Quick answer
Private lenders lend investors' money, usually short term and secured by a first or second mortgage over residential or commercial property. They focus on the value of the security and how the loan will be repaid — a refinance, a sale or an incoming payment — more than on tax returns or credit history. That makes them useful for urgent, untidy or time-limited situations, at a higher cost than bank finance.
Key points
- Security and exit strategy drive the decision more than financial statements.
- Common uses: ATO debt, bridging a sale or refinance, settlement deadlines, buying stock or equipment quickly.
- Terms are usually measured in months, not years.
- Expect valuation, legal and establishment costs; compare in total dollars.
- Security
- Residential or commercial property
- Typical term
- Short term
- Strength
- Looks past credit and paperwork
- Weakness
- Higher cost, needs an exit
A private lender asks two questions before anything else: what is the property worth, and how will I be repaid? If both answers are solid, a lot of things that would stop a bank — an untidy credit file, tax returns not lodged, a young ABN — matter much less. That’s why private lending exists, and why it’s priced the way it is.
Where does private lending money come from?
Private lenders pool money from individual investors, family offices or managed funds and lend it, usually against real estate. Investors accept the risk of a business loan because the property stands behind it. For you, that means the lender’s comfort depends mainly on the security and the plan to repay, not on a scoring model.
Property already plays a big role in small business lending generally. The RBA’s October 2025 Bulletin found new SME loans secured by residential property are on average about four and a half times the size of loans secured in other ways. Private lenders take that link between property and business credit to its logical end.
What do private lenders typically fund?
- Clearing an ATO debt before it escalates, while a longer-term solution is arranged.
- Bridging finance between buying and selling property, or until a refinance completes.
- Meeting a settlement or contract deadline that a bank can’t hit.
- Buying stock, equipment or a business quickly when an opportunity has a short window.
- Consolidating short-term debts that are straining cash flow.
- Releasing equity when the business’s financial records aren’t ready for a bank.
How does a private lender assess a deal?
| Factor | What the lender looks at |
|---|---|
| Security | Property type, location, value, existing mortgages, whether it’s residential or commercial |
| Equity | How much room there is after existing debt and the new loan |
| Exit | Refinance, sale, incoming payment — and how believable the timing is |
| Purpose | Business purpose, explained clearly |
| Borrower | ID, ABN, the story behind any credit or tax issues |
| Serviceability | Sometimes capitalised or prepaid interest rather than monthly repayments |
The paperwork is lighter than a bank’s, but the valuation and legal work are just as real. Owners are often surprised that “low doc” doesn’t mean “no process”.
Who is a private lender right for?
Owners who have property equity and a problem with a time limit or a paperwork gap. Typical examples include a contractor who needs to clear a tax debt now and refinance to a non-bank once returns are lodged, or a business owner selling an investment property in a few months who needs working capital until settlement.
Private lending is usually the wrong tool for long-term funding of an ongoing shortfall. If the business needs money permanently rather than temporarily, a short-term loan only delays the problem.
Unsure whether your equity and exit stack up? Ask a specialist — we’ll run through it on the phone before anything is lodged, and asking doesn’t touch your credit file.
Why do private lenders say no?
- Not enough equity. Once existing mortgages and the lender’s own limits are applied, the numbers don’t work.
- No clear exit. “We’ll sort it out later” isn’t an exit.
- Hard-to-value security. Specialised or remote properties can fall outside policy.
- Owners not on board. Every registered owner must consent, and guarantors usually need independent advice.
- Personal purpose. Business lenders won’t fund what’s really personal spending.
What should you ask a private lender before signing?
- What’s the total cost in dollars over the expected term, including establishment, legal, valuation and any line fees?
- Is interest paid monthly, prepaid or capitalised?
- What happens if the exit takes longer — is there an extension fee or default rate?
- What does early repayment cost?
- Will the lender register a first mortgage, a second mortgage or a caveat?
Commercial lenders don’t all belong to an external dispute scheme. ASIC’s guidance notes that lenders providing only commercial loans aren’t legally required to hold a credit licence or be members of AFCA, so check a lender’s membership and read the contract carefully. Our guide to checking a lender is legitimate walks through it.
Private lending often sits alongside caveat and second-mortgage lenders, who work behind an existing home loan. If your purpose is a tax debt, see who lends to clear ATO debt.
An illustrative example
Purely illustrative, with no real business: a wholesale business has a supplier offering a large discount for bulk stock if paid within ten days. The bank needs weeks. The owner has an investment property with plenty of equity and a firm buyer for that property settling in four months. A private lender advances the funds on a short term against the investment property, with the property sale as the exit. The stock is bought at the discount, sold through the business’s normal channels, and the private loan is repaid at settlement.
Quick checklist before you approach a private lender
- Property address, estimated value and current mortgage balance.
- A written exit plan with realistic timing.
- ID for every borrower and guarantor.
Could property equity solve your business problem?
If you have equity and a clear way to repay, there’s a good chance a lender will listen. Send a short enquiry with the property, the amount and the purpose, and a lending specialist will tell you straight whether a private lender, a non-bank or a bank is the better route. No credit check to ask, no spraying your details around the market, and accurate form answers mean we can line up the right lender on the first attempt.
Frequently asked questions
What is a private business lender?
A lender that funds loans from private investors or funds rather than deposits, typically secured by real property. Private lenders sit in the non-bank market but specialise in short-term, security-led lending.
Do private lenders check credit?
Most will look at credit, but a poor history isn't automatically a deal-breaker. What matters most is the property's value, how much equity there is and how the loan will be repaid.
Can I use my home as security for a business loan from a private lender?
Yes, residential property is commonly used, including the family home, as long as the loan is for business purposes. Every registered owner must agree, and lenders will usually require independent legal advice for guarantors.
What is an exit strategy?
It's how the loan gets repaid at the end of its term: refinancing to a cheaper lender, selling a property or asset, collecting a large receivable, or receiving settlement funds. Private lenders want to see an exit that's realistic and roughly timed before they approve.
How much can a private lender advance against property?
It depends on the lender, the property type, location and whether it's a first or second mortgage. Every lender applies its own loan-to-value limits after a valuation, so equity is the key number to know before you ask.