Private lender vs bank: which is right for your commercial deal?
Private credit is non-bank lending, structured deal-by-deal outside the ADI system. Aurelius Private are private lending brokers — we arrange commercial-purpose deals across Australia on a panel of 131+ private lenders, and we refer standard commercial files to banks when that's the right outcome. We see both sides of this decision every week.
There's no universal answer to the private lender vs bank question. It comes down to the deal in front of you. Here's how we weigh it for Australian commercial property borrowers.
The deal-type matrix
Every commercial financing decision starts with the same question: does this file sit inside bank credit policy, or doesn't it? Everything else follows from the answer. The matrix below maps the common deal types to where the capital should come from.
| Deal type | Bank debt | Private credit | Deciding factor |
|---|---|---|---|
| Stabilised commercial, tenanted, LVR ≤60%, clean covenant | ✓ First choice | Bridge or refi only | Bank wins on rate; serviceability test passed; no timing pressure |
| Construction or development (residential, mixed-use, commercial) | Conditional | ✓ Most deals | Bank pre-sale thresholds and drawdown conditions rarely match the build programme; private writes to 70–80% TDC |
| Time-critical bridging: settlement required in under 3 weeks | ✗ | ✓ | Banks can't approve in that window; private first-mortgage bridging settles in 5–10 business days |
| High-LVR commercial (>65%) | ✗ | ✓ Senior or mezz | Banks cap at 50–65% on most commercial stock; private panel writes to 75% senior, 80–85% with mezzanine |
| Vacant or partially-leased security | ✗ | ✓ Bridge to stabilisation | Banks require cashflow covenant; private underwrites to asset value with a credible exit |
| Complex entity: trust, SMSF, multiple titles, cross-collateral | Difficult | ✓ | Private lenders assess security and exit; entity structure rarely blocks the deal |
| Special situations: asset-rich-cash-poor, business disruption, tax liability bridge | ✗ | ✓ | Outside bank credit appetite entirely |
When bank debt wins
The bank is the right answer when the asset is stabilised and tenanted, the borrower has two years of clean financials, the LVR sits at or below 60%, and nobody is in a hurry. Investment-grade commercial files at major banks are pricing at 6.5–7.5% p.a. in 2026.[3] That's 2–6 percentage points under what private credit charges. On a $3M facility held three to five years, that gap is real money.
Bank credit policy also suits hold-forever strategies. Own the asset for a decade with no exit event and no construction risk? Bank-term debt is cheaper, longer, and more appropriate.
The catch is timing. Commercial credit approval at the majors usually runs 6–10 weeks from application to settlement. If your file sits cleanly inside policy and you can wait that out, start with a bank, not a broker placing private credit.
When private credit wins
Speed
A commercial deal that needs to settle in two to three weeks cannot go through a bank. First-mortgage bridging financewith a private lender settles in 5–10 business days. Caveat and second-mortgage positions settle in 48–72 hours. Missing a settlement date on a commercial contract is expensive. Private credit exists to absorb that timing risk when a deal won't hold.
Construction and development
Construction financeat a bank requires satisfying pre-sale thresholds, progressing through bank-mandated quantity surveyor cycles, and meeting drawdown conditions that frequently don't align with the developer's actual build programme. Most residential and mixed-use development finance in Australia runs through non-bank lenders: senior debt to 70% of total development cost, with mezzanine available to 85% TDC on the right deal. Banks participate, but on narrower terms that exclude a significant share of the market.
High LVR
Banks write commercial property to 50–65% LVR on most asset classes. When the deal requires 70–75% senior, or a senior-plus-mezzanine stack to 80–85%, bank policy is not the right starting point. Private lenders on the non-bank panel write to those LVR points as standard product. Second mortgageand mezzanine positions can also sit behind bank first mortgages, structured within the first-mortgagee's consent requirements.
Complex security and entity structures
Banks run income-based credit assessment, and entity complexity — trusts, SMSFs, multi-title cross-collateral arrangements — adds friction that often stalls or kills the application. Private lenders assess security and exit. This matters for property investors using discretionary trusts or SPVs that the majors require to be restructured before they'll proceed. The deal is the same; the path through is different.
Vacant and partially-leased assets
A commercial property without a tenant in place fails the bank's cashflow serviceability test. The private credit assessment sizes the deal against the asset value and a credible re-tenanting or sell-down exit within 6–18 months. Bridging into a vacant commercial asset, or through a lease-up period, is one of the most common deal types we structure and place.
The cost trade-off
Private credit costs more.
In 2026, private commercial lenders price stabilised files at 9–11% p.a., with construction and higher-LVR positions ranging to 14% p.a.[3] Add origination fees of 1–2% and you have the total cost of capital for a 6–24 month term.
Pay the premium when the cost of missing the deal is bigger than the extra interest, or when no bank will touch the file whatever the rate. Don't pay it when you'd qualify for bank debt, you're not under time pressure, and the higher rate buys you nothing. Private credit is expensive money with a specific job to do. Know the job before you take it.
APRA's DTI limits are shifting the market
From 1 February 2026, APRA introduced debt-to-income limits that constrain how many high-DTI loans ADIs can write.[2] For commercial borrowers carrying existing property debt, this has narrowed bank appetite on a subset of files that would previously have been approved. The RBA's March 2026 Financial Stability Review noted that private credit now accounts for approximately 11% of business lending, with non-bank volumes outgrowing the ADI sector.[1]
The major banks aren't going anywhere. It's a policy-driven gap that private credit fills while it exists, and the gap is wider in 2026 than it was two years ago.
Exit strategy is not optional
Private credit is short-term by design: 6 to 24 months is standard, 36 months is the outer edge for most structures. The exit must be defined at entry. Bank refinance once the asset stabilises, pre-sales at development completion, equity raise, or asset sale: the plan needs to be on the table when the deal is structured, not when the term expires.
Borrowers who enter private credit without a clear exit end up refinancing at elevated cost or selling under pressure. Aurelius Private maps the exit as part of structuring every deal, before it goes to a lender on the panel.
For more background on what private lending is and how it works, see our full overview.
Got a deal?
Got a deal to size? Submit the scenario to Aurelius Private. We come back within four business hours with an indicative structure, lender path, and pricing band — before any formal application. Submit a scenario here.
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