What private lenders require: documents, criteria and what slows a deal down

Private lender requirements in Australia come down to four things: property with enough equity in it, a business reason for the money, a way to pay the loan back that holds up on paper, and the documents that prove all three. That is the whole list. Most of what a bank asks for on top of that, like two years of financials and a serviceability test, does not come into it.

Aurelius Private are private lending brokers. We arrange private lending for Australian business owners, investors and developers, and place it with a lender from a very large panel of private lenders, family offices and high-net-worth investors. Clients ask us the same question before nearly every deal: what do I actually have to give you? This is the answer, stage by stage. It also covers what you will not be asked for, and the four things that hold up a settlement more than anything else.

What a private lender is actually looking at

A bank looks at you. A private lender looks at the deal. The lender wants to know whether the property covers the loan if everything goes wrong, whether the money is going into a business, and whether the exit is real. Your track record and your credit file still get looked at, but they come second to the property and the exit. We covered how that assessment works in our guide to how private lending works in Australia. This piece is about the paperwork that proves it.

Because the lender is looking at less, the document list is shorter. But it is not optional, and it comes in a set order. Send the right things at the right stage and a first mortgage can settle in days. Send them in the wrong order, or leave something out, and the same deal loses a week.

The criteria in numbers

Every lender on the panel has its own limits, but the ranges are consistent enough to plan around.

• Loan size: from $100,000 up. The ceiling depends on the security and the lender, and large deals run well into the tens of millions
• LVR: first mortgages usually sit between 65% and 80% of the property value. Second mortgages, caveats and higher-risk structures can go higher, with the rate priced to match, and up to 90% is possible on the right deal
• Term: usually six to 24 months. Private lending is a bridge, not a long-term loan
• Security: residential, commercial, industrial and land, including rural. The property does not need to be earning income
• Cost: rates start from 7.5% per annum and move with the LVR, the security, the term and the exit. Most loans also carry an establishment fee, typically 1% to 3%, plus legal costs. Every fee is shown in the term sheet before you commit

The LVR is the number to work out first. Take the top of the lender's range, subtract what is already owing on the property, and what is left has to cover the new loan plus the interest and fees for the term. If it does not fit, the deal does not fit, no matter how good the exit is.

Stage one: what we need to give you an answer

Before any application, we want a scenario: the basics of the deal, in an email or through the online scenario form. Six things:

• The security property: address, type, and roughly what it is worth
• What is already owing on it, and to whom
• How much you need
• What the money is for
• How the loan gets paid back, and when
• Your settlement deadline, if there is one

That is enough for us to tell you the same day whether the deal can be placed, roughly what it will cost, and which kind of lender on the panel will want it. We do not need documents or a credit check to give you that answer. If the numbers do not work here, we say so before you spend a dollar on a valuation.

The two answers people rush are the debt and the exit. "About $800K to the bank" is not a number a lender can work with, and "we will refinance" is not an exit until you can say to whom and by when. Get those two right and the answer you get back is a lot more useful.

Stage two: what documents do private lenders require?

Once a lender gives you indicative terms and you accept them, the formal application starts. On a standard first mortgage, second mortgage or bridging deal, the documents needed for a private loan are:

• Photo ID for every borrower and guarantor
• A signed statement of assets and liabilities
• The current council rates notice for the security property, and the land tax notice if you get one
• Statements for any loan already secured against the property, showing the balance and that repayments are up to date
• Proof of the exit: a signed contract of sale, a refinance approval or broker letter, an agent's listing agreement, or proof of money coming in
• A lease, if the security property is tenanted

We do the title search ourselves. It shows who owns the property and every mortgage or caveat registered on it. That is why a second mortgage you forgot to mention never stays hidden for long.

Some lenders charge a commitment fee when you accept the term sheet, and some do not. We tell you which before you sign anything. It is written in the terms, not sprung on you later. How Aurelius Private is paid is a separate question, and the short answer is that the lender pays us at settlement.

Company and trust borrowers: the extra documents

Most business deals are borrowed through a company or a trust, not in a personal name. That means extra documents, and this is where files go wrong most often.

For a company borrower: a current ASIC company extract, photo ID for every director, and a personal guarantee from each director. The loan is to the company, but the directors are on the hook if it does not pay.

