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Private Lending in Australia

Private lending in Australia refers to asset-backed loans provided by non-bank and private lenders outside traditional banking criteria. These loans are commonly used for business, investment, and time-sensitive transactions where speed, flexibility, or structure are more important than conventional serviceability metrics.

 

Private lending plays a critical role in Australia’s finance market by supporting transactions that banks cannot accommodate due to policy constraints, complexity, or timing.

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This page explains how private lending works, when it is used, how lenders assess risk, and how different private-lending solutions fit together.

What Is Private Lending?

Private lending is a form of non-bank finance where loans are assessed primarily on:

  • Asset quality

  • Loan structure

  • Exit strategy

 

Rather than relying solely on income verification or standard serviceability models, private lenders focus on risk mitigation and recoverability. Private loans are typically:

  • Secured against real property

  • Short to medium term in nature

  • Structured for business or investment purposes

  • Designed to solve specific funding problems

Private lending is not a replacement for traditional banking. It is a specialised funding solution used where banks are unsuitable or unavailable.

Where We Lend

How Private Lending Differs From Bank Lending

Traditional banks prioritise long-term affordability and uniform credit policy. Private lenders prioritise transaction viability. Key differences include:

  • Faster assessment and settlement

  • Flexible borrower structures (companies, trusts, complex ownership)

  • Asset-focused risk assessment

  • Greater reliance on exit strategy

  • Willingness to fund non-standard transactions

This flexibility allows private lenders to support transactions that would otherwise stall or fail.

When Is Private Lending Used?

Private lending is commonly used in situations where timing, structure, or risk profile fall outside bank criteria.

Typical scenarios include:

  • Time-sensitive property purchases

  • Construction or development funding

  • Short-term business funding

  • Working capital secured against property

  • Bridging finance between transactions

  • Refinancing distressed or non-performing loans

Private lending is most effective when used strategically, with a clear plan to transition to long-term finance or complete a defined exit.

How Private Lenders Assess Risk

Private lenders assess risk differently from traditional banks, focusing on downside protection rather than borrower profile alone.

Security Quality

Lenders prioritise:

  • Property type and location

  • Market depth and resale liquidity

  • Valuation reliability

The secured asset underpins the entire transaction.

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Loan-to-Value Ratio (LVR)

Private loans are assessed using conservative LVR limits to manage market risk. Loans may be structured as:

  • First mortgage loans (senior security)

  • Second mortgage loans (subordinate security behind an existing lender)

Subordinate lending requires stronger equity buffers due to increased risk.

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Exit Strategy

Every private loan must have a clear, realistic exit. Common exits include:

  • Refinance into a bank or long-term facility

  • Sale of the secured property

  • Capital injection from a verifiable source

Exit strategy strength is often the deciding factor in approval.

Core Private Lending Solutions in Australia

Private lending is not a single product. It is a suite of specialised solutions, each designed for a specific use case.

Property-Based Lending

  • First mortgage loans

  • Second mortgage loans

  • Construction loans

  • Development loans

  • Caveat loans

These solutions focus on funding property-related transactions at different stages of ownership, construction, or development.

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Business & Cashflow Solutions

  • Secured business loans

  • Short-term business loans

  • No-doc loans

  • Bad credit business loans

  • Unsecured business loans

These facilities support businesses where traditional finance is unavailable due to time, documentation, or credit constraints. Each solution serves a different purpose and is assessed independently.

Consumer vs Business Lending

Most private lending in Australia is structured for business or investment purposes and is therefore NCCP-exempt.

However, limited consumer lending does exist. On this site:

  • Business and investment lending form the core offering

  • Consumer lending is limited to consumer bridging loans only

This distinction is critical for both compliance and borrower suitability.

Why Private Lending Applications Are Declined

Private lenders will decline applications when risk cannot be adequately mitigated. Common reasons include:

  • No clear or realistic exit strategy

  • Over-leveraged or illiquid security

  • Inflated or unsupported valuations

  • Consumer-purpose loans incorrectly presented as business-purpose

  • Insufficient equity to support the proposed structure

Declines are typically structural rather than personal. Proper preparation significantly improves outcomes.

Why Private Lending Requires Careful Structuring

Private lending offers flexibility, but it is not suitable for every borrower or transaction. Risks may include:

  • Higher costs than bank finance

  • Shorter loan terms

  • Reliance on exit execution

  • Exposure to market timing

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For this reason, private loans must be:

  • Appropriately sized

  • Conservatively structured

  • Supported by realistic exit strategies

Poorly structured private lending can create unnecessary financial pressure.

How Innovate Funding Approaches Private Lending

Innovate Funding approaches private lending with a focus on structure, risk clarity, and exit viability. This includes:

  • Assessing whether private lending is appropriate

  • Matching transactions to suitable lenders

  • Structuring facilities around defined exits

  • Avoiding unnecessary complexity or over-leverage

Private lending is treated as a strategic tool, not a default solution.

Private Lending in Australia – Frequently Asked Questions

Is private lending legal in Australia?
Yes. Private lending is legal and widely used for business and investment purposes.

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How fast can private loans settle?
Depending on complexity, settlements can occur within days rather than weeks.

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Are private loans safe?
When structured correctly with appropriate security and exit strategies, private lending is a legitimate and widely accepted funding solution.

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What properties are acceptable as security?
Residential, commercial, industrial, and development sites are commonly accepted, subject to location and market depth.

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Can private loans be refinanced later?
Yes. Many private loans are designed as interim solutions pending refinance or sale.

Understanding Your Options

Private lending in Australia provides access to capital where traditional finance is unsuitable or unavailable. When structured correctly, it can enable transactions to proceed efficiently and safely. Understanding how private lending works and which solution fits your situation is essential before proceeding. From here, each private-lending solution is explored in detail to explain:

  • When it is used

  • How it is assessed

  • What risks to consider

This ensures borrowers understand not just how to borrow, but how to exit successfully.

Get Started Today

Whether you're in New South Wales, Queensland, Victoria, or anywhere in between Innovate Funding is ready to help. We bring 20+ years of combined experience in private lending and specialise in non-bank loans that get results, fast.

 

Call us on 02 8919 3639 or enquire online to discuss your state-specific lending needs.

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