What Is Private Lending? How Non-Bank Finance Works in Australia

Banks decline good deals every day. Not because the borrower is a bad credit risk or the property is worthless — because the deal doesn't fit the bank's credit policy. Too complex. Too fast. Wrong structure. Wrong postcode. Wrong time of the financial year for that particular credit team.

That's the gap private lending fills. And in Australia, it's no longer a fringe market. Private lending — also called non-bank lending — now funds billions of dollars in property and commercial transactions every year. Developers, investors, and business owners use it not as a last resort, but as a deliberate financing strategy.

If you've heard the term but aren't sure exactly what it means, how it works, or whether it's right for your situation, this is the guide.

What is private lending?

Private lending is finance provided by non-bank entities — private credit funds, managed investment schemes, family offices, or high-net-worth individuals — secured against real property. The mechanics are similar to a bank loan: you borrow a sum, it's secured by a registered mortgage (first or second), and you repay it over an agreed term with interest.

The critical difference is in how the deal gets assessed. Banks use rigid credit policies driven by APRA requirements, internal risk weightings, and serviceability calculators. If your application doesn't pass the automated scorecard, it doesn't matter how strong the underlying deal is. You get declined.

Non-bank lenders in Australia take a fundamentally different approach. They assess the deal on its commercial merits: the value of the security, the strength of the exit strategy, the borrower's track record, and the overall risk profile. A human reads your deal. A human makes the decision. That distinction matters more than most people realise.

How non-bank lenders are structured in Australia

Not all non-bank lenders are the same. Understanding who you're borrowing from helps you assess the offer.

Private credit fundspool capital from wholesale or institutional investors and deploy it into secured lending. They operate under managed investment scheme structures regulated by ASIC. These funds have formal credit committees, documented policies, and professional loan management teams. They're the institutional end of the private lending market.

High-net-worth (HNW) lenders are individuals or family offices lending their own capital. Deals are typically arranged through a broker or lending intermediary. HNW lenders can move extremely fast — some will approve and settle in 48 hours — but their appetite varies deal to deal.

Non-bank mortgage managers operate like banks in many respects — branded products, formal application processes, panels of valuers — but they fund through warehouse facilities or securitisation rather than deposits. They sit between traditional banks and pure private lenders in terms of both pricing and flexibility.

At Aurelius Private, we work across all three categories. The right lender depends on the deal — loan size, urgency, security type, and complexity all factor in. We match the transaction to the lender, not the other way around.

What private lenders actually lend on

Private lending in Australia covers a wide range of transaction types. The common thread is that each deal is secured against property and has a clear repayment path.

Construction finance. Funding the build phase of residential, commercial, or mixed-use projects. Drawdowns are staged against construction milestones — slab, frame, lock-up, practical completion. Private construction finance is often faster to arrange than bank construction loans, with fewer pre-sale requirements and more flexible LVR positions.

Bridging finance. Short-term loans that bridge a timing gap — typically when a borrower needs to settle on a purchase before selling an existing asset. Private bridging financesettles in days, not weeks, which is the entire point. If you need a bridge loan in three months, you don't need a bridge loan.

Development finance. Funding site acquisitions, DA-approved projects, or full development cycles from land to completion. Private lenders assess the end value and project feasibility rather than requiring two years of tax returns and a perfect credit score.

First and second mortgages. Standalone secured loans for any commercial purpose — equity release, debt consolidation, business acquisition, or opportunistic property purchases. Second mortgages sit behind an existing first mortgage and are priced accordingly.

Caveat loans. Short-term, fast-settlement loans secured by a caveat on the title rather than a full mortgage registration. Used when speed is the primary concern and the loan term is measured in weeks or months, not years.

Business and working capital.Loans secured against property to fund business operations, cash flow gaps, or growth capital. Useful when the business is strong but doesn't fit standard bank lending criteria.

Typical rates and terms

Private lending rates in Australia vary depending on the lender, the loan-to-value ratio, the security quality, and the deal complexity. As a guide:

First mortgage rates typically start from 7.5% to 9.5% per annum for straightforward deals with strong security. Second mortgages run higher — 12% to 18% is common — reflecting the subordinated position. Caveat loans and very short-term facilities can sit above that, but the cost is offset by terms measured in weeks rather than years.

Establishment fees (sometimes called application or origination fees) range from 1% to 3% of the loan amount. Legal costs are borne by the borrower. Some lenders charge monthly management fees; others don't. Exit fees vary — some lenders charge them, some don't. Ask upfront.

Loan terms range from one month to 24 months for most private lending products. Some non-bank mortgage managers offer longer terms — up to five years — but the sweet spot for private lending is 3 to 12 months. These are transactional loans designed to get a deal done, not long-term hold facilities.

LVRs (loan-to-value ratios) typically cap at 65% to 75% for first mortgages, though some lenders will stretch to 80% or beyond for the right deal. Combined LVRs for second mortgages depend on the first mortgage position and the overall risk profile.

