What Is Private Lending and How Does It Work in Australia?

Private lending is finance provided by private or non-bank lenders rather than a traditional bank. At Innovate Funding, our focus is property-secured lending for eligible business purposes.

Full financial statements are not required for our initial deal assessment. We review the business purpose, funding requirement, property security, existing secured debts and proposed repayment strategy.

Through our Australia-wide private lending service, we arrange funding from $50,000 through private and non-bank lending partners and directly fund selected suitable transactions.

When might a business consider private lending?

A business may consider private lending when its funding requirement, documentation or timing falls outside its bank’s lending criteria.

Innovate Funding considers eligible scenarios involving:

Working capital and supplier payments.
Stock or equipment purchases.
Business expansion.
Business tax debt.
Refinancing existing business debt.
Suitable business-purpose property transactions.
Eligible construction, development and project-completion costs.

The funding should address a defined business need and have a credible repayment plan. A bank decline does not automatically mean a private lender will approve the transaction.

How does private lending work with Innovate Funding?

1. Submit your funding scenario

Provide the borrower’s name and ABN, relevant company or trust details, the business purpose, required loan amount and preferred term.

We also need the security property’s address and estimated value, existing secured debts, your funding deadline and how the proposed loan will be repaid.

Tell us the net amount you need after fees, funded interest and any existing-debt payouts.

2. We assess the proposed structure

We review the business purpose, borrower structure, property security, existing debt and proposed exit to identify whether a funding pathway may be available.

For suitable scenarios, Innovate Funding can generally provide indicative terms within 24–48 hours of receiving sufficient information. These may outline the proposed amount, term, interest, fees, security and key conditions.

Indicative terms are not formal approval or a binding offer of finance.

3. Assessment and documentation are completed

The proposed lender confirms its requirements for the transaction. These may include valuation, title searches, supporting evidence, legal review and loan documentation.

We explain whether funding is being arranged through a lending partner or considered through our own capital, including who the lender is and the applicable costs and conditions.

Formal approval and settlement depend on satisfying the relevant requirements.

4. Funding settles and the loan is repaid

Funds are released once the settlement conditions have been met.

The borrower then meets the facility’s repayment obligations and repays the loan within the agreed term. The repayment source needs to support the amount owing, including applicable interest and fees.

Do I need financial statements for an initial assessment?

No. Innovate Funding does not require full financial statements to complete an initial deal assessment.

Our initial review focuses on the borrower’s business details, funding purpose, property security, existing secured debts and proposed repayment strategy.

Supporting information may include:

Identification for relevant borrowers and guarantors.
A current council rates notice for the security property.
Mortgage statements confirming balances and facility limits.
Evidence supporting the business use of funds.
Documents supporting repayment, such as a sale contract, refinance correspondence or contracted business receipts.
Relevant company or trust documents.

Documentation requirements for formal approval and settlement are confirmed for the particular lender and transaction. Learn more about our no-doc business loan assessment.

How do property security and LVR affect borrowing?

Loan-to-value ratio, or LVR, measures the assessed secured exposure against the lender’s accepted property value.

Innovate Funding’s indicative maximum LVRs are 70% for eligible residential security and 55% for eligible commercial security. Lower limits may apply.

For second mortgages, the assessment considers the existing secured exposure together with the proposed facility, including funded interest and fees. Relevant facility limits and priority arrangements can also affect the assessment.

For example, if a lender accepts a property value of $1 million, existing secured exposure is $500,000 and the proposed gross facility is $150,000, the combined LVR is: ($500,000 + $150,000) ÷ $1,000,000 × 100 = 65%

The proposed gross facility may include costs, so it does not necessarily represent the cash received by the borrower.

Property equity alone does not guarantee approval.

How much can I borrow, and for how long?

Innovate Funding’s minimum loan amount is $50,000. The maximum depends on the lender, property security and individual transaction.

Our typical business-purpose loan terms are 3–12 months, with longer terms subject to lender approval. Construction and development facilities require assessment of the project’s funding needs and timeline.

The term should allow enough time to complete the proposed repayment strategy. An extension requires approval and may involve additional interest and fees.

What is an exit strategy?

An exit strategy explains how the borrower expects to repay the loan by its maturity date.

Depending on the transaction, a proposed exit may involve:

A property sale supported by realistic marketing, contract and settlement timing.
Refinancing supported by a credible pathway to an incoming lender.
Contracted business receipts supported by relevant documents and payment timing.
Another repayment source that the lender can assess and accept.

For construction or development funding, explain how completing the project will lead to sales, refinancing or another source of repayment funds.

The assessment needs to consider whether the expected proceeds will cover the full payout and what happens if the proposed exit is delayed.

What loan structures can be used?

Private business funding can involve first or second mortgages, business bridging finance, equity release, and eligible construction or development facilities. Suitable caveat scenarios may also be considered.

The names describe different aspects of the funding. A business equity-release loan, for example, may be structured through a second mortgage. For a detailed comparison, read what types of loans private lenders offer.

What costs and risks should I review?

Before accepting a private loan, request a breakdown of the interest, establishment and brokerage fees, valuation and legal costs, ongoing charges and discharge costs.

Confirm:

The net funds available at settlement.
How interest is paid, retained or capitalised.
Any minimum-interest or early-repayment conditions.
The expected payout at the proposed repayment date.
The consequences of default or a delayed exit.

Short-term funding can create pressure if a sale, refinance or business payment is delayed. If the loan is not repaid, the property offered as security may be at risk. Obtain independent advice before committing to the facility.

Are all private loans outside consumer credit legislation?

No. The applicable rules depend on the borrower, actual loan purpose and transaction structure. Consumer credit legislation can apply to personal or household borrowing and certain residential investment loans.

Innovate Funding’s service is limited to eligible business-purpose lending. Personal home purchases and personal or household spending fall outside this service.

Having an ABN, offering residential property as security or describing a transaction as an investment does not automatically establish eligibility. The actual use of funds and borrower structure must be assessed.

A documented example: business funding in Penrith

Innovate Funding arranged a $250,000 business-purpose second mortgage behind an existing CBA loan over a Penrith property.

The facility had a six-month term, capitalised interest and a 60% combined LVR. It funded supplier payments and ongoing contracted work, with repayment planned from contracted business receipts. That transaction settled in nine business days.

Read the Penrith second mortgage case study for the transaction’s circumstances and funding structure.

Request an initial deal assessment

Tell Innovate Funding what the funds will be used for, the net amount required, the property available as security, existing debts, your deadline and the proposed repayment source.

You can submit a scenario for initial assessment without full financial statements. Submit your funding scenario or call 02 8919 3639.

For further answers about eligibility, documentation, LVRs, costs and repayment, visit our private lending FAQs.