The short verdict
Private business lenders are individuals, funds and specialist firms that lend their own or investors' money, usually short term and secured by property. They suit owners with equity in residential or commercial property who need money for a defined period and have a clear way to repay, such as a sale, a refinance or a contract payment. They're not for open-ended borrowing with no exit. Judge them on total dollars and the exit.
At a glance
- Private lenders usually lend against property: first mortgages, second mortgages and caveats.
- They assess the security and the exit more heavily than tax returns.
- Terms are short, typically months rather than years.
- Establishment, legal and valuation costs add up, so compare in total dollars.
- An exit plan with a realistic date matters more than anything else.
- Usually suits
- Property owners with a short-term need and a clear exit
- Typical documents
- Property details, ID, a short explanation of purpose and exit; light on financials
- Security
- Residential or commercial property: first or second mortgage, or a caveat
- Speed
- Can be quick when the file and the valuation are in order
Private business lenders provide short-term business finance from private capital, either their own or funds pooled from investors, and nearly always take property as security. Because the property carries most of the risk, private lenders can approve deals that banks won’t touch, and they can move when the paperwork is in order. The trade-off is cost and a short runway. This verdict explains when a private lender is the right call and how to avoid the classic traps.
How do private business lenders work?
Private lenders assess three things above all: the property, the purpose and the exit. Where a bank starts with tax returns and financial statements, a private lender starts with what the security is worth, what’s already owed against it and how you’ll repay at the end of the term.
The loan is usually one of three structures:
- First mortgage over unencumbered property, or one that refinances an existing first mortgage
- Second mortgage registered behind an existing home loan or commercial loan, often needing the first lender’s consent
- Caveat loan, where the lender lodges a caveat over the title instead of registering a mortgage; quicker to put in place and usually shorter
Our pages on caveat loans, second mortgage business loans and caveat loan or second mortgage go deeper on each one.
Terms are short, usually measured in months. Interest may be paid monthly, prepaid at settlement or added to the balance, and there are establishment, valuation and legal costs on top.
When is a private lender the right choice?
A private lender is the right choice when you have property equity, a job that can’t wait for a bank and a firm plan to repay. Situations where private money often makes sense:
- settling on a commercial property before long-term finance is approved
- clearing an ATO debt while a property sale or refinance is arranged
- funding a large contract’s start-up costs ahead of the first progress payment
- buying stock or equipment at a discount that would expire before a bank decided
- bridging between selling one property and buying another (see bridging loans)
It’s the wrong choice for ongoing operating losses, for long-term debt you have no real plan to refinance, or for small amounts where the fixed costs swallow the benefit.
How do private lenders compare with other lender types?
For a property owner needing $500k for six months, here’s how private money grades against the alternatives on our five tests.
| Test | Private lender | Bank | Non-bank specialist | Unsecured online lender |
|---|---|---|---|---|
| Dollar cost over the term | Fair | Strong, if approved in time | Fair | Weak |
| Fit to a short, defined need | Strong | Weak | Fair | Fair |
| Security | Weak (property at risk) | Fair | Fair | Fair |
| Flexibility on credit and documents | Strong | Weak | Fair | Fair |
| Paperwork | Strong | Weak | Fair | Strong |
Note what drives the result. Private lending wins on fit and flexibility, and loses on security because your property stands behind the loan. Unsecured options rarely reach $500k for a business that can’t show the turnover to support it.
What does a private loan really cost?
Count every dollar, because the fixed costs matter more on a short loan. Ask for a written breakdown of:
| Cost item | What to ask |
|---|---|
| Establishment or lender fee | Is it a set dollar amount, and is it taken from the advance? |
| Interest | Monthly, prepaid or capitalised? What’s the total in dollars over the term? |
| Valuation | Who orders it, and what does it cost? |
| Legal fees | Yours and the lender’s: both are usually paid by you |
| Extension fee | What happens if you need another month? |
| Default charges | What triggers default, and what does it add? |
Add them up for the full term and compare that dollar figure across offers. The total cost comparer does the arithmetic for you. If you’d like a specialist to price your situation, start here in about a minute.
Our verdict on private business lenders
Our verdict: right for short, property-backed needs with a firm exit; wrong for open-ended borrowing
- Best for
- Owners with residential or commercial property equity who need money for months, not years, and can show exactly how and when it will be repaid.
