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What Are Private Lending Business Loans and How Do They Work in Australia?
- Innovate Funding
- 2 days ago
- 5 min read
Australia’s small businesses drive innovation. But accessing capital through banks can be a brick wall. In fact, over 40% of small business loan applications in Australia are rejected by traditional lenders. This is where private lending business loans Australia come in. They offer flexible, fast, and asset-backed alternatives.
In this blog, we’ll explore how non-bank business loans work, when they make sense, and how Australian businesses are using private funding to grow, pivot, and seize opportunities without the red tape.
What Is a Private Lending Business Loan?
A private lending business loan is a type of commercial loan offered by non-bank or private lenders. These lenders include individuals, family offices, mortgage funds, and specialist finance firms. Unlike traditional banks that assess lending based on strict criteria, private lenders focus more on the value of the asset, the business purpose, and the exit strategy.
Key features of private lending business loans Australia:
Asset-backed (typically secured by real estate or business assets)
Fast settlement (commonly within 24 to 72 hours)
Flexible loan terms, usually between 3 to 36 months
Looser documentation and credit requirements
Customised structures based on business needs
When Should You Use a Private Lender?
Private lending is not only for businesses in distress. Many Australian SMEs use non-bank business loans for strategic reasons.
Common scenarios where private lending is suitable:
Urgent capital needs: Fast access to funds to take advantage of opportunities.
Bridge finance: To cover short-term cash gaps before long-term funding becomes available.
Asset acquisition: To purchase stock, equipment, or property.
Development finance: For early-stage property development where banks won’t lend without pre-sales.
Cash flow management: To handle seasonal revenue fluctuations or pay down ATO debt.
Debt consolidation or restructuring: To refinance or consolidate existing debts.
What Types of Private Lending Are Available?
Private lenders offer a variety of business loan types tailored for specific needs.
1. Caveat Loans
Quick, short-term loans secured via a caveat on the borrower’s property. Ideal for urgent funding needs.
2. Second Mortgage Business Loans
These loans allow borrowers to access equity in their property while a first mortgage is still in place.
3. Short-Term Private Loans
Loans ranging from 3 to 12 months. Perfect for bridging gaps or funding a business opportunity quickly.
4. Bridging Finance
Used when buying a new asset before selling an old one. It covers the interim period.
5. Development Finance
Tailored funding for property developers, especially during land acquisition or early works.
How Much Can You Borrow from a Private Lender?
Loan amounts are based on the value of the asset offered as security and the lender’s acceptable Loan-to-Value Ratio (LVR).
Criteria | Typical Range |
Loan Amount | $50,000 – $50 million+ |
Loan Term | 3 – 12 months |
LVR | <75% |
Interest Rate | 8.50% – 12.95% (first mortgage) |
Settlement Time | 1–10 business days |
Private lending rates are higher than bank loans due to the flexibility and speed of service. However, many businesses find the return on investment justifies the cost.
The Private Lending Process in Australia
The process for private lending business loans Australia is streamlined compared to banks.
Step-by-step process:
Initial Enquiry: Submit a brief outline of your loan needs and asset details.
Indicative Offer: Receive proposed terms including interest rates, LVR, and fees.
Valuation & Legal Review: Often a desktop or kerbside valuation is sufficient.
Loan Documentation: Contracts are issued and reviewed.
Settlement: Funds are disbursed, typically within a few business days.
Pros and Cons of Private Lending for Business
Pros:
Fast funding turnaround
Asset-based rather than credit-based
No-doc options available
Custom lending structures
Ideal for short-term funding needs
Cons:
Higher interest and fees compared to bank finance
Shorter repayment terms
Requires a clearly defined exit strategy
Less regulatory oversight compared to traditional lenders
Working with a trusted broker helps navigate these challenges and ensures transparent, fair loan terms.
How to Choose a Trusted Private Lender in Australia
Due to fewer regulations in the private lending space, selecting a reputable lender is essential.
What to look for:
Transparent fee structures
A strong track record in business or property lending
Flexibility in structuring deals
Good communication and responsiveness
Recommendations or partnerships through trusted brokers
Innovate Funding connects businesses with vetted private lenders who offer clear, fair, and fast funding solutions.
Is a Private Business Loan Right for You?
Private business loans work best when you:
Need funding fast
Have equity in property or other assets
Are facing roadblocks with traditional lenders
Have a short-term funding gap or opportunity
Can clearly outline how the loan will be repaid
If this sounds like your situation, private lending could be the smart move to grow or stabilise your business.
Final Thoughts
Access to fast capital is critical in a competitive business environment. Whether you're acquiring property, managing cash flow, or funding a development project, private lending business loans Australia can give you the speed and flexibility that banks often can't provide.
These loans are not just for distressed businesses. They're for savvy operators who know the value of acting quickly and decisively. As always, understanding the terms and planning your exit is key.
Want to discuss your private lending options? Innovate Funding is here to help with transparent advice and access to trusted non-bank lenders.
Frequently Asked Questions (FAQs)
1. What is a private lending business loan?
A private lending business loan is a type of finance provided by non-bank lenders, such as private investors or mortgage funds. These loans are typically secured against property or business assets and are used for short-to-medium-term funding needs.
2. How do private lending business loans work in Australia?
In Australia, private lenders assess loans based on the asset value and exit strategy rather than strict credit requirements. Once a business provides details about its loan needs and security, a lender offers terms. If accepted, the loan can often be settled within 24 to 72 hours.
3. Who can apply for a private lending business loan in Australia?
Any business owner, property developer, or investor with real estate or commercial assets can apply. Private lenders work with borrowers who may not qualify for traditional loans, including those with ATO debt, credit issues, or complex financials.
4. What are the benefits of using private lenders for business loans?
Key benefits include fast approvals, flexible lending criteria, asset-based decision-making, and customised loan terms. These features make private lending ideal for time-sensitive opportunities or when banks say no.
5. Are private business loans more expensive than bank loans?
Yes. Private loans usually have higher interest rates and fees due to the speed, flexibility, and risk tolerance involved. However, the quick access to capital often outweighs the cost, especially for short-term needs.
6. What can private lending business loans be used for?
They can be used for:
Business expansion
Purchasing equipment or stock
Refinancing debt
Property development or acquisition
Cash flow support
Paying ATO debt
7. How much can I borrow from a private lender in Australia?
Loan amounts typically range from $50,000 to $50 million or more, depending on the value of the security and the lender’s criteria. Most private lenders offer up to 75% Loan-to-Value Ratio (LVR) on real estate assets.
8. Do I need a good credit score to get a private business loan?
Not necessarily. Private lenders focus more on the asset and the proposed exit strategy than credit history. Businesses with defaults or irregular income may still qualify.
9. What types of security do private lenders accept?
Most private lenders require real estate security, but some may accept other business assets such as invoices, stock, or equipment. Residential, commercial, and rural properties are commonly accepted as collateral.
10. Is private lending regulated in Australia?
Private lending for business purposes falls outside the National Consumer Credit Protection (NCCP) Act. While there are general legal obligations under contract and corporations law, the same consumer protections as residential loans may not apply. This is why working with a reputable lender or broker is essential.