Private lenders vs banks: which suits your business loan?

We’d like to be clear about this from the start: banks are great. For a long, low-cost loan on a straightforward file, a bank is very hard to beat, and if that’s what your situation needs we’ll tell you. Private lending exists for the files and the timelines that banks aren’t designed for.

Side by side

	Banks	Private lenders
Typical speed	Weeks to months	Days, sometimes same day
Decision made by	Policy and scorecard	A person weighing security, exit and purpose
Documents	Full financials, tax returns, serviceability	Focus on property, purpose and exit
Credit history	Defaults and tax debt often decline	Considered case by case
Security accepted	Mostly mainstream residential and commercial	Wider, including land, rural and company or trust property
Term	Years	Months, commonly 1 to 36
Cost	Lowest, if you qualify	Higher, reflecting speed and risk

Where banks win

• Cost. Over a long term, the difference is substantial.
• Term. Bank loans can run for decades, smoothing repayments.
• Relationship. Transaction accounts, overdrafts, merchant facilities and loans in one place.

If you qualify and have time, start there.

Where private lenders win

• Speed. A private lender can value, approve and settle while a bank is still requesting documents.
• Difficult files. A default, an ATO debt, a loss year, late returns or an unusual property.
• Short needs. When the loan only has to last until a sale or refinance, a 25-year bank loan is the wrong tool.
• Decisions by people. A lender can weigh a good story and strong security against a weak score.

Using both, in the right order

The most common pattern we see is sequential:

1. Problem arrives. A tax debt, a settlement deadline or a creditor demand that won’t wait.
2. Private loan solves it. Secured by property, settled in days.
3. The business steadies. Financials are lodged, the ATO is squared away and repayments are clean.
4. Bank refinances. The private loan is paid out with long-term, lower-cost finance.

Seen this way, private lending isn’t competing with your bank. It’s buying you the time to get back to one.

After a bank says no

A bank refusal tells you something useful. Ask the bank, politely, which part of the application didn’t fit: the credit file, serviceability, the security, the industry or the timing. That answer tells us what a private lender needs to see. Our page on what to do when the bank says no walks through it step by step.

Making the private option cost-effective

• Borrow only what solves the problem
• Choose a term with a sensible buffer, not an excessive one
• Plan and evidence the exit from day one
• Know the early repayment terms so you can exit as soon as the bank is ready

Three owners, three right answers

The steady trader. A Toowong dental practice with five years of strong accounts wanted to fit out a new surgery over three months. There was no deadline and the paperwork was immaculate. A bank was the right choice, and we said so.

The urgent tax bill. A Caboolture transport operator had an ATO debt, a director penalty notice and a home with plenty of equity. The bank couldn’t move in 21 days. A private second mortgage cleared the debt inside a week, and the bank refinanced it later once the debt was off record.

The awkward property. A Byron hinterland retreat owner needed working capital against a property that banks found hard to value because of its mixed residential and tourism use. A private lender who understood that market funded it, with an exit through the sale of a separate block.

The pattern is simple. When time, structure or property type is the problem, private money tends to solve it. When none of those apply, a bank usually costs less.

A fair comparison of costs

Comparing a bank and a private lender on headline price alone misses half the picture. Weigh up:

• the cost of the deadline being missed, such as penalty interest, lost contracts or legal action
• how long the money is actually needed, since short terms limit the total cost
• establishment, legal and valuation fees on both options
• whether the bank’s offer comes with conditions you can’t meet in time
• the cost of the refinance at the end of a private loan

Laid out side by side, the more expensive loan is sometimes the cheaper decision.

Ask which option fits

Tell us the amount, the property, the deadline and what your bank has said. We’ll tell you honestly whether you’re better off waiting for a bank, going private, or doing one then the other. There’s no credit check when you first enquire, and we won’t send your details to a long list of lenders.

Accurate answers on the form, including any bank feedback, help us match you correctly first time. See if you qualify, or read the three questions private lenders ask and then send us the deal.