For a trust: the trust deed, every deed of variation since it was signed, and a trustee resolution approving this loan and the mortgage. The lender's solicitor reads the deed to check the trustee is actually allowed to borrow and to put up the property as security. If the deed was never stamped in a state that needs it, that has to be fixed before settlement. If the trustee is a company, the company documents are needed too.

Self-managed super funds come up now and then. The rules are tighter, the property has to sit in a separate bare trust, and the lender will want the fund deed, the bare trust deed and the latest audit report. We place these deals from time to time, but fewer lenders do them, so tell us up front.

Construction and development deals need more

A bridging or equity release loan is judged on what the property is worth today. A construction or development loan is judged on what it will be worth when it is finished, and whether you can finish it. So the lender needs to see the whole project, not just the site. On top of the standard pack:

• The development approval or complying development certificate (CDC), with the approved plans and the conditions attached
• A quantity surveyor's cost report, and the fixed-price building contract with the builder's licence details
• The feasibility: what it will sell for, what it will cost to build, and the profit in between
• Presale contracts, if the lender needs a certain number of presales before it will fund
• A capability statement: what you have built before, when, for how much, and how it went

The capability statement is the one developers skip, and it is the one that changes the price. A lender funding a first-time developer charges for the risk that the project stalls. Three finished projects on paper, with the numbers, gets you a better rate and a higher LVR than saying "I have done this before" on the phone. Our pages on construction finance and development finance cover how those loans work and how the money is drawn down.

Valuation, legals and who pays what

The lender orders the valuation from a valuer on its own panel, after you accept the indicative terms. You pay the lender for it, and the lender pays the valuer. If you already have a recent valuation it can help, but expect the lender to want its own on all but the smallest deals, because the valuer answers to the lender, not to you. On a first mortgage the valuation is usually the slowest step, so we get the lender to order it as soon as you accept terms.

The lender's solicitor draws up the loan agreement, the mortgage and any guarantees. Your solicitor checks them. Anyone signing a personal guarantee has to get independent legal advice first, and their solicitor signs a certificate to say they did. Nearly every lender requires this. It rarely holds anything up, as long as you have a solicitor lined up before the documents arrive. If you start looking for one the day the documents land, that is how a week goes missing.

Legal costs, the lender's establishment fee and any prepaid interest normally come out of the loan at settlement. So the only cash you put in before settlement is usually the valuation, plus a commitment fee with some lenders. We put the full cost of the deal in writing before you commit to any of it.

What private lenders do not ask for

On most deals we place, nobody asks for two years of financials, BAS or tax returns. There is no serviceability test, because the loan is judged on the property and the exit, not on whether your income over the last two years would cover the repayments. That is why a private deal can move in days when a bank takes a month or two.

If a lender wants some comfort that the interest will get paid during the term, an accountant's declaration usually does it. That is a short letter from your accountant saying the business can meet the payments. We arranged a $1.725M first mortgage on a Gold Coast apartment purchase on exactly that. 75% LVR, settled inside a week to meet a fixed Wednesday deadline, with close to $200,000 in cash out on top. No financials and no serviceability test. One letter from the accountant did it.

One document most borrowers have never seen before is the business purpose declaration. Most lenders require it. You sign to confirm the loan is mainly for business or investment. That is what keeps the loan outside the National Consumer Credit Protection Act, the law that covers personal and home loans, and lets a private lender write it at all. It has to be true. If the money is really for personal use, or it is going into the home you live in, it is a consumer loan. That belongs with our affiliated brokerage, Aurelius Capital, not with us. It is why we ask what the money is for at the very start.

The four things that hold up a settlement

Between accepting terms and settling, the same four problems cause most of the delays we see.

The payout figure from your current lender. If the new loan is paying out an existing one, your current bank has to give a payout figure and sign off on the discharge. Banks are slow at this, and slower again if you have not signed the discharge request. Sign it the day you accept terms. We chase the bank, but we cannot sign for you.

Something on the title or the credit file you did not mention. A caveat from a supplier, a second mortgage from an old private loan, or an ATO debt that has been sitting for a year. All of these show up in the searches. None of them has to kill the deal, but a surprise at document stage means the lender either reprices or walks away. Tell us at the start and it gets built into the deal from day one.

