Alternative property finance in Australia: non-bank, private, mezzanine, vendor finance and sale and leaseback, matched to your situation and exit.
Property Lending Hub
Alternative Property Finance · Non-Bank Options · Exit First
"Alternative" is not one product. It is a menu, and most business owners who get a bank knock-back pick from the wrong end of it. This hub post maps every option, which situation each one fits, what each needs from you and how each one ends.
Quick Answer
Alternative property finance is a menu, not a product: non-bank lenders, private lenders and vendor finance on the lender side, preferred equity, joint ventures and sale and leaseback on the equity side, chosen by why the bank said no and how you will exit. For a standard secured loan, start with commercial property loans; for short-term funding against equity, see private lending. The situation table below matches six common situations to the option that usually fits.
Also called: non-bank property finance, alternative property lending. Non-bank property finance is the lender side only; alternative property finance also covers vendor finance, equity and sale and leaseback.
What is alternative property finance?
Alternative property finance is any way of funding a property purchase, refinance or project that does not come from a major bank's standard loan. It covers lenders who are not banks, and it covers structures that are not loans at all, which is why it is better read as a menu than as a single product.
The menu has two halves: the lender side and the equity side. On the lender side sit non-bank lenders, private lenders, private credit funds, second mortgages, caveat loans, bridging loans, mezzanine debt and vendor finance, where the seller acts as the lender. On the equity side sit preferred equity, joint ventures and sale and leaseback, where you give up a share of the property or the property itself in exchange for capital that does not have to be repaid like a loan.
The lender side is still a small part of the system. According to the Reserve Bank's Financial Stability Review (October 2026, read November 2026), non-bank lenders account for around 6 per cent of financial system assets and private credit for less than 2 per cent, although the largest estimates put private credit at around 10 per cent of total business debt, concentrated in real estate lending including construction and development. APRA's System Risk Outlook (May 2026, read November 2026) estimates domestic private credit at around $200 billion, or about 3 per cent of the size of the banking system. Small as a share, but large enough that most commercial deals a bank declines now have somewhere else to go. Who those funders are, and why private credit grew, is covered in commercial real estate debt in Australia. The regulator's reference report on the sector is ASIC's REP 814 Private credit in Australia.
Sources: Reserve Bank of Australia, Financial Stability Review, October 2026, published 1 October 2026. Australian Prudential Regulation Authority, System Risk Outlook, May 2026, published 21 May 2026. Read 4 November 2026.
What are the alternative property finance options in Australia?
The alternative property finance options in Australia fall into nine broad types, and each one solves a different problem. Here is the menu, in rough order from closest to a bank loan to furthest from it.
- Non-bank lenders. Funders that lend on policy close to a bank's but with more room on documents, income type and credit history. Often the first stop after a bank says no; see non-bank lender vs bank for the self-employed, and for how lender tiers work, second tier lenders in Australia.
- Private lenders and private credit funds. Lenders funded by investors rather than deposits, assessing the property and the exit more heavily than your income. Usually short terms; see how private lending works.
- Second mortgages and caveat loans. Short-term funding secured behind an existing first mortgage, used when the equity is there but the first lender will not extend. See second mortgage loans and caveat loans.
- Bridging loans. Short-term finance that covers the gap between buying one property and selling or refinancing another; see the bridging finance guide.
- Mezzanine finance. Second-ranking debt that sits between the senior loan and your equity, mostly used in development and value-add projects. Defined in the glossary under mezzanine finance.
- Vendor finance. The seller lends you part of the price and is repaid later, usually from a refinance. Defined under vendor finance.
- Preferred equity. An investor puts in equity that ranks ahead of your own equity for returns, but behind every lender.
- Joint ventures. A capital partner funds part of a project and shares in the profit, instead of charging interest.
- Sale and leaseback. You sell premises you own and lease them back, turning the equity into cash without a loan; see sale and leaseback in Australia.
Which option fits which borrower situation?
The option that fits is decided by why the bank said no and by how the money will be repaid, not by which funder advertises the loudest. The table below maps the six situations we see most often to the option that usually fits, what it costs in words, and how it ends.
| Your situation | Option that usually fits | What it costs, in words | How it usually exits |
|---|---|---|---|
| Bank said no on documents | A low doc or lease doc loan from a non-bank lender | Typically above a bank, varying by lender and by the type of evidence you supply | Stay on it, or refinance to a full doc loan once tax returns are lodged |
| Bank said no on serviceability | A non-bank lender that reads rental income differently, or a lease doc commercial loan | Typically higher than a bank, often with tighter loan limits (varies by lender) | Refinance once income or the lease profile improves |
| Need to settle fast | A private lender, a bridging loan or a caveat loan | Among the highest on the menu, with establishment and exit fees on top | Refinance to a non-bank or bank loan, or repay from a sale |
| Deposit gap | A second mortgage over other property, vendor finance, or mezzanine for a project | Second-ranking money costs more than first-ranking money, typically by a clear margin | Consolidate into one first mortgage, or repay from the sale or project profit |
| Want cash out of premises you own | An equity release refinance or a sale and leaseback | The loan costs interest; the leaseback costs rent for the lease term and the property itself | Loan: repay or refinance. Leaseback: lease expiry, or a buy-back option if one was negotiated |
| Selling a property to a known buyer | Vendor finance from you to the buyer | Priced by negotiation between seller and buyer, usually above a bank to reflect the seller's risk | The buyer refinances to pay out the vendor by an agreed date |
Where this commonly lands: a bank decline on documents or serviceability is usually a non-bank question, not a private lending one. The higher-cost rows are for timing or equity problems, not paperