How Private Lending Actually Works in Australia
Private Lending
Business borrowers · Property-secured private lending · General information
Private lender is not one thing, and the difference matters more than the rate. This guide covers where the money actually comes from, what a lender needs from your company or trust, whose agreement a second-ranking security requires, what happens between accepting terms and settlement, what the facility costs on a net-advance basis, how to check the lender and what protection you actually have, what a personal guarantee puts at risk, how you get out, what happens if you cannot repay, and when private lending is the wrong answer entirely.
Quick Answer
Before signing a private loan, verify the lender and funding source, every borrower and guarantor, any existing-lender consent, the net advance after costs, every settlement condition, the repayment exit and the default path. Put each answer in writing and have your solicitor explain any guarantee before paying a fee.
Also called: private mortgage, private business loan and non-bank property-secured finance. “Private credit” may instead describe the investment side of the market.
| Stage | What to do | Why it matters |
|---|---|---|
| Before paying a fee | Get the lender entity, funding source, security, net advance, fee treatment and conditions in writing. | A headline approval is not committed money, and some costs may remain payable if the loan does not settle. |
| Before accepting terms | Have your solicitor check immediate obligations, guarantees, security and charging clauses, existing-loan covenants, default terms and what happens if you withdraw. | The term sheet may create costs, restrictions or personal exposure before the formal loan documents exist. |
| Before settlement | Track every condition, who controls it and what evidence is still missing. | The slowest unresolved third party, not the advertised lender speed, usually controls the date. |
| After settlement | Record the maturity date, reporting duties, exit milestones and the date a refinance or sale must begin. | A short facility becomes dangerous when the exit is monitored at maturity instead of months earlier. |
| If the exit slips | Tell the lender early, obtain a payout figure and written extension terms, and run sale or refinance options in parallel. | An extension is a new credit decision; delay reduces options and bargaining power. |
| If repayment is not realistic | Get urgent legal and financial-counselling help before adding more secured debt. | New borrowing does not solve an underlying inability to repay and may put more property at risk. |
Where does the money actually come from?
Private-loan money generally comes from the lender's own balance sheet, a pooled fund it manages, or individual investors matched to the loan. The source affects whether funds are already committed or still depend on an allocation or investor commitment.
Which is why the phrase to listen for is "subject to funding". Those three words mean completely different things depending on which of the three you are dealing with. From a balance-sheet lender they usually mean the credit decision is not final. From a fund manager they usually mean the allocation has not been made. From a contributory lender they can mean that the money does not exist yet and someone still has to be persuaded to put it up. Same phrase, three different risks, and you are entitled to ask which one applies to you before you pay a fee or sign a mandate.
None of the three is inherently better. A contributory arrangement can be the only source willing to look at an unusual security, and a balance-sheet lender can be conservative in ways that do not suit your file. The point is that this is a knowable thing about the person you are borrowing from, and asking about it is normal. If the answer is evasive, that is information too.
“Private credit” can mean the investment side rather than the borrowing product. In consumer-facing government material it commonly describes funds that lend to businesses and pay a return to investors. This guide is written for the borrower on the other side of that transaction.
For scale, the regulator's own estimate is worth knowing. ASIC's report on private credit in Australia records that "the size of the market is estimated at around $200 billion, approximately half of which is real estate-focused finance" (ASIC, Report 814, Private credit in Australia, published September 2025, read again for this guide in August 2026). That is an estimate rather than a measured total, and ASIC says so, noting other market estimates in a similar range and that definitions of private credit vary. What it establishes is that this is a large and mostly property-secured market rather than a fringe of the finance system, which is why the questions in the rest of this guide are worth asking properly.
If you want the product explainer rather than this structural read, the guide to what private lending is covers the basics, and the glossary entry for private lending is the short version. This page starts one step later, at who is on the other side of the table.
What does a lender need from your business structure?
A private lender needs evidence that the borrower can grant the proposed security: matching ownership records, authorised signatories and, for a trust, a deed that permits borrowing and security plus any required consents. This is a documentation and authority check, not a promise that credit history or the purpose of the loan will be ignored.
The simplest case is an individual on the title borrowing in their own name. The next is a company that owns the property and borrows against it. The most involved is a company acting as trustee of a trust, and the reason is specific rather than bureaucratic: before anything can be documented, the lender's solicitor has to read the trust deed and satisfy themselves of three things. That the trustee has power to borrow. That it has power to grant security over trust assets. And that whatever consents the deed requires, from an appointor, a guardian or the beneficiaries, have actually been given. A deed that nobody has opened since it was signed is not a problem until the week it is.
There is a second question that catches people, and it is a directors' question rather than a lender's. Where a company grants security over an asset in support of borrowing that benefits someone else, a related entity or another director, the directors have to be able to explain what the company gets out of it. That is their duty, not the lender's, and it is exactly the kind of thing a lender's solicitor will want addressed rather than assumed. A director's guarantee is a separate promise again, given personally, and it survives the company.
What makes an entity straightforward
- The borrowing entity is the registered owner of the security property, with nothing unusual on title
- Where a trust is involved, the deed is available, complete, and has been read by someone qualified recently
- Company records are current, so who can sign for the company is not in question
- Everyone who has to sign is contactable and able to receive independent legal advice where required
- The purpose of the borrowing is clearly a business purpose and the benefit to the borrowing entity is obvious
What makes an entity slow
- A corporate trustee where the deed cannot be located, is incomplete, or has been varied and the variations are missing
- Property held by one entity while the borrowing benefits another, with no explanation of the benefit
- Registered names that do not match across the title, the company records and the contract
- Signatories who are overseas, unwell, estranged from a co-owner, or simply unavailable that week
- A structure that was set up for a reason nobody currently involved can remember
One change to the professional chain around all of this is genuinely new and worth knowing about, because it took effect on 1 July 2026, shortly before this guide was written. AUSTRAC states that lawyers, conveyancers, accountants, trust and company service providers, real estate professionals and certain other businesses "will be regulated by us from 1 July 2026" (AUSTRAC, About the reforms, read August 2026). Among the new professional designated services, listed under table 6 of subsection 6(5B) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, is "assisting in organising, planning, or executing a transaction for equity or debt financing relating to a body corporate or legal arrangement" (AUSTRAC, Professional designated services, read August 2026). Whether a particular professional in your particular transaction is providing a designated service is a question for that professional and not for this page. The practical point for a borrower is simply that the advisers around a property-secured deal now carry their own obligations, and identification and source-of-funds questions from your own solicitor or accountant are not them being difficult. Expect the same from the lender's side: identification of directors and beneficial owners, a current company extract, and verification of identity checks are normal parts of documenting a property-secured loan, and where a guarantee or third party security is involved, a certificate of independent legal advice is commonly required before anything completes.
From our broking files, general and without figures
Patterns we see on private lending files, kept deliberately to direction rather than numbers, because this is exactly the kind of page where an invented figure does damage.
- The exit that was described rather than evidenced is the most common reason a file that looked straightforward stops being straightforward.
- The entity structure nobody had looked at since it was established is the second. It is almost always solvable, and it is almost never solvable quickly.
- The existing facility whose terms had not been read is the third, and it is the most frustrating, because the answer was sitting in the borrower's own drawer the whole time.
- The most expensive assumption in this product is that the deadline is immovable. Often it is not, and testing that costs nothing.
- The question we are asked most is "what is your rate". The question that would have served the borrower better is "what is the net advance, and what is the interest calculated on".
- The file that moves is almost always the file that was already simple before anyone called a lender. Preparation does more of the work here than appetite does.
General information only, drawn from broking experience as at August 2026, and not financial advice. This is not an offer, an approval, or an indication of the likelihood of approval; every application is assessed on its own facts, its security, its exit and lender policy at the time. Speak to a qualified broker, your own solicitor, and your accountant.
What a lender wants to see in the file itself is covered from the lender's side in the piece on what private lenders need before they can act, and how a site file reads to a private funder is set out in the red and green flags on an approved site file. Both are worth reading before the first conversation rather than after it.
What does a personal guarantee put at risk?
A personal guarantee can make the guarantor personally responsible for the borrower's debt if the borrower does not repay. Depending on the guarantee and any charging or security clauses, personal assets may be exposed as well as the property named as loan security. The documents determine the scope, so a company borrower does not by itself keep the risk inside the company.
A guarantee, a mortgage and a third-party mortgage do different work. The borrower owes the facility debt. A guarantor promises to answer for that debt if the circumstances in the guarantee occur. A mortgagor gives security over identified property, and a third-party mortgagor may put property behind another person's or company's borrowing without receiving the loan proceeds. One person or entity can occupy more than one of those roles in the same transaction.
| Arrangement | Who owes or supports the debt | What may be exposed | What to ask your solicitor |
|---|---|---|---|
| Company borrower | The company owes the facility debt | Company assets and every asset covered by its mortgage or other security | Exactly which assets and obligations the facility and security documents cover |
| Director's personal guarantee | The director promises to answer for the borrower's obligations if the guarantee is called | Personal assets may be pursued to the extent permitted by the guarantee and applicable law | The cap, covered fees and enforcement costs, charging clauses, later variations and release conditions |
| Third-party mortgage | The borrower owes the debt and another person or entity grants property security | The identified property, even where its owner did not receive the loan money | The maximum amount secured, priority, enforcement rights and when the mortgage must be released |
| Corporate trustee borrower or guarantor | The company signs in its capacity as trustee, subject to the documents | Trust assets and the trustee's rights and liabilities, which depend on the deed and transaction | Borrowing and guarantee powers, deed variations, trustee indemnity and any limitation-of-liability wording |
| Related-company guarantee | A related company supports the borrower's obligations | The related company's assets and any security it grants | Corporate benefit, director approvals, the guarantee's scope and the release mechanism |
Credit reporting is a separate question from liability. The OAIC states that a credit provider may access a person's consumer credit report, with consent, to assess an application for commercial credit or whether to accept that person as a guarantor (OAIC, Third-party access to credit reports, read August 2026). Ask the lender what enquiry it will make and what it may report if the guarantee is called; do not assume the company structure makes the guarantor invisible.
The questions to put to your own solicitor are specific: what amount can I become liable for, does that include interest and enforcement costs, does the document charge any of my property, can the facility be varied without fresh consent, and what written evidence releases me when the loan is repaid or refinanced. ASIC has previously required changes to standard-form small-business loan terms that exposed guarantors to increases beyond the original principal and interest without adequate limits or consent (ASIC, small-business borrowers and guarantors, published September 2018). That does not decide whether your term is enforceable; it shows why the scope and variation clauses deserve their own review.
Does your existing lender have to agree?
An existing lender must agree where the current loan covenants or a negotiated priority arrangement require consent. Registration of a later-ranking security and compliance with the existing loan contract are separate questions, so have your solicitor check the current facility before anyone promises a settlement date.
On the registry side, priority between registered interests generally runs by registration, so a second mortgage ranks behind the first mortgage and is paid after it. On the contract side, your existing loan documents may contain a promise not to grant a further encumbrance without consent, and breaking that promise can be an event of default under the first facility even though the registration itself goes through. Which is why the first thing to do is not to ring a private lender. It is to read your own loan covenants, or have your solicitor read them. The position also varies between states in ways that a general guide should not flatten, so treat the general rule as a prompt to check your documents rather than as the answer for your property.
Where the two lenders do need to deal with each other, that is a negotiation between them, usually documented as a priority arrangement that caps how much the first lender can claim ahead of the second and sets the order of payment. The reason the cap matters is that a first lender's exposure is not frozen at settlement: a redraw or further advance can increase what ranks ahead of the incoming lender, and where a further advance ranks against a later security is exactly what a priority arrangement settles. The honest conclusion is the one nobody selling speed wants to put in writing: a private lender can move at private-lender pace right up to the point where it needs something from your bank, and from that point it moves at your bank's pace. That is not a criticism of either party. It is the structure, and knowing it in advance changes how you plan.
| Step | Who controls it | What they are deciding | What commonly stalls it here |
|---|---|---|---|
| Reading the existing loan terms | You, through your own solicitor | Whether you promised not to grant a further encumbrance, and what consent the promise requires | Nobody looks until late, and the documents are not where the borrower thought they were |
| Approaching the first lender, where consent is required | The first lender | Whether it will consent, on what conditions, and what it charges to consider the request | The request enters a queue you do not control, and the answer is not always yes or no |
| Agreeing priority between the two lenders | Both lenders and their solicitors | How much ranks ahead, in what order money is applied, and what each lender must tell the other | Two sets of solicitors negotiating terms neither borrower sees, on the first lender's timetable |
| Documenting and signing the new security | The incoming lender's solicitor | That the borrowing entity can grant the security and that everyone who must sign has signed | The trust deed question in the section above, and signatories who cannot be reached |
| Registering the security | The land registry in your state | Whether the instrument is in registrable form | Name mismatches between the title, the company records and the loan documents |
A caveat-secured facility works differently again, and the difference is worth understanding before you choose between them, because a caveat is a protective mechanism rather than a registered security interest of the same kind. The comparison is set out in the piece on how private lending compares with a caveat-secured facility, and the choice between going direct and taking second-ranking security is covered in choosing between a private lender and a second mortgage. Where a second-ranking registered security is the likely answer, the second mortgage page covers that product specifically. There is also a live glossary entry on first mortgagee consent, which is the term your solicitor will use.
What does it cost, and what actually lands in your account?
The usable amount is the net advance: the gross facility less retained interest, establishment fees, valuation, legal and other deducted costs. Ask in writing whether interest is calculated on the gross facility or on the smaller amount received, and compare total cost to the planned exit date.
Start with the distinction that does the work. The gross facility is the amount the loan documents say you have borrowed. The net advance is what is actually paid to you or to your solicitor at drawdown. Between the two sit several things that may be retained, capitalised, deducted or billed separately. Compare offers by obtaining the same written answer for every row below rather than placing two headline rates beside each other.
| Term | Exact figure or wording to obtain | Why it can change the comparison |
|---|---|---|
| Gross facility | The total debt documented at settlement | It may be materially larger than the cash available for your transaction |
| Net advance | The amount actually reaching you or your solicitor after every deduction | This is the usable funding and the correct starting point for comparing offers |
| Interest treatment and basis | Whether interest is periodic, retained or capitalised, and whether it is calculated on the gross facility, drawn balance or net advance | The same stated rate can produce a different cash advance and total cost |
| Minimum interest | The minimum period charged and whether early repayment changes it | A short actual loan can still carry interest for a longer minimum period |
| Establishment and lender costs | Each fee, when it becomes payable and whether it is deducted or invoiced | Deducted costs reduce the net advance while remaining part of the transaction cost |
| Valuation and legal costs | Who appoints each provider, any estimate or cap, and whether the costs survive a failed settlement | Third-party work may remain payable even when no loan money is advanced |
| Broker remuneration | Who pays it, the amount or method, when it is earned and whether it is inside or outside the facility | It can affect both the total cost and which offers are presented |
| Exit and discharge costs | Every exit fee, discharge fee, notice requirement and the method used to calculate the payout figure | The price of leaving belongs in the original comparison, not only at repayment |
| Extension costs | Whether an extension is available, how it is assessed and every fee or repricing consequence | An extension is a new credit decision rather than an automatic right |
| Default pricing | The default rate, default fees, enforcement costs and events that trigger them | Default may arise from non-monetary breaches as well as a missed repayment |
| Non-settlement liability | What becomes payable on acceptance, what is refundable and what remains payable if either party does not proceed | "Indicative" does not necessarily mean the document has no immediate consequences |
| Funding status and conditions | Whether funds are committed, every remaining condition, who controls it and the offer expiry date | A cheaper proposal is not a usable alternative if its critical path cannot meet your deadline |
Can you still owe fees if the loan never settles? Possibly. A term sheet or letter of offer may make valuation, legal, assessment, establishment or other costs payable before settlement or even if the facility does not proceed. "Indicative" describes the proposed facility; it does not answer whether the fee, exclusivity, confidentiality, cost or security clauses take effect on acceptance. Ask your solicitor to identify every immediate obligation before you sign or instruct a valuation.
Two structural points follow from that list. The first is that a comparison rate, which is a useful tool on regulated consumer credit, will often not be published for a commercial facility, so you cannot rely on it to do the comparing for you. You have to ask for the net advance and the total cost to the exit date, in writing, and compare those.
The second is the failure pattern that costs borrowers the most money in this product, and it is not a high rate. It is a facility priced and structured for a short period that ends up running for a long one. A short-term facility that runs several times its intended life has usually stopped being a solution and started being the problem, which is why the exit section below matters more than this one. The cost difference between arranging this through a broker and going direct is examined in the piece on what going direct actually costs, and who private mortgage lenders are and what they charge is covered in its own guide.
What happens after you accept private-loan terms?
The usual path is due diligence, valuation and title checks, entity review, any existing-lender consent, formal approval, loan documents, independent legal advice, signing and settlement. Acceptance of a term sheet is the start of that critical path, not proof that every condition is cleared or that funds are committed.
- Written terms and fees. Confirm the lender's legal entity, funding source, gross facility, net advance, security, term, exit, default terms, every fee and what remains payable if the loan does not proceed.
- Due diligence. The lender or its solicitor checks the property, title, valuation, loan purpose, borrower, directors, beneficial owners, trust documents, guarantees and the evidence behind the exit.
- Third-party conditions. Your existing lender may need to consent, two lenders may need a priority arrangement, a valuer may need more evidence, or a contract counterparty may need to provide documents.
- Formal approval and documents. Once conditions are accepted, the lender's solicitor prepares the facility and security documents. The detailed obligations and default rights live here rather than in the marketing summary.
- Independent advice and signing. Borrowers, guarantors and third-party security providers receive the legal advice or certificates the documents require, then sign in the required form.
- Settlement. The solicitors coordinate searches, registrations, priority or discharge steps, payout amounts and funds. Ask for a settlement statement showing exactly how the gross facility becomes the net advance.
Does accepting a term sheet guarantee the money?
No. Accepting indicative terms normally begins valuation, due diligence, formal approval and documentation; it does not necessarily mean every condition is satisfied or the lender's funds are unconditionally committed. Ask which conditions remain, who controls each one, whether the lender still needs an allocation or investor commitment, and what can still cause the offer to expire or the lender not to settle.
What if private funding misses a property settlement?
Missing settlement may trigger consequences under the sale contract, including interest, a formal notice, termination, deposit risk or a damages claim. The actual result depends on the contract and jurisdiction, so contact your conveyancer or solicitor immediately and ask what extension or protective step is available. The lender and broker do not control the vendor's rights, and an indicative approval is not a substitute for a finance condition in the purchase contract.
What should you do immediately after settlement?
Record the maturity date, every reporting obligation, the expected payout method and the date the exit process must begin. If the exit is a refinance, work backwards from the maturity date through assessment, valuation, approval, documents and discharge rather than waiting until the final month. If it is a sale, record the listing, campaign, contract and settlement milestones that make the exit evidenced rather than hoped for.
How do you check the lender and what protection do you have?
Legitimacy cannot be judged from an Australian credit licence alone. A lender that only provides commercial loans may operate without one and without AFCA membership, so verify the exact legal entity, funding source, AFCA status, fee terms, security documents and complaint path before signing.
First, a commercial-only lender does not need a credit licence and does not have to be an AFCA member. ASIC states it in one sentence: "Lenders that only provide commercial loans are not required to have a credit licence and are not legally required to be a member of AFCA" (ASIC, Disputes about commercial loans, page last updated 19 April 2024, read again August 2026). That is not a loophole. It is how the law draws the line between consumer credit and commercial credit, and most legitimate commercial lenders sit on that side of it.
Second, the protection that comes with commercial borrowing is deliberately thin. The same ASIC page says so directly: "The law provides the lowest level of protection to commercial loans, including loans to small businesses" (ASIC, Disputes about commercial loans, last updated 19 April 2024). Where a facility is provided to an individual wholly or predominantly for personal, domestic or household purposes, different rules apply regardless of what the paperwork calls it, and that is a question worth putting to your own solicitor rather than to the lender. The main protection that does still apply to commercial borrowing is the unfair contract terms law, which covers standard form small business contracts for financial products and services (ASIC, Information Sheet 211, read August 2026); whether a negotiated facility counts as a standard form contract is a question for your solicitor.
