What is Private Lending?
Private lending is a form of financing where money is lent by a private individual or non-bank institution rather than a traditional bank or regulated financial institution. Private lenders operate outside the conventional banking system, offering secured loans based primarily on the value of an asset — typically real estate — rather than relying heavily on credit scores, tax returns, or lengthy approval processes.
In practical terms: if a bank has said no, moved too slowly, or simply doesn’t offer the product you need — a private lender is often the solution.
How Private Lending Works
At its core, private lending is asset-backed lending. The lender advances funds secured against a property or other tangible asset. If the borrower defaults, the lender has legal recourse to that security.
The loan is structured around three key factors: the value of the security property, the loan-to-value ratio (LVR) — typically capped between 65% and 75% — and a clearly defined exit strategy. The exit strategy is how the borrower intends to repay the loan: through a property sale, refinance with a mainstream lender, receipt of funds, or another specific event.
Private lenders assess risk differently to banks. Rather than running a borrower through a rigid credit scoring matrix, they evaluate the deal on its merits. The security, the exit, the loan purpose, and the borrower’s overall situation are weighed together. This flexible credit assessment is what makes private lending accessible in scenarios where traditional lending falls short.
Types of Private Loans
Private lending is not a single product. It spans a range of loan types, each serving a specific financial need.
Bridging Finance
Bridging finance — also called a bridging loan — is a short-term loan used to bridge a financial gap between two events. The most common scenario is property: a borrower buys a new property before selling their existing one, and needs short-term funding to cover the shortfall.
Bridging loans are also used in property development to fund construction before long-term financing is secured, or in business to cover a cash flow gap while awaiting settlement of a major deal or asset sale.
Terms typically range from one to 24 months. Because bridging finance is short-term and interest is often capitalised — added to the loan — the borrower doesn’t necessarily need to make monthly repayments during the loan term. The interest is repaid when the loan is discharged. This structure makes it highly practical when cash flow is temporarily constrained.
Private bridging finance can be settled in as few as 24 to 72 hours. A bank doing the equivalent loan may take 30 to 60 days.
Second Mortgages
A second mortgage is a loan secured against a property that already has an existing first mortgage registered against it. The second mortgage sits behind the first in priority — meaning if the property were sold under enforcement, the first mortgage lender is paid out first.
Because of this subordinate position, second mortgages carry more risk for the lender and attract higher interest rates than first mortgages. However, they serve a valuable purpose for borrowers who have equity in their property but cannot — or do not want — to refinance their existing first mortgage.
Common use cases include accessing equity for business investment, debt consolidation, property renovation, or covering a short-term cash requirement — without disturbing a competitive first mortgage rate a borrower may have already locked in. Second mortgages through private lenders can be arranged quickly and independently from the first mortgage lender.
Secured Business Loans
Private lenders offer secured business loans to businesses that need capital quickly or that don’t meet the strict criteria imposed by banks. These loans are secured against real property — commercial or residential — owned by the business or its directors.
The business doesn’t need to be profitable for years or have spotless financials. What matters is the quality of the security and a credible repayment plan. This makes private secured business loans particularly valuable for:
- Businesses in a growth phase with strong revenue but limited profit history
- Companies that have recently restructured or experienced a difficult trading period
- Business owners who need capital immediately to act on a time-sensitive opportunity
- Self-employed borrowers with non-standard income documentation
Loan amounts typically range from $100,000 to several million dollars, depending on the security offered and the lender’s appetite.
Caveat Loans
A caveat loan is a short-term private loan secured by lodging a caveat on the title of a property. Rather than registering a formal mortgage, the lender places a legal caveat on the property title — preventing the borrower from selling or refinancing without first discharging the caveat and repaying the loan.
Private caveat loans are among the fastest finance products available, with some settlements occurring within hours. They are typically used for urgent working capital needs, tax debt resolution, or to secure a transaction where time is the critical factor. Terms are generally very short — one to three months — and interest rates reflect the speed and risk involved.
Private Lending vs. Bank Lending
Understanding the difference between private lending and bank lending clarifies when each is appropriate.
Banks are highly regulated, risk-averse institutions. Their lending criteria are rigid: clean credit history, verified income through payslips or tax returns, low debt-to-income ratios, and lengthy assessment periods. Banks are built for borrowers with straightforward financial profiles and time to wait.
Private lenders exist for everyone else. The trade-off is clear: private lending is faster and more accessible, but it costs more. For a borrower using a private loan as a short-term solution before transitioning to mainstream finance, the higher rate is often entirely justified by the outcome it enables.
| Factor | Bank Lending | Private Lending |
| Approval Speed | Weeks to months | Days to hours |
| Credit Assessment | Rigid, score-based | Flexible, case-by-case |
| Income Verification | Strict documentation | Less emphasis |
| Loan Terms | Long-term (years) | Short-term (months) |
| Interest Rates | Lower | Higher |
| Accessibility | Narrow criteria | Broad criteria |
Speed — The Private Lending Advantage
Speed is the defining advantage of private lending. Banks are structured for volume and compliance. Private lenders are structured for agility.
A motivated borrower with a clear deal and strong security can receive a formal approval within 24 hours and settlement within 48 to 72 hours. In some cases — particularly caveat loans — same-day funding is possible.
This speed matters in scenarios that are irreversibly time-sensitive: a property auction requiring fast settlement, a business opportunity that will be lost without immediate capital, a bridging position where a vendor will not extend, or a tax debt that must be resolved before enforcement action.
In these moments, the cost of a private loan is minor compared to the cost of the missed opportunity — or the consequence the loan prevents.
Private lenders achieve this speed by reducing administrative layers, making credit decisions in-house, using experienced assessors who evaluate deals on their merits, and working directly with solicitors to execute settlements rapidly.
Private Lending in Australia
The private lending market in Australia has grown significantly over the past decade, driven by increasingly tight bank credit policies, regulatory restrictions on mainstream lending, and growing awareness of alternative finance among borrowers and their advisors.
Private lending in Sydney is particularly active, reflecting the city’s high property values, competitive property market, and concentration of sophisticated borrowers — developers, investors, and business owners — who require fast, flexible capital to transact. Sydney’s median property prices mean that even a relatively conservative LVR produces a substantial loan, attracting well-capitalised private lenders who are willing to engage with quality deals.
Private lenders in Australia operate across residential and commercial property, from single-security loans in metropolitan areas to complex multi-property transactions and land funding. Some lenders specialise in specific products — such as bridging finance or second mortgages — while others offer a broader suite. Unlike in some other markets, most reputable Australian private lenders are either licensed or operate through licensed credit representatives, providing borrowers with a degree of regulatory protection and transparency.
The Australian market has also seen growth in family offices, wholesale investor funds, and managed investment schemes entering the private lending space — bringing greater capital depth and professionalism to the sector as a whole.
Costs and Considerations
Private lending is not cheap, and it is not designed to be a long-term financing solution. Understanding the cost structure is essential before proceeding.
Interest rates for private loans in Australia typically range from 10% to 24% per annum, depending on the loan type, LVR, loan size, term, and perceived risk. Second mortgages and caveat loans sit at the higher end; first mortgage bridging loans at the lower end.
Establishment fees are standard, typically ranging from 1% to 3% of the loan amount. These cover the lender’s origination costs and are usually capitalised into the loan.
Legal fees are incurred by both lender and borrower. Private loan documentation must be prepared and registered by qualified solicitors, and borrowers are required to obtain independent legal advice in most cases.
Exit fees may apply if the loan is repaid before the minimum loan term. This varies by lender and should be clearly understood before signing.
The total cost of a private loan should always be weighed against the cost of not having the funds — the lost opportunity, the penalty, or the consequence the loan prevents.
Who Uses Private Lending?
Private lending serves a wide cross-section of borrowers. Common users include:
- Property developers and investors who need short-term construction finance, settlement bridging, or land funding outside conventional bank parameters.
- Business owners who need immediate working capital, want to leverage property equity, or have had a trading difficulty that temporarily impacted their credit profile.
- Self-employed borrowers whose income is structured through trusts, companies, or multiple entities — making standard bank documentation difficult to satisfy.
- Borrowers with credit impairment who have a legitimate explanation for past issues and can demonstrate capacity to repay now.
- Time-sensitive buyers purchasing at auction, acting on off-market opportunities, or completing settlements where finance cannot wait weeks.
How to Qualify for a Private Loan
Qualifying for a private loan is considerably more straightforward than qualifying for a bank loan, but there are still core requirements.
The property security must be acceptable — generally, major metropolitan residential or commercial property is preferred. Regional and rural properties may be considered at lower LVRs. The LVR must be within the lender’s appetite: most private lenders will not exceed 75% on a first mortgage, and 65% is more common for second mortgages.
The exit strategy must be clear and credible. ‘We’ll refinance with a bank when our financials improve’ is a valid exit — but it must be realistic within the loan term. The borrower must also meet basic identity, legal, and compliance requirements, as Australian credit laws apply to most private lending transactions.
Working with an experienced finance broker who has established relationships with private lenders will significantly improve both your access to suitable lenders and the terms you can achieve.
Is Private Lending Right for You?
Private lending is a powerful financial tool when used for the right purpose at the right time. It solves problems banks cannot. It moves at the speed business and property demand. It creates access to capital for borrowers who have equity, a clear plan, and a defined exit — but don’t fit the bank mould.
It is not a permanent solution. The higher cost of private finance is designed to be temporary. The goal is always to use the private loan to achieve an outcome — buy the property, settle the deal, resolve the issue — and then transition to lower-cost, longer-term finance when the situation allows.
If you’re considering a private loan, speaking with a specialist is the right first step. Secured Lending works with borrowers across Australia to arrange bridging finance, second mortgages, and secured business loans — connecting clients with the right private lender for their specific situation, quickly and without the runaround.
Frequently Asked Questions
What is the difference between a private lender and a bank?
A bank is a regulated deposit-taking institution that lends according to strict credit policies. A private lender is a non-bank entity — an individual, company, or fund — that lends primarily against asset security with more flexible criteria and significantly faster turnaround.
Are private lenders legal in Australia?
Yes. Most private lenders in Australia operate under Australian credit law, either holding their own Australian Credit Licence (ACL) or operating under the licence of a credit representative. Borrowers should always confirm the regulatory status of any lender they engage.
How fast can a private loan be approved?
Approvals can be issued within 24 hours and settlements can occur within 48 to 72 hours for well-prepared applications. Caveat loans can settle even faster — sometimes the same day — depending on the circumstances.
What is the maximum LVR for a private loan?
Most private lenders cap first mortgage loans at 70% to 75% LVR. Second mortgages typically sit between 60% and 65% of the property’s value. Loan purpose, location, and property type all influence the maximum LVR a lender will consider.
Can I get a private loan with bad credit?
Yes, in many cases. Private lenders focus on the security and exit strategy rather than credit score. Adverse credit history is considered as part of the overall picture but is not automatically disqualifying. The strength of the security and the credibility of the exit are the primary factors.
What is an exit strategy in private lending?
An exit strategy is the clearly defined method by which the borrower will repay the private loan at the end of the term. Common exit strategies include: sale of the security property, refinance with a bank or mainstream lender, receipt of funds from a business transaction, or income from a completed development.
