Private Lending Explained: When Traditional Bank Finance May Not Be the Right Fit

Most borrowers go to a bank because the bank is the obvious starting point. For the majority of straightforward applications, stable PAYG income, standard property, adequate deposit, and clean credit are also the right starting points. Bank financing often offers competitive rates for borrowers who meet standard lending criteria. 

Bank lending criteria can make some transactions harder to place, particularly where timing, income, property type, or loan structure fall outside standard policy. In 2026, APRA’s mortgage serviceability buffer remains at 3 percentage points. From February 2026, APRA requires ADIs to limit high-DTI lending to no more than 20% of new owner-occupied lending and 20% of new investment lending, with high DTI defined as six times income or more. These settings provide useful context for bank lending, but they do not, by themselves, mean a borrower needs private finance. 

What Private Lending Actually Is

Private lending and non-bank lending in Australia are related but not identical. Non-bank lenders include established mortgage and finance companies that do not take deposits, while private lending typically refers to privately funded credit provided by private credit funds, asset managers, or other private capital sources. Private credit is therefore one part of the broader non-bank lending market.

Feature	Bank Lending	Non-Bank Lending	Private Lending
Provider	Banks / ADIs	Non-bank finance companies	Private credit funds or private capital
Assessment	Income, serviceability, credit, and security	Varies by lender	Often more focused on security, LVR, and exit strategy
Pricing	Often competitive	Varies	Often higher
Best suited to	Standard lending scenarios	Borrowers needing an alternative lender policy	Short-term or specialised transactions
Timing	Varies by lender	Varies by lender	Can be faster in some cases, but not guaranteed
Exit strategy	Depends on the product	Depends on the product	Often particularly important

Also Read: Commercial Property Loans in Australia: How Business Lending Works in 2026 

When It Is the Right Product

Private lending can be appropriate where traditional bank finance is unavailable, unsuitable for the required timeframe, or unable to accommodate the transaction structure. The most common scenarios where private lending genuinely makes sense:

• Time-sensitive transactions: where the required settlement timeframe does not align with the available lender’s assessment process. 
• Bridging finance Australia: short-term funding may sometimes be used when purchasing a new property before an existing property is sold, subject to equity, serviceability and lender criteria.
• Non-standard property: rural land, vacant land over a threshold size, heritage-listed properties, properties requiring renovation, and property types that may fall outside some lenders’ standard policies.
• Complex borrower circumstances: some specialist or private lenders may consider transactions that do not fit standard lender criteria, subject to the nature of the credit history, security, and proposed repayment strategy.
• Developer or construction timing: gap between construction completion and bank refinance approval; a private loan holds the asset while the full bank application is processed 

None of these scenarios requires a distressed borrower. Many involve borrowers with significant equity and strong underlying financial positions who simply cannot use bank finance at the moment they need to act. Private property lending is often structured for a defined short-term purpose, although available loan terms vary by lender and transaction.

The Cost Is Higher: So Compare the Full Transaction

Private lending can carry higher interest rates, establishment fees, valuation costs, and other charges than standard bank finance. The relevant question is not simply which loan has the lower rate but whether the total cost of the finance is reasonable for the transaction it supports.

For short-term private lending in Australia, borrowers should understand the interest cost, fees, loan term, repayment requirements, and exit strategy before proceeding.

The Exit Question Is the Most Important One

A private loan without a credible exit strategy is a problem waiting to happen. Before entering any private lending arrangement, the exit must be clearly defined: sale of the bridged property, refinancing with a bank once the income situation clarifies, or settlement of a transaction that frees the capital. For many short-term private lending transactions, the exit strategy is a key part of the lender’s assessment. 

What Is the Exit Strategy?

Before taking private finance, borrowers should be able to answer:

1. What is the exit?
Sale, refinance, completion of construction, asset sale, or another defined source of repayment.

2. When will the exit occur?
The timing should be realistic, not simply based on an optimistic assumption.

3. What happens if the exit is delayed?
Consider whether there is enough equity, liquidity or flexibility to extend the facility if required.

4. Is the proposed refinance actually achievable?
If the strategy is to refinance to a bank, the expected income, LVR, servicing and property position at that future point should be considered.

The role of a broker in a private lending scenario is partly to find the right lender and structure and partly to ensure the exit strategy is realistic. A private loan bridging to a bank refinance is only sensible if the bank refinance is genuinely achievable at the end of the private loan term, which requires confirming the bank’s lending criteria against the borrower’s expected position at that point, not at the point of the private loan’s origination.

Private lending is not a last resort. It is a specific tool for specific situations. Used correctly with a clear exit, a realistic cost calculation, and the right loan structure, it may provide an alternative where the required transaction or timeframe does not fit standard bank lending criteria. 

Private Lending for Commercial Property and Development

Private lending can be particularly relevant to commercial property and development transactions where timing, valuation, construction requirements or an upcoming refinance create a funding gap.

Examples may include:

• Commercial property acquisitions with tight settlement deadlines
• Land or property transactions requiring short-term funding
• Development or construction funding gaps
• Refinancing an existing facility before a longer-term lender is ready
• Transactions involving complex ownership or entity structures
• Borrowers waiting for a property sale or refinance to complete

Choosing the Right Lending Path with Safe Haven Finance 

At Safe Haven Finance, Payal Varma and the team work across a broad panel of bank, non-bank and specialist lenders to help borrowers assess the most suitable funding pathway for their circumstances.

With nearly 20 years of lending experience and access to more than 50 lenders, the focus is not simply on finding a loan. It is on understanding the transaction, comparing suitable options and determining whether a bank, non-bank, specialist or private finance is the most appropriate solution.

For private lending, this includes looking closely at the loan structure, total cost, security, timeframe and, importantly, the proposed exit strategy.

If you are considering private, commercial or specialist finance, book a free consultation with Safe Haven Finance or call +61 433 564 936 to discuss your requirements. Follow Safe Haven Finance on Instagram, Facebook, and LinkedIn.

Frequently Asked Questions

Q: What interest rates do private lenders charge in Australia?

Answer: Private lending generally carries a higher cost than standard bank finance. Pricing varies significantly depending on the security, LVR, loan purpose, borrower circumstances, term and exit strategy, so borrowers should assess the total cost rather than comparing interest rates alone. 

Q: How quickly can a private lending deal settle?

Answer: Some private lending transactions can settle significantly faster than a conventional bank application, particularly where the security and transaction are straightforward and the lender has the required information. However, timing varies by lender, valuation, legal documentation and transaction complexity.

Q: Is private lending regulated in Australia?

Answer: It depends on the borrower and purpose of the loan. Consumer credit and residential investment lending to individuals can fall under the National Credit Act and National Credit Code. Commercial and business-purpose lending can be treated differently, depending on the structure and purpose of the facility. Borrowers should obtain appropriate legal or financial advice about the regulatory treatment of a specific loan.”