Third, the gap shows up in the complaints data. AFCA has publicly cautioned that "under the current law, not all small business lenders are required to be members of AFCA, leaving business owners taking out loans with non-AFCA members with fewer options for redress if something goes wrong", and records that "in the financial year 2024-25, AFCA closed 2,063 small business complaints about 'finance' with 21 per cent of them closed because they were outside AFCA's rules" (AFCA media release, updated 14 November 2025). Those are complaints closed rather than received, in AFCA's own product category, and being outside AFCA's rules covers more than non-membership. Even read conservatively, roughly one in five small business finance complaints closed that year never reached a decision on their merits.
For completeness on eligibility: AFCA's rules define a small business as "a primary producer or other business with less than 100 employees" (ASIC, Disputes about commercial loans, last updated 19 April 2024). Meeting that definition still does not help if the lender is not a member, which is the whole point of the check below. There is also a monetary boundary even where the lender is a member: AFCA states it can consider disputes "where the credit facility does not exceed $6,317,000 for small businesses and primary producers", a limit in force from 1 January 2024 and indexed every three years, with a compensation cap per claim that is lower again (AFCA, compensation caps and monetary limits, read August 2026). On a larger facility, AFCA is not available even against a member, and that also belongs in your decision.
One practical update worth knowing: AFCA states it no longer issues membership certificates from FY26, so a certificate on a lender's website is not verification. The live financial firm search is.
Checks worth doing before you sign
- Ask whether the lender is an AFCA member, then verify it yourself on AFCA's public member register rather than taking the answer on trust
- Ask whose money is being lent, in the terms set out at the top of this guide, and ask what "subject to funding" means on your file
- Ask for the full fee schedule and the net advance figure in writing before you pay any application or assessment fee
- Search the company and its directors on the national business registers, and check that the entity on the term sheet is the entity on the loan documents
- Ask your own solicitor to read the term sheet before you sign it, not after, and ask what happens to any fee if the facility does not proceed
- Apply the same questions to whoever introduced you, broker or otherwise, including how they are paid and by whom
Signals worth walking away from
- Pressure to pay a substantial non-refundable fee before you have seen written terms
- Reluctance to answer where the money comes from, or an answer that changes between conversations
- A term sheet that will not state the net advance, or that leaves what the interest is calculated on ambiguous
- Discouraging you from having your own solicitor review the documents, or setting a deadline that makes review impossible
- Any suggestion that the purpose of the loan should be described as business when it is not, including signing a business purpose declaration that is untrue, or that a company should be inserted as borrower purely to change how the loan is treated
- A structure you cannot explain back to someone else in plain language after it has been explained to you twice
It is also worth knowing the regulatory weather this product is operating in, stated as what the regulator has published rather than as an accusation against anyone. ASIC's enforcement priorities list "poor private credit practices", "misconduct exploiting consumers facing financial difficulty including predatory credit practices" and "unlawful practices seeking to evade small business creditors" among its current focus areas (ASIC enforcement priorities, page updated 13 November 2025). Most private lenders are unremarkable commercial businesses doing ordinary secured lending. A regulator publishing that list is a reason to do the checks above properly, not a reason to avoid the product.
One last point, and it runs against our own commercial interest, which is exactly why it belongs here. Every question in the left-hand column applies to a broker as much as to a lender, including this one. Ask how the person arranging your finance is paid, by whom, and whether that changes which lender you are shown. The trade-offs of going direct versus using an intermediary are set out honestly in the broker versus direct decision guide, and general, independent information about loans and borrowing is published by the government at moneysmart.gov.au.
How do you get out, and what should you do if the exit slips?
A private loan is normally repaid through the documented exit presented at approval, such as a sale or refinance. If that exit starts slipping, tell the lender before maturity, obtain a current payout figure, request extension terms in writing and run the sale or refinance path in parallel.
The distinction that decides most files is between an exit that is described and one that is evidenced. "We will refinance" is described. A written approval from an incoming lender is evidenced. "We are selling the other property" is described. A signed contract, or at minimum a formal agency listing, is evidenced. "The project will be finished" is described. A building contract with a completion date, and the funding in place to reach it, is evidenced. None of this is a lender being difficult. An exit strategy is the only thing standing between a short-dated facility and the enforcement section below.
| Proposed exit | Evidence available now | Milestones to monitor | Warning sign |
|---|---|---|---|
| Mainstream refinance | A lodged application, serviceability evidence, current financial information and a property ready for valuation | Assessment, valuation, approval, documents, payout request and discharge | The reason mainstream finance was unavailable has not changed or cannot change within the term |
| Sale of the security or another property | A signed agency appointment, active campaign, genuine offers or a signed contract | Listing, inspections, offers, unconditional contract and settlement | The expected price or settlement date leaves no buffer for selling costs, delay or the payout figure |
| Development completion | Approved plans, building contract, programme, funding to complete and current cost reporting | Draws, construction progress, certification, practical completion and titles where relevant | Delay or cost overruns consume the remaining term before the completed asset can be refinanced or sold |
| Sale of completed stock | Presales or signed contracts, buyer status and an achievable settlement schedule | Completion, titles, contract conditions and purchaser settlements | Contracts are conditional, concentrated, expiring or insufficient to clear the payout |
| Asset sale or business transaction | Ownership evidence, valuation, mandate, negotiated terms or an executed sale agreement | Due diligence, conditions, completion and receipt of cleared funds | Repayment depends only on an intention to sell or forecast proceeds with no active transaction |
| Extension as a contingency | Early disclosure to the lender, an updated payout figure, revised exit evidence and written extension terms | Fresh credit assessment, approval, fees, documents and the new maturity date | The borrower treats an extension as automatic or waits until maturity to ask |
Extending is where expectations and reality separate. An extension is a fresh credit decision rather than an administrative step, and it is made by a lender who now knows that your original exit did not happen. That is new information about the file, and it is priced accordingly. Ask before you sign what the process is if you need more time, what it costs, and whether the answer depends on anything outside the lender's control, which brings you back to the funding-source question at the top of this guide.
The other common way out is a refinance into a longer-term product, and the sequencing is worth understanding in advance. The incoming lender assesses on its own terms, the outgoing lender produces a payout figure and controls the discharge, and the discharge runs on the outgoing lender's process rather than yours. Evidencing an exit on a second-ranking facility is covered specifically in the piece on evidencing the exit on a short-dated facility, and the mechanics of moving from a short-dated facility into a term product are set out in exiting short-term property finance into a term loan.
What happens if you cannot repay?
If the facility is not repaid, enforcement may progress from default and notice to demand, possession and sale, with receivership available in some company-borrower cases. The contract and applicable law determine the actual rights, notices and timing, so read the enforcement clause before signing and obtain urgent legal advice if a default occurs.
Four things get run together in most people's minds and should not be. A default notice is a notice that something has gone wrong and, usually, an opportunity to fix it. A demand is a requirement to repay. Taking possession is a step that puts the lender in control of the property. A sale is the final step, and a secured lender selling has duties about how it does so. Where the borrower is a company, a receiver appointed by a secured creditor is a different mechanism again. What each of those means in your case, and how much time sits between them, is set by your documents and by the law in your state, which is why this guide states the shape and refuses to publish periods that would be wrong for most readers.
| Stage | What it is | What has to happen first | What it does not mean |
|---|---|---|---|
| Default | An event the loan documents define as a default, which is often more than just missing a payment | The event itself, as defined in your documents, which is why the definition is worth reading before you sign | It does not by itself mean the lender has taken any step, and it does not always mean the loan is immediately repayable |
| Notice | A formal notification of the default, commonly with a period to remedy it | What your documents and the law applying to your facility require, which differs between commercial and regulated consumer credit | It is not a demand for the whole balance, and it is not the last opportunity to negotiate |
| Demand | A requirement to repay what is owing, often the whole facility | The default, and usually the notice period expiring without the default being remedied | It does not transfer the property, and it does not end the possibility of a refinance or a sale you arrange yourself |
| Possession | The lender taking control of the property under its security | The steps above and the procedure the relevant state law requires for that kind of security, which can include court proceedings | It is not a sale, and it does not extinguish your interest in any surplus after the debt and costs are paid |
| Sale | The lender selling the secured property and applying the proceeds | Possession or the equivalent step, and compliance with the duties that apply to a lender selling secured property | It does not necessarily end your liability, because a shortfall between the sale proceeds and the debt can remain owing |
| Receivership, where the borrower is a company | A receiver appointed by a secured creditor to deal with assets covered by its security | A security interest that gives the creditor the power to appoint, and the appointment itself | It is not liquidation, and the receiver is not appointed to represent the company or its unsecured creditors |
On that last row, ASIC publishes plain-language guidance worth reading before you need it. A secured creditor "can appoint a receiver because they hold a security interest that allows them to appoint a receiver", and while the receiver's principal obligation is to that secured creditor, ASIC records that the main duty owed to unsecured creditors is "an obligation to take reasonable care to sell secured assets for not less than market value or, if there is no market value, the best price reasonably obtainable" (ASIC, Receivership: a guide for creditors, last updated 17 December 2024). Read the live guidance rather than relying on a summary, and note that receivership applies to companies rather than to individuals.
Two practical points to close. A private business loan does not automatically appear on a consumer credit report, and reporting depends on the lender, borrower and facility. Credit enquiries may appear, while defaults, court action and insolvency appointments may become visible through credit or public-record searches, so ask the lender what it reports before signing. And if the honest position is that the business cannot service or repay the debt at all, a short-dated secured facility is not the answer to that problem and taking one will usually make it worse. The section below sets out who to speak to, and free financial counselling is genuinely free and genuinely independent.
When is private lending not the right answer?
Private lending is usually unsuitable when there is insufficient property equity, no documented exit, or the underlying problem is an ongoing inability to meet debts rather than a short, defined funding gap. In those cases another structure, a renegotiated deadline or no additional borrowing may be safer.
The useful ranking rule is structural rather than promotional. The option you can actually plan around is the one with the fewest third parties in its critical path, because that is a property of the instrument itself rather than a claim anyone makes about it.
| Option | What problem it actually solves | What it needs from you | Who else has to agree | Where the cost sits |
|---|---|---|---|---|
| Caveat-secured facility | A short, defined gap where property equity exists and registering a full security is not workable | Property with equity, a documented purpose and a dated exit | Fewest parties of the property-secured options, though your existing loan terms still matter | Higher cost for a short period, concentrated in interest and establishment costs |
| Registered second mortgage | Raising a larger amount against equity while keeping an existing first mortgage in place | Genuine equity behind the first mortgage, a clean entity position, and a documented exit | Potentially your first lender, depending on your covenants, plus both sets of solicitors | Interest plus legal and documentation costs on both sides |
| Private lending against property | Transactions a bank cannot assess on income, where the security and the exit carry the file | Security, an evidenced exit, and an entity that can actually grant the security | Depends on the security position and on where the lender's money comes from | Interest, establishment and legal costs, usually deducted from the advance |
| Working capital facility | A cashflow deadline rather than a property one, where the business trades profitably | Trading history and business performance rather than property equity | Usually nobody outside the lender | Materially lower cost than property-secured short-dated finance in most cases |
| Invoice or debtor finance | A customer who has not paid, where the money is owed rather than missing | Creditworthy debtors and invoices that are genuinely due | Sometimes the debtors themselves, depending on the structure | Priced against the invoices rather than against property |
| Refinancing the first mortgage | A structural need for more funding where the timetable genuinely allows a full assessment | Serviceability evidence and time, which is the constraint that rules it out | The incoming lender and the outgoing lender's discharge process | Usually the lowest cost of the options here, and the one that requires the fullest assessment |
Two further boundaries worth stating. If a bank has declined and the reason was serviceability rather than timing, a property-secured facility changes who is lending but not whether the business can repay, and the piece on what private lenders look at after a bank decline is the honest read on that. And if the question is which property-secured instrument suits which transaction, the piece on private lending across property transactions and the caveat loans guide cover the two most common alternatives in more depth. For a general survey of business funding types, the government publishes a neutral overview at business.gov.au.
What should you do before paying a fee or signing?
Before committing, have your solicitor check consent and enforcement terms, confirm the net advance and interest basis in writing, verify the lender and AFCA status, and test the repayment exit with your accountant or broker. Do the document and counterparty checks before urgency turns an indicative proposal into the only apparent option.
Your own solicitor, first. Ask two specific questions rather than a general one: what does my existing loan say about granting further security, and what does the enforcement clause in this new facility actually allow. Both answers are in documents you already have or are about to sign. Your accountant, where a company or trust is involved, because the entity question in section two is theirs rather than the lender's, and they can usually answer it quickly. Your existing lender, to ask what it requires. That answer sometimes ends the problem outright and sometimes reveals a constraint you did not know about, and either is better learned early. A broker, in parallel rather than first, so that you find out whether the deal is fundable while the legal and structural positions are being confirmed, rather than after the fact.
Where to get help
Reading your own loan terms costs nothing and forecloses nothing. Neither does asking your existing lender what it requires, or asking a prospective lender to put the net advance in writing. None of those steps commits you to anything, and every one of them improves the decision you make afterwards.
Where the underlying problem is financial difficulty rather than timing, free, independent and confidential financial counselling is available before you borrow. The Small Business Debt Helpline is on 1800 413 828 (sbdh.org.au) for business owners, and the National Debt Helpline is on 1800 007 007 (ndh.org.au) for personal finances. Neither sells finance, and calling costs nothing. A short-dated secured facility is not a solution to insolvency, and speaking to a counsellor first is a strength rather than a last resort.
One closing note on sequencing. A solicitor who confirms that your existing facility has no restriction on further security has just made the rest of this straightforward for the price of an email. One who finds a restriction has told you, early, that your first lender is now in the transaction, which changes the plan rather than ending it. Either answer is worth having early rather than late.
The safest order is to verify, quantify, document and then monitor. Verify the exact lender entity, funding source, AFCA status and every person or entity giving a guarantee or security. Quantify the gross facility, net advance, interest basis, total costs and extension costs. Document the guarantee scope, existing-lender consent, every settlement condition, the formal default path and an exit supported by dates and evidence. After settlement, monitor the exit early enough to preserve a sale, refinance or negotiated extension as real options. If repayment is not realistic, obtain legal and financial-counselling help before adding more secured debt.
Key takeaway: do not pay for urgency until you know who controls settlement, what money you will receive, whose assets are exposed and how the loan will end.Frequently Asked Questions
Before paying any fee, get written terms showing the lender entity, funding source, proposed security, gross facility, net advance, interest basis, every fee, conditions, term, exit and what happens if the loan does not proceed. Ask whether the fee is refundable and have your own solicitor review the terms before you sign or pay.
No. A term sheet summarises proposed commercial terms; the formal loan and security documents contain the binding obligations and detailed default rights. A term sheet can still contain immediate provisions about fees, exclusivity, confidentiality or costs, so treat it as potentially consequential until your own solicitor confirms what is and is not binding.
The usual sequence is due diligence, valuation and title checks, entity and trust review, any existing-lender consent, formal approval, preparation of loan and security documents, independent legal advice, signing and settlement. The slowest unresolved third party usually controls the timetable, so ask who owns each condition and what evidence is still missing.
There is no reliable standard timeframe. Release depends on valuation, title and entity checks, first-lender consent, legal documents, independent advice, signed conditions and whether the lender's funds are already committed. Ask for the unresolved conditions and responsible party in writing instead of relying on a headline promise.
Sometimes. Registration rules and your existing loan contract are separate questions. Your covenants may require consent to further security even where a later-ranking interest can be registered, and a negotiated priority arrangement may also be needed. Ask your solicitor to check the current facility before approaching the incoming lender.
