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How to Secure Business Finance With Private Lending
- Jan 20, 2025
- 4 min read
Updated: Apr 9
Private lending has become a common and legitimate funding option for Australian businesses that need flexibility, speed, or alternative assessment methods compared to traditional bank finance.
This guide explains how to secure business finance with private lending, including how lenders assess applications, what security is required, how exit strategies work, and when private lending may be appropriate for business use.
This content is educational only and does not promote specific loan products.
If you are unfamiliar with private lending, you may find it helpful to begin with our overview of private lending in Australia.
What Is Private Lending for Business Finance
Private lending refers to loans provided by non-bank lenders and private credit funds rather than major banks. These loans are commonly used for business or investment purposes and are typically secured by property or other assets.
Unlike bank loans, private lending focuses less on income based serviceability and more on asset quality, equity position, and exit strategy. Many lenders offer no doc loans where traditional income documentation is not required.
This approach allows private lenders to fund business scenarios that banks may decline due to policy restrictions rather than actual risk.
Why Businesses Use Private Lending
Understanding how to secure business finance with private lending starts with understanding why businesses choose this option.
Common reasons include:
urgent funding timeframes
complex business structures
irregular or self employed income — often suited to bad credit business loans
property backed funding requirementstransitional or short term finance needs
Private lending is often used strategically rather than as a last resort.
How Private Lenders Assess Business Finance Applications
Private lenders assess business finance applications differently to banks.
Security Comes First
Most private business loans are secured by property. This may include:
commercial property
residential property used for business purposes
mixed use assets
The location, marketability, and existing debt against the property are critical factors.
Loan to Value Ratio Assessment
Loan to value ratio, commonly referred to as LVR, measures the loan amount compared to the value of the security.
Lower LVRs reduce lender risk and generally improve approval outcomes.
You can learn more about how this works in our guide to loan to value ratios in private lending.
Exit Strategy Requirements
An exit strategy explains how the loan will be repaid at the end of the agreed term.
Common exit strategies include:
refinance to a traditional lender
sale of the secured property
business cash flow improvements
completion and sale of a development
Private lenders assess both the credibility and timing of the exit strategy before approving funding.
A strong exit strategy is often more important than current income when securing business finance with private lending.
Common Types of Private Business Finance Structures
Private lending can be structured in several ways depending on the business need.
First Mortgage Business Loans
A first mortgage loan is the primary secured loan registered against a property. These loans are often used where speed and certainty are required.
Learn more about first mortgage loans.
Second Mortgage Business Loans
Second mortgages sit behind an existing first mortgage and allow businesses to access additional equity without refinancing the senior lender.
More information is available in our guide to second mortgage loans.
Bridging Finance for Businesses
Bridging finance is used when funds are needed before another transaction completes, such as a property sale or refinance.
For context, see our explanation of bridging loans.
Typical Loan Terms and Costs
Private business loans are usually:
short to medium term
interest only or capitalised
structured for a specific business purpose
Interest rates are typically higher than bank loans. This reflects:
faster access to funds
flexible assessment criteria
reduced reliance on income verification
Businesses should assess total cost in relation to timing, opportunity cost, and exit outcomes rather than interest rate alone.
Regulatory Context for Business Private Lending
Private business lending in Australia operates within established legal frameworks.
Many private business loans are structured as business purpose facilities and may be exempt from consumer credit legislation. Borrowers are typically required to obtain independent legal advice before settlement.
Understanding this context is essential when learning how to secure business finance with private lending.
Common Mistakes to Avoid
Businesses seeking private lending should avoid:
unclear or unrealistic exit strategies
overestimating property value
requesting excessive LVRs
using short term finance for long term needs
Preparation and realistic structuring significantly improve approval outcomes. Explore our full range of services or contact us to discuss your requirements.
When Private Lending May Not Be Suitable
Private lending may not be appropriate where:
there is no viable exit strategy
the loan is intended for long term personal use
the business cannot support repayment or exit
In these cases, traditional bank finance or alternative funding options may be more suitable.
Frequently Asked Questions About How to Secure Business Finance With Private Lending
How to secure business finance with private lending if a bank has declined?
Private lenders focus on asset security and exit strategy rather than income serviceability alone.
Is private lending suitable for short term business funding?
Yes. Many private business loans are designed specifically for short term or transitional use.
Is property always required as security?
Most private business loans are secured by property, although structures vary.
Is private business lending legal in Australia?
Yes. It operates within Australian lending and property law frameworks.
