What’s the Difference Between a Non-Bank Lender and a Private Lender?

In 2024, over 30% of commercial loans in Australia were sourced outside the Big Four banks. That marks a major shift in how businesses access capital. Traditional banks have become known for red tape, rigid lending policies, and slow response times.

Non-bank lenders and private lenders have stepped in as agile, responsive alternatives. They’re more open to deals that banks simply won't consider. While both fall outside the traditional banking system, they are not the same.

If you're a business owner, property developer, or commercial finance broker, knowing the difference could influence your funding strategy, impact the cost of finance, and determine whether a deal gets across the line.

This guide breaks it all down so you can make informed borrowing decisions in today’s evolving financial landscape.

What Is a Non-Bank Lender?

A non-bank lender is a financial institution that provides loans without holding a banking licence. These lenders do not accept customer deposits, which means they are not classified as authorised deposit-taking institutions (ADIs). Despite this, many non-bank lenders operate under similar regulatory oversight for responsible lending, particularly when it comes to consumer credit.

They typically fund loans using wholesale markets, securitisation, or capital sourced from institutional investors. In Australia, this sector has grown significantly in recent years, offering everything from residential mortgages to commercial and development finance. Some of the better-known names in the space include Liberty, Pepper Money, and Thinktank.

Non-bank lenders generally sit between traditional banks and private lenders. They are more flexible than banks but more structured and regulated than private lenders, making them a popular choice for borrowers who may not qualify for a bank loan but still have verifiable income and acceptable credit history.

What Is a Private Lender?

A private lender is typically an individual, a small group of investors, or a company that lends money directly to borrowers, usually secured by real estate. Unlike banks and non-bank lenders, private lenders are not required to follow the same regulatory framework when lending to businesses. This lack of red tape allows them to assess deals based on asset value rather than a borrower's income, credit score, or financial statements.

In many cases, private lending is referred to as asset-based or security-based lending. The key focus is on the underlying property or asset being offered as collateral. If the deal makes sense, the lender can act quickly—often settling transactions in as little as 24 to 72 hours (pending external factors like legal reviews, registering mortgages, etc.). This makes private lending ideal for urgent settlements, unusual deals, or borrowers with complex financial backgrounds.

These lenders often work through brokers or boutique advisory firms and fund loans ranging from short-term bridging finance to multi-million dollar development deals. The terms are usually bespoke and negotiated directly with the borrower or their representative.

At Innovate Funding, we specialise in structuring fast, flexible commercial loans through a curated network of trusted private lenders. Whether it's a last-minute settlement, a project that doesn’t tick the bank’s boxes, or a borrower with a complex profile, we work quickly to find a solution that gets the deal done.

Key Differences Between Non-Bank and Private Lenders

While both non-bank and private lenders operate outside the traditional banking system, their differences are significant. From how they’re funded to how they assess risk, each option offers unique advantages depending on the borrower’s situation.

Non-bank lenders are structured institutions. They operate under responsible lending regulations (especially for consumer loans), have internal credit policies, and often rely on data-driven decision-making. Their approval process is generally quicker than banks, but still involves credit scoring, serviceability assessments, and document verification.

Private lenders, in contrast, take a more pragmatic, deal-by-deal approach. They are often more interested in the asset than the applicant. A strong security property, a reasonable loan-to-value ratio (LVR), and a clear exit strategy may be all it takes to get the deal over the line especially when time is tight or traditional criteria can't be met.

This fundamental difference in approach influences speed, documentation requirements, interest rates, and risk appetite.

Side-by-Side Comparison: Non-Bank vs Private Lender

To make the differences easier to understand, here’s a simple side-by-side breakdown:

Feature	Non-bank lender	Private lender
Type of institution	Licensed finance company	Individual, group, or private company
Regulation	Governed by ASIC and NCCP (for consumer lending)	Less regulated, especially for business/commercial lending
Funding source	Securitisation, wholesale lenders, institutional capital	Private capital (individuals, SMSFs, family offices)
Loan assessment	Based on income, credit, and financials	Based on asset value and exit strategy
Speed to fund	Days to weeks	Typically 3 to 14 days (subject to legal and mortgage registration processes)
Flexibility	Moderate	High – terms are often negotiable
Loan terms	1 to 30 years	Typically 3 to 12 months
Common uses	Full-doc commercial loans, investment purchases, refinancing	Bridging, urgent settlements, construction, special situations

This table highlights how each lender type serves different borrowing needs. It’s not about which one is better—it’s about which one is more suitable for the specific deal or scenario.

When Should You Use a Non-Bank Lender?

Non-bank lenders are a solid option for borrowers who can’t meet major bank criteria but still have some documentation and a reasonably strong financial position. They suit borrowers who need more flexibility than a bank offers but don’t necessarily require the speed or asset-focused nature of private lending.

You might turn to a non-bank lender if you’re self-employed and have non-standard income, or if your credit history includes minor blemishes that a bank might reject. They’re also a go-to option for refinancing, business expansion, or property investment where speed is important but full financials are still available.