Not if they only provide commercial loans. ASIC states that commercial-only lenders are not required to hold an Australian credit licence or be AFCA members. A lender providing regulated consumer credit is in a different position, so the purpose, borrower and security structure matter and should be checked by your solicitor.
Search the lender's exact legal name in AFCA's public Financial Firm Search; do not rely on a logo or an old certificate. If the lender is not listed, ask for its internal complaint process and obtain legal advice about available remedies before signing. Non-membership is not proof of illegitimacy, but it changes your complaint options.
The net advance is the amount that actually reaches you or your solicitor after retained interest and deducted establishment, valuation, legal and other costs. Compare it with the gross facility and ask in writing what interest is calculated on, because the calculation may use the larger gross amount rather than the money received.
Act before the maturity date. Tell the lender, obtain an up-to-date payout figure, ask for extension terms in writing, and run the refinance or sale path in parallel with your solicitor, accountant and broker. An extension is a new credit decision and may add costs, so delay reduces your options and bargaining power.
A private business loan does not automatically appear on a consumer credit report; reporting depends on the lender, borrower and facility. Credit enquiries may appear, while defaults, court action and insolvency appointments may become visible through credit or public-record searches. Ask the lender what it reports and obtain advice about your specific position.
Possibly. A term sheet or letter of offer may make valuation, legal, assessment, establishment or other costs payable even if the facility never settles. The result depends on the wording and applicable law, so ask what becomes payable on acceptance, what is refundable and what remains payable if either party does not proceed before signing or instructing work.
A personal guarantee can make the guarantor personally responsible for the borrower's debt if the borrower does not repay. Depending on the guarantee and any charging or security clauses, personal assets may be exposed as well as the stated loan security. Ask your own solicitor about the scope, any cap, charging clauses, later variations and the conditions for release before signing.
What sources support this guide?
This guide is supported by current Australian regulator, complaints-scheme and government sources rather than lender marketing. They include ASIC on commercial lending, guarantor terms, credit licensing, complaints access, unfair contract terms, receivership and enforcement priorities; AFCA on small business complaints, membership and monetary limits; OAIC on credit-report access and defaults; ASIC's market study of private credit in Australia; AUSTRAC on the professional obligations that commenced this year; and government guidance on business-loan security and property settlement. Every source was read again in August 2026. Where a source does not publish a position, or where a figure could not be verified against a primary source this build, this guide leaves it out rather than filling the gap. That is why there are no rates and no funding timeframes anywhere on this page, and the only dollar figures are the regulators' own published numbers, quoted with their dates.
| Source | What it supports | As at |
|---|---|---|
| ASIC, Disputes about commercial loans | That commercial-only lenders are not required to hold a credit licence or to be AFCA members, that the law provides the lowest level of protection to commercial loans, and AFCA's small business definition | Apr 2024, read Aug 2026 |
| AFCA, media release on unregulated lending and small business complaints | That not all small business lenders must be AFCA members, and the number of small business finance complaints closed in 2024-25 with the proportion closed as outside AFCA's rules | Nov 2025, read Aug 2026 |
| AFCA, Financial Firm Search | How a borrower can verify whether the lender's exact legal entity is currently listed as an AFCA member | Checked Aug 2026 |
| ASIC, Report 814 Private credit in Australia | The estimated size and composition of the Australian private credit market, and that the estimate is indicative rather than measured | Sep 2025, read Aug 2026 |
| ASIC, Receivership: a guide for creditors | How a receiver is appointed, whose interests the appointment serves, and the duty owed on the sale of secured assets | Dec 2024, read Aug 2026 |
| ASIC, enforcement priorities | That private credit practices, misconduct affecting people in financial difficulty, and practices evading small business creditors are current regulatory focus areas | Nov 2025, read Aug 2026 |
| AUSTRAC, About the reforms and Professional designated services | That lawyers, conveyancers, accountants and trust and company service providers became regulated from 1 July 2026, and that assisting with a transaction for debt financing relating to a body corporate is a listed designated service | Read Aug 2026 |
| AFCA, compensation caps and monetary limits | The monetary limit on small business credit facility complaints and the three-yearly indexation of AFCA's limits and caps | Jan 2024, Rules reissued Mar 2026, read Aug 2026 |
| ASIC, Information Sheet 211, Unfair contract term protections for small businesses | That the unfair contract terms law covers standard form small business contracts for financial products and services | Read Aug 2026 |
| ASIC, Prospa removes unfair loan terms for small business borrowers and guarantors | Examples of guarantor terms ASIC required a small-business lender to limit or make subject to guarantor consent | Sep 2018, read Aug 2026 |
| OAIC, Third-party access to credit reports | When a credit provider may access a consumer credit report to assess commercial credit or a proposed guarantor, subject to consent | Read Aug 2026 |
| business.gov.au, Choose your funding | Neutral government guidance on business funding types, secured lending and the consequence of not repaying secured debt | Read Aug 2026 |
| moneysmart.gov.au | Independent government guidance on loans and borrowing, used as a neutral reference point in this guide | Read Aug 2026 |
Regulatory positions are summarised here rather than reproduced in full, and none of this is legal, tax or financial advice. Regulatory guidance changes, AFCA's rules change, and your own loan documents impose obligations this general guide cannot see. Confirm the detail with your own solicitor and on the current regulator pages before you act.
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