Private Lending Process in Australia

Private lending has become a mainstream funding solution for Australian borrowers who need speed, flexibility, or alternative assessment methods that traditional banks cannot always provide.

This article explains the private lending process in Australia from start to finish. It is designed to help borrowers understand how private loans are assessed, structured, approved, and repaid, without focusing on specific products or sales outcomes.

This is an educational guide only.

If you are new to this topic, you may also find it useful to start with our overview of private lending in Australia.

What Is the Private Lending Process

The private lending process refers to the steps a borrower goes through when applying for and receiving funding from a private or non bank lender.

While each lender has its own criteria, the overall process is broadly consistent across the industry and centres on asset security and exit strategy rather than traditional income based lending models. Understanding this process helps borrowers prepare properly and avoid delays.

Step One: Initial Assessment and Loan Purpose

The first step in the private lending process in Australia is clarifying the purpose of the loan.

Private lenders typically want to understand:

• why the funds are required

• how the funds will be used

• how long the loan is needed

Clear loan purpose helps lenders determine whether the request fits their risk profile and lending mandate.

Step Two: Property Security Review

Most private loans are secured by real estate.

At this stage, lenders assess:

• property type and location

• market demand and liquidity

• ownership structure and title

• existing debt on the property

Security quality plays a central role in the private lending process in Australia because it underpins risk management.

Step Three: Loan to Value Ratio Assessment

Loan to value ratio, commonly referred to as LVR, measures the loan amount compared to the property’s value.

Lower LVRs generally result in:

• stronger lender appetite

• more flexible terms

• smoother approvals

You can learn more about how this is assessed in our guide to loan to value ratios in private lending.

Step Four: Exit Strategy Evaluation

Exit strategy is one of the most critical components of the private lending process in Australia.

An exit strategy explains how the loan will be repaid at the end of the agreed term.

Common exit strategies include:

• sale of the secured property

• refinance to a traditional lender

• completion and sale of a development

• improved business cash flow

Private lenders assess both the realism and timing of the exit.

Step Five: Loan Structure and Terms

Once the core risk elements are satisfied, lenders structure the loan.

This includes:

• loan amount

• term length

• interest calculation method

• repayment structure

• fees and conditions

Private loans are commonly short term and interest only or capitalised, reflecting their transitional nature.

Step Six: Legal Documentation and Advice

Before settlement, borrowers are typically required to:

• review loan documentation

• obtain independent legal advice

• confirm understanding of terms

This step ensures compliance and transparency within the private lending process in Australia.

Step Seven: Settlement and Funds Release

Once documentation is complete, funds are released at settlement.

Private lenders are often able to settle faster than banks because assessments are less reliant on rigid internal credit models.

This is one reason private lending is frequently used for time sensitive scenarios.

Common Private Lending Structures

The private lending process may involve different loan structures depending on risk and security.

First Mortgage Lending

A first mortgage is the primary loan secured against a property. These loans often offer stronger security positions and are widely used in private lending.

Learn more about first mortgage loans.

Second Mortgage Lending

Second mortgages sit behind an existing first mortgage and allow borrowers to access additional equity without refinancing the senior lender.

More detail is available in our guide to second mortgage loans.

Bridging Finance

Bridging finance is commonly used where funds are needed before an existing property is sold. For context, see our explanation of bridging loans.

How the Private Lending Process Differs From Banks

Banks typically assess borrowers using:

• income verification

• expense analysis

• long term serviceability models

Private lenders focus instead on:

• asset quality

• equity position

• exit certainty

This difference explains why private lending can be appropriate even when bank finance is not available.

Common Delays in the Private Lending Process

While private lending is often faster than bank finance, delays can still occur.

Common causes include:

• unclear exit strategy

• incomplete property information

• unresolved title or ownership issues

• unrealistic LVR expectations

Preparation and clarity significantly improve approval speed.

When Private Lending May Not Be Suitable

The private lending process in Australia may not suit every borrower.

Private lending may not be appropriate where:

• there is no viable exit strategy

• the loan is intended for long term personal use

• the property cannot support the required security position

In such cases, alternative funding options may be more suitable.

Frequently Asked Questions About the Private Lending Process in Australia

How long does the private lending process take?

Timeframes vary, but private lending assessments are often completed faster than traditional bank approvals.

Is property always required as security?

Most private loans are secured by property, although structures vary depending on risk.

Is private lending regulated in Australia?

Yes. Private lending operates within Australian legal frameworks, particularly for business purpose lending.

Can private lending be used short term?

Yes. Many private loans are designed specifically for short term use.