- Not for
- Covering ongoing losses, borrowing with no realistic exit, owners without property equity, or small sums where fixed costs outweigh the benefit.
- Check before you sign
- Total dollars over the term including legal and valuation costs, extension and default terms, whether interest is prepaid, and that the exit date has room to slip.
Illustrative example: a private loan with a clear exit
Illustrative only, round numbers. A building company owns an investment unit worth $900k with $300k owing. It has a $250k ATO debt and has just signed a contract for the sale of a block of land, settling in five months.
A private lender advances $260k on a second mortgage over the unit for six months. The ATO debt is cleared, stopping further general interest charge, which hasn’t been tax deductible for charges incurred from 1 July 2025. When the land settles, the private loan is repaid in full. The total dollar cost of the private loan is high relative to a bank loan, but the exit is contracted and there’s a month of buffer.
Verdict for this owner: private loan, because the security, the purpose and the exit all line up. Our ATO debt guide covers the alternatives.
What protections apply to private business loans?
Fewer than most owners assume. ASIC reminds business borrowers that commercial credit carries the weakest legal safeguards, and private lenders who only fund business loans aren’t obliged to be licensed or to sign up with AFCA. If the lender is an AFCA member, AFCA can hear complaints from small businesses with fewer than 100 employees, but not about credit facilities over $5 million. Get independent legal advice on the loan documents, especially the guarantee.
How long do private business loans run, and what if you need longer?
Most private business loans are written for a matter of months, and some for a year or two. The lender is planning to be repaid from your exit, not from years of monthly instalments, so the term is set around the date that exit should happen.
If the exit is delayed, you have three options, and it pays to know which ones exist before you sign:
- Extend with the same lender. Usually possible if the loan is in good order, but expect an extension fee and a fresh look at the property’s value.
- Refinance to another lender. A bank or non-bank may take the loan out if your position has improved, for example once financials are lodged or a credit issue has aged.
- Sell the security. The fallback nobody wants, which is why the exit date needs a buffer.
The worst position is reaching the end of the term with no extension agreed and no refinance approved, because default charges can start immediately. Ask at the outset what an extension would cost and how much notice the lender needs. For how private money fits alongside the other lender types, see our lender comparison hub.
How do you choose a private lender well?
- Start with the exit. Write down how and when the loan will be repaid, and add a buffer.
- Know your equity. Estimate the property’s value and everything already owed against it.
- Get the full dollar cost in writing for the whole term, including extension terms.
- Check who you’re dealing with: ABN, company details, AFCA membership. Our lender red flags list helps.
- Have a lawyer read the documents before you sign, not after.
Ready to see if private money fits your situation?
If you have property equity and a short-term job to fund, find out what you could qualify for. A real person looks at your security, purpose and exit, with no credit check at the first step and no sharing of your details with a queue of lenders. Give us accurate figures for the property and what’s owed, so the match is right the first time.
Questions owners ask
What is a private business lender?
A lender that funds business loans from private capital, either its own or money pooled from investors, rather than customer deposits. Most private business lending is short term and secured by property. Because the security does much of the work, private lenders can often look past credit history, tax debts or thin financials that would stop a bank.
How much can a private lender lend for a business?
It depends mainly on the property's value, the debts already registered against it, and the exit. Property-secured business loans commonly run from $20,000 to $5,000,000 against residential or commercial security. Most private lenders cap the loan at a proportion of the property's value, so equity is the limiting factor.
Are private lenders more expensive than banks?
Usually, yes, because they take on deals banks won't and lend for short periods, so fixed costs such as establishment, valuation and legal fees weigh more heavily. That cost can still be worthwhile if the loan protects something bigger, like a property settlement or a contract. Compare every offer on total dollars repayable.
What is an exit strategy and why does it matter?
An exit strategy is how you'll repay the loan when the term ends, for example selling a property, refinancing to a bank, or receiving a contract payment. Private lenders lend short and expect to be repaid on time. If the exit slips, extension fees and default charges can grow quickly, so a realistic exit date is essential.
Can I get a private business loan with bad credit?
Often, if you have enough property equity and a believable exit. Private lenders look mostly at the security and the plan for repayment. They will still ask what happened and check that the business purpose is genuine, and the loan must be for business purposes.
Reviewed by the Best Biz Loan editorial team · updated 5 October 2026
We judge loan structures and lender types against the same five tests, never named lenders' products, and we never publish rates. How we judge