When private lending makes more sense than a bank

Private lending is not always the right answer. If you qualify for a bank loan at 6.5% over 25 years, take it. Banks are cheaper for long-term, straightforward lending. That's their lane.

But banks fall short in specific, recurring scenarios — and that's where private lending earns its place.

Speed.You need to settle in days, not months. A property opportunity won't wait for a bank's 8-to-12-week approval process. Private lenders can assess, approve, and fund within the same week.

Complexity.The deal doesn't fit a standard product. Multiple securities, unusual property types, borrower structures involving trusts or SPVs, construction with no pre-sales — banks struggle with these. Private lenders don't.

Self-employed borrowers.Banks assess income using two years of tax returns and a serviceability calculator. If your income is lumpy, your structure is complex, or you've optimised your tax position, the bank sees low income. A private lender sees the asset base and the deal.

Bank decline.You've been knocked back — not because the deal is bad, but because it doesn't fit the bank's current appetite. Credit policy changes quarterly at the majors. What got approved last year might get declined today, with no change in the borrower's position.

Short-term need.You need capital for six months, not six years. Banks don't offer six-month commercial loans. Private lenders do.

The approval process

A typical private lending approval follows a straightforward path. The borrower (or their broker) submits a deal summary: what the loan is for, the security being offered, the amount required, the proposed term, and the exit strategy — how the loan will be repaid.

The lender assesses the security value (usually via an independent valuation or desktop assessment), reviews the borrower's background, and evaluates the exit. If the deal stacks up, a letter of offer is issued — often within 24 to 48 hours.

Once the offer is accepted, the lender's solicitor prepares loan documents and arranges settlement. For straightforward deals, the entire process from enquiry to settlement can happen within five to seven business days. Complex deals — construction finance with staged drawdowns, for example — take longer to document but can still be approved in days.

Compare that to a bank, where a standard commercial loan application takes four to eight weeks minimum. A construction finance application at a bank can take three to four months. If your deal has a time constraint, the bank process is the risk — not the deal itself.

What private lenders look for

Every lender is different, but the core assessment criteria in private lending are consistent.

Security.What's the property worth? Is it readily saleable? What's the LVR? Private lenders are asset-backed lenders first. The security is the primary risk mitigant.

Exit strategy.How does the borrower repay? Sale of the security, refinance to a bank, project completion and sell-down, or business cash flow. A clear, credible exit is non-negotiable. Lenders who don't ask about the exit are lenders you shouldn't borrow from.

Borrower track record.Have you done this before? Do you have experience with this type of transaction? A developer who's completed five projects is a different risk profile to a first-timer — and will get different terms.

Purpose and structure.What's the loan for, and does the structure make sense? A 12-month bridging loan to buy a site while selling another is clean and logical. A request to borrow 90% against an unimproved rural block with no clear exit is not.

Risks to understand

Private lending is not risk-free, and any guide that tells you otherwise is selling something.

Cost. Private lending is more expensive than bank finance. Rates are higher, fees are higher, and terms are shorter. The cost is the price of speed and flexibility. You need to factor the total cost of the facility into your deal feasibility — not just the headline rate.

Short terms. Most private loans are 3 to 12 months. If your exit takes longer than expected — a development runs over time, a sale takes longer to settle — you may need to extend the loan or refinance. Extensions usually come with additional fees.

Default consequences.If you default on a private loan, the lender has the same enforcement rights as a bank — possession and sale of the security. Because private lenders are often more agile in enforcement, the timeline can be faster. Don't borrow unless you have a credible exit.

Regulation.Private lending in Australia operates under the National Consumer Credit Protection Act (NCCP) for consumer lending, but many commercial and investment loans fall outside NCCP regulation. This means fewer consumer protections apply. Understand what you're signing, and get independent legal advice if you're unsure.

How to find the right private lender

The private lending market in Australia is fragmented. There are hundreds of lenders, each with different appetites, pricing, and specialisations. Some focus on construction. Some only do first mortgages. Some won't lend outside metro areas. Some will fund anything with a pulse and a property.

Working with a specialist broker who operates in the private lending space daily gives you access to the full market — not just whichever lender happens to be running Google ads this week. A good broker knows which lenders are actively writing, what their current appetite looks like, and how to present your deal to get the best terms.

At Aurelius Private, that's exactly what we do. We structure private lending across construction finance, bridging finance, development finance, first and second mortgages, caveat loans, and business working capital — through a panel of lenders we've vetted and work with regularly. We know their credit appetite because we talk to their credit teams every day.

Get a straight answer

If you're weighing up private lending for a deal — or you've been declined by a bank and want to know what your options actually look like — start a conversation with us. We'll tell you within 24 hours whether the deal is fundable, what it's likely to cost, and which lender is the best fit. No obligation, no runaround. Just a straight answer from people who do this every day.