Company or trust documents that are missing or wrong. A trust deed without its variations, a resolution signed by the wrong trustee, a director who has resigned but is still listed with ASIC. Each one is a round trip to your accountant or solicitor, and each round trip is a day or two.

An exit that sounds good but has nothing behind it. "Refinance to the bank in six months" is a good exit if there is a pre-approval, a broker letter, or a clear reason the bank will say yes then when it is saying no now. Without that, the lender will shorten the term or ask for a backup exit. Put the proof in the file before the lender asks for it.

The common thread is honesty up front. A private lender can price almost anything it knows about at the start. It cannot price what it finds out at the end.

How long it takes when the file is right

With a complete scenario, you get an indicative answer from us the same day. The lender's formal approval takes two to five business days once the documents are in and the valuation is back. A caveat loan or a clean first mortgage can settle within days of approval. Construction and development loans take two to four weeks from terms to the first drawdown, because the QS report, the building contract and the legal work all have to line up. A bank takes four to eight weeks on the same deal at best, and a bank construction loan often takes more than three months.

Frequently asked questions

What documents do private lenders require in Australia?

Private lenders in Australia require photo ID for every borrower and guarantor, a statement of assets and liabilities, the current rates notice, statements for any existing loan on the property, and proof of the exit, such as a contract of sale or a refinance approval. Company borrowers add an ASIC extract and director guarantees. Trusts add the deed, any variations and a trustee resolution. Construction deals add the DA, plans, QS report, building contract, feasibility and a capability statement. As private lending brokers, Aurelius Private collects the pack once and takes it to the lender.

Do private lenders need tax returns or financial statements?

Most private lenders do not need tax returns or financial statements on a property-secured deal. The loan is judged on the property, the purpose and the exit, not on two years of income. If a lender wants comfort that the interest can be paid during the term, an accountant's declaration usually covers it. Business capital and cash-flow loans are the exception and can need bank statements or management accounts.

What LVR will a private lender go to?

First mortgages from private lenders usually sit between 65% and 80% of the property value. Second mortgages, caveats and higher-risk structures can go higher, with the rate priced to match, and up to 90% is possible on the right deal. The LVR has to cover any existing loan on the property plus the new loan, interest and fees for the term.

Do private lenders do a credit check?

Yes, private lenders see your credit file, but they treat it as background rather than a gate. A default, arrears or a tax debt usually changes the rate and how much they will lend, not whether the deal can be done. The property and the exit carry the decision. There is no credit check at scenario stage. It happens as part of the formal application.

Who pays for the valuation on a private loan?

The borrower pays for the valuation on a private loan. The lender orders it from a valuer on its own panel after you accept the indicative terms, you pay the lender, and the lender pays the valuer. It is usually the only cash you put in before settlement, apart from a commitment fee with some lenders. Legal costs and the establishment fee normally come out of the loan at settlement.

Do I need a solicitor for a private loan?

Yes, you need a solicitor for a private loan. The lender's solicitor draws up the loan and security documents and your solicitor checks them. Anyone signing a personal guarantee has to get independent legal advice first, and their solicitor signs a certificate to say they did. Line up a solicitor when you accept terms so the documents do not sit waiting.

What is a business purpose declaration?

A business purpose declaration is a signed statement that the loan is mainly for business or investment. It keeps the loan outside the National Consumer Credit Protection Act, the law that covers personal and home loans, and lets a private lender write it. Most lenders require one. If the real purpose is personal, it is a consumer loan and needs a licensed consumer broker instead.

How long does a private loan take to settle?

A private loan can settle within days of approval on a caveat or a straightforward first mortgage. Aurelius Private, as your broker, gives an indicative answer the same day from a complete scenario, and the lender's formal approval takes two to five business days once the documents are in and the valuation is back. Construction and development loans take two to four weeks from terms to the first drawdown. What changes the timing is how quickly your documents, the valuation and the payout figure from any existing lender come in.

Put the scenario in front of us

You do not need the full pack to start. You need the six things from stage one, and straight answers on debt, purpose and exit. Submit the scenario and we will tell you the same day whether it can be placed, what it will cost, and exactly which documents we need next, in the order the lender wants them.