit at offer: The 18-month term aligned with the realistic timeline for a bank refinance once trading evidence existed. Without the exit, the loan would have been expensive permanent debt.

• Match the structure to the security: Unencumbered commercial premises supported a clean first mortgage. A second mortgage or caveat would have priced higher and added complexity.

• Compare the cost to the value, not just the bank rate: $73,750 of total cost against an $800,000 annual revenue stream is exceptional value.

Frequently Asked Questions

Can private lending really fund a business acquisition?

Yes. Business acquisitions are one of the most common use cases for private property-secured lending. The loan is secured against real property (not the business being acquired), and the exit is typically a refinance to a bank once the merged entity has sufficient trading history.

What rate can I expect for a similar deal?

Rates depend on the LVR, property type, and deal complexity. This deal achieved 9% p.a. at 50% LVR against unencumbered commercial property. Higher LVRs or weaker security typically attract rates in the 9.95%–13% p.a. range. See our private lending rates guide for detail.

How do I know if private lending is worth the cost for my acquisition?

Compare the total interest cost against the commercial value of the opportunity. If a $25,000–$75,000 interest bill secures a revenue stream worth many multiples of that, the maths supports the decision. If the acquisition margin is thin and the payback uncertain, the cost may not be justified.

What is the minimum LVR for the best rate?

Sub-50% LVR on metropolitan residential or commercial security with clean credit typically attracts the lowest end of the private lending rate range. Above 70% LVR, the rate steps up materially.

How fast can a similar deal settle?

Most non-bank business acquisition files settle in 7 to 14 business days from initial enquiry. Files with simple security, clean credit, and a complete submission pack on Day 1 can settle in 5 to 7 business days.

Can I do this with residential property as security?

Yes. Residential property is widely accepted as security for business-purpose loans. Metropolitan residential typically attracts the lowest rates and highest LVRs. See our secured business loan detail.

Is the interest tax-deductible?

For business and investment-purpose borrowing, interest is generally deductible in the year incurred. The Australian Taxation Office outlines the deductibility framework. Always confirm specific deductibility with a registered tax agent.

The Bottom Line on the Growth Solution Case Study

This deal is a clean example of when a non-bank loan beats a bank loan: a deadline the bank cannot meet, strong security supporting low LVR, clean credit supporting a single-digit rate, and a clear exit path through a bank refinance once trading evidence catches up. The 9% p.a. headline rate is high relative to bank pricing but a fraction of the value created by closing the acquisition.

The framework generalises across Australian SME acquisitions in 2026. Strong property equity, a viable target, a deadline-driven seller, and a credible exit. Match these elements and a non-bank loan delivers exactly what it is built for: speed and certainty at a manageable cost premium.

If you have an acquisition or growth opportunity with a tight deadline, talk to Innovate Funding for an indicative offer within 24 hours. Visit our knowledge hub for more guides, or contact us to discuss your scenario.