Private lending can open doors that traditional lenders sometimes keep closed. Whether you’re buying property, funding a development, or securing short-term capital for business growth, private lenders can provide the flexibility and speed that banks often can’t.
It’s important to understand that most private lenders in Australia lend only for business or commercial purposes, not for personal or consumer use. Typically, they work with individuals who have an Australian Business Number (ABN), a company, or company with a trust. These entities don’t always need to be actively trading, many are property-holding companies or trusts, but they must be structured correctly and have a legitimate business, commercial or investment purpose.
If you’ve ever found yourself limited by rigid lending policies, this guide will help you understand what private lending is, how it works, and when it can make financial sense.
What Is Private Lending?
Private lending refers to loans provided by individuals, private companies, or specialist funds rather than banks or credit unions. These lenders use their own capital or pooled investor funds to offer finance secured against property or other tangible assets.
Private loans are usually short-term, anywhere from six months to three years, and are designed to fill a funding gap. For example, they can help you settle quickly, bridge finance between purchases, or provide business cash flow while waiting for longer-term funding.
How Private Lenders Differ from Banks
Banks assess every application against strict policies: credit scores, income verification, and serviceability ratios. Private lenders take a more flexible, common-sense approach.
They focus on:
- The value and strength of the asset (what the loan is secured against).
- The borrower’s exit strategy, how and when the loan will be repaid.
- The overall opportunity the finance enables.
Because private lenders assess risk differently, approval times are often much faster, sometimes within days. That speed can make all the difference when you’re competing for a property, finalising a purchase, or needing quick capital to fund business growth.
When Private Lending Makes Sense
Private lending isn’t for every situation, but it can be an ideal solution when:
- You need fast access to funds and can’t wait for a bank’s processing timeline.
- You’re purchasing, developing, or refinancing a property that doesn’t meet bank criteria.
- You’re bridging finance between settlements or projects.
- Your business needs working capital to seize a growth opportunity.
- You want flexible loan terms, structures, or security options.
Typical Loan Structures
Private loans can be secured against residential, commercial, or development property. Common structures include:
- First mortgage loans: where the lender holds the primary security over the property.
- Second mortgage loans: secured behind another lender, often used for top-ups or bridging.
- Caveat loans: short-term solutions secured by a caveat on the title, often used for business or investment purposes.
Interest rates are generally higher than bank loans, reflecting the added flexibility and shorter terms. However, when used strategically, private lending can be a powerful way to move fast and capitalise on opportunities that might otherwise be lost.
Case Study: Using Private Lending to Secure an Opportunity
A client recently needed to settle on a small commercial property within two weeks. Their bank required updated financials and a full valuation, which would have taken more than a month. We arranged short-term private funding secured against an existing residential property, allowing the purchase to proceed on time. Once the business’s accounts were finalised, we refinanced to a traditional lender at a lower rate.
In another case, an investor used private finance to complete an office renovation that banks had declined due to the property’s condition. After completion, the new valuation supported a mainstream refinance, and the profit from the sale more than covered the cost of the private loan.
Both scenarios show how private lending can create breathing room and keep opportunities alive when timing and flexibility matter most.
Benefits and Considerations
Benefits
- Fast access to funds
- Flexible approval criteria
- Tailored loan terms
- Ideal for bridging or time-sensitive opportunities
Considerations
- Higher interest rates and setup costs
- Shorter loan terms
- Need for a defined exit strategy
Private lending works best when you understand your return on your investment and there’s a clear plan for repayment or refinance. It’s not about replacing traditional finance but using it as a tool to keep your momentum going.
Working with a Private Lender Strategically
A trusted broker or finance planner can help you:
- Assess whether private lending suits your circumstances.
- Compare lenders and loan structures.
- Develop a clear exit or refinance plan before you commit.
Private lending is most effective as part of a broader financial strategy. Used wisely, it can help you act quickly and grow with confidence.
A Thought to Leave You With
Private lending isn’t about taking risks, it’s about creating readiness. When you understand how to use finance strategically, you can act with confidence, move faster, and turn opportunity into progress.
If you’d like to explore whether private lending could support your next property or business goal, I invite you to reach out for a confidential chat.