Common scenarios include:

• A business owner seeking to refinance a $1.5 million commercial property loan but who doesn't meet serviceability under bank guidelines

• A property investor with two or more mortgages, making a bank nervous due to debt exposure

• A developer needing funding for a site acquisition or early-stage project finance, where traditional valuation or pre-sale conditions may be difficult to meet

Non-bank lenders are also ideal for borrowers looking for slightly more customised terms or repayment structures without stepping too far outside the bounds of traditional lending models.

When Should You Use a Private Lender?

Private lenders come into play when time is critical, the deal is outside standard lending policy, or the borrower can’t provide traditional documentation. These lenders are not constrained by credit scores or income verification in the same way banks or non-bank lenders are. Instead, they focus on the strength of the asset being offered as security and the feasibility of the borrower’s exit strategy.

If you need a fast settlement, are dealing with an unusual asset type, or have a borrower with tax debt, defaults, or mortgage arrears, private lending is likely the best path. They are also suitable for deals involving non-conforming titles, distressed assets, or where funding is needed during legal disputes or business restructuring.

Some typical scenarios include:

• A borrower who needs $2 million in seven days to settle on a commercial property and has a buyer lined up for resale in six months

• A developer needing a short-term injection of funds to complete a project while waiting on delayed pre-sales

• A business with outstanding ATO debt securing funding against unencumbered property to maintain operations

Innovate Funding recently assisted a client who needed $1.1 million within 10 days to settle on an industrial property in Melbourne’s western suburbs. The client had been knocked back by their bank due to an unresolved BAS lodgement and couldn't provide full financials in time. With limited time and a non-standard asset involved, Innovate Funding sourced a private lender who was comfortable with the LVR and security position. The deal was settled within the required timeframe, avoiding penalties and securing a valuable investment opportunity for the client.

Private lenders are solution-focused. If the property stacks up and the risk is manageable, they can move quickly and structure deals to suit unique circumstances—even when traditional lenders won’t engage.

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Interest Rates and Fee Structures: What to Expect

The cost of borrowing varies significantly between non-bank and private lenders, and understanding these differences is key when structuring a deal. Private lending typically attracts a higher interest rate and fee structure due to the increased risk, faster access to capital, and lower documentation requirements. In contrast, non-bank lenders can offer more competitive rates, especially for borrowers with clean credit and the ability to provide full or partial financials.

Here’s a general comparison:

Lender type	Typical interest rate	Fees
Non-bank lender	6% – 12% per annum	Establishment fee, valuation, legal fees, sometimes ongoing account fees
Private lender	8% – 20%+ per annum	Higher establishment fees, lender fees, exit fees, broker or referral costs

With private lending, interest rates are not one-size-fits-all. They vary based on several key factors, including the purpose of the loan (e.g. investment, development, working capital), the loan-to-value ratio (LVR), and whether the security is held under a first or second mortgage. First mortgages with conservative LVRs (e.g. under 65%) will attract more favourable rates, while second mortgages or higher-risk loans generally come with premium pricing.

Private lending is almost always short term—commonly 3 to 12 months—so even though the annual interest rate might be higher, the actual cost over the loan’s life could be manageable, especially if it allows the borrower to seize an opportunity or avoid a larger penalty or loss.

Fees also vary depending on the loan size, complexity, and urgency. Legal costs are typically higher in private lending as deals are often tailored and time-sensitive, requiring more hands-on work from solicitors and lenders.

Which Option Is Right for You?

Deciding between a non-bank lender and a private lender comes down to understanding your financial position, how fast you need the funds, and how much documentation you can provide. It’s not about choosing the cheapest option—it’s about choosing the most suitable one based on the deal’s complexity, time constraints, and your long-term goals.

Non-bank lenders are often the right fit when:

• You need more flexibility than a bank but can still provide financials

• You’re looking for more competitive rates than private lending

• The loan isn’t urgent, but you don’t meet strict bank criteria

• You want a longer-term solution for commercial property, refinancing, or business expansion

Private lenders are ideal when:

• The deal is time-sensitive and needs to settle within days or weeks

• You can’t provide standard documentation

• The property or purpose is outside the scope of institutional lending

• You need short-term funding with a clear exit

At Innovate Funding, we help you assess your options with transparency and speed. We work with a broad network of private and non-bank lenders across Australia, so we can source the right product for your deal—whether it’s urgent funding, complex security, or something outside the box.

Final Thoughts

Australia’s lending landscape has evolved well beyond the big banks. Non-bank and private lenders now play a crucial role in helping business owners, investors, and developers access the capital they need—on terms that work for them. Understanding the differences between the two can help you avoid delays, secure better terms, and ultimately close deals faster.

Non-bank lenders offer flexibility with structure. Private lenders offer speed with simplicity. Both have their place, and the smartest borrowers and brokers know when to use each.

If you’re unsure which option fits your scenario, speak with a commercial lending expert who understands both sides of the market. At Innovate Funding, we tailor every solution to your situation—whether it’s bridging finance, a time-critical settlement, or a longer-term investment loan. When banks say no, we find a way forward.