Private business loans: how they work in Australia

Private lending sits in the space between what a bank will do and what a business actually needs. It’s not a last resort and it’s not a magic trick. It’s a different way of assessing risk, one that leans on the property and the plan instead of a credit score and two years of tidy tax returns.

This page explains how private business loans work in Australia, who they suit, what the lender will want to know and how to tell whether one is right for you.

What makes a loan “private”?

The money comes from someone other than a bank or a mainstream lender. That might be a single investor lending their own capital, a group of investors pooled in a private credit fund, a family office or a specialist non-bank that lends from its own balance sheet.

Because private lenders write their own credit policy, they can say yes to things bank policy rules out:

• a settlement or tax deadline that’s days away
• a recent default, judgment or ATO debt on file
• financials that are late, incomplete or not yet showing the turnaround
• security banks dislike, such as vacant land, rural holdings or property held in a trust
• a loan that only needs to run until a sale, refinance or payment lands

What they ask in return is solid security and a clear way out. That’s the core bargain of private lending.

How private lenders decide

A bank’s decision is mostly made by a scorecard. A private decision is made by a person, and it usually comes back to three questions.

What’s the security? The property’s value, location, type and condition, and how much is already owed against it. Lenders cap the total debt as a share of value (the loan-to-value ratio, or LVR). That cap is commonly somewhere between 60% and 80% of value, depending on the property and the lender’s position on title.

What’s the exit? Private loans are short by design. The lender wants to understand how they’ll be repaid: the property is being sold, the bank will refinance once the books are lodged, a contract payment is due, a tax refund is coming. A credible exit with a buffer is often more important than the borrower’s credit history.

What’s the purpose? The loan has to be for a business purpose. Paying the ATO, settling a commercial property, buying stock for a contract or refinancing business debt are typical. A clear purpose also shows the lender the loan will solve a problem rather than delay it.

If you can answer those three questions well, most other issues become negotiable. Try our exit plan checker to pressure-test the second one before you call.

The three structures

Private business loans are secured in one of three ways, depending on where the lender sits on title.

Structure	Where the lender sits	Typical use
Caveat loan	An interest noted on title, behind any existing mortgage	Fastest option for short, urgent needs
Second mortgage	A registered mortgage behind the first lender	Larger amounts or longer terms with an existing home loan in place
Private first mortgage	First and only mortgage on the property	Clear titles, or refinancing a bank or another lender out

The higher the lender sits, the more it will usually lend and the more flexible the term. The lower it sits, the faster it can often move, because it doesn’t need to replace the existing mortgage.

What a private business loan can be used for

Almost any genuine business purpose. The most common reasons owners come to us:

1. Clearing an ATO debt before it escalates to a garnishee or director penalty notice
2. Settling on a commercial property or business purchase when the bank runs late
3. Funding stock, materials or a deposit for a contract that has to be won this week
4. Paying out a creditor, supplier or statutory demand before it becomes a winding-up application
5. Refinancing expensive short-term or unsecured debt into a single secured loan
6. Bridging the gap until a property sells or a refinance with a bank is ready

Our urgent funding section walks through each of these situations in detail.

What it costs, in plain terms

We never quote rates on this site, because every private loan is priced on the deal in front of the lender: the property, the LVR, the term, the position on title and the exit. What we can tell you is how the cost is built.

• Interest, often calculated monthly and sometimes prepaid or capitalised so there are no repayments during the term
• Establishment fee, charged by the lender when the loan settles
• Valuation, ordered by the lender and paid by the borrower
• Legal costs, for the lender’s solicitor and your own
• Discharge and registration costs, for putting the security on and taking it off title

The caveat loan calculator lets you enter these as dollar amounts to see the total cost and the funds you’ll actually receive. Always compare the total dollar cost against the cost of the problem you’re solving, whether that’s ATO interest, a lost deposit or a missed contract.

When a private loan is the wrong answer

We’d rather tell you now than after you’ve paid a valuation. A private loan usually isn’t right when:

• there’s no realistic exit and the loan would just push a problem down the road
• the property has little equity left once existing debts are counted
• the money is for personal or household use
• a bank or a cheaper unsecured option can do the job in the time you have

If one of those applies, we’ll say so and, where we can, point you at what might work better, such as the unsecured options in our business loans section.

How to see if you qualify

Tell us the amount, the property, the purpose and the date you’re working to. Someone on our Brisbane desk reads every enquiry and calls you back, usually the same day. There’s no credit check when you first enquire, and your details stay with us rather than being sprayed across a list of lenders.

The more accurate your answers, the faster we can tell you whether a private lender will back the deal. Start your enquiry here, or if you’d like to run the numbers first, open the second mortgage calculator and then send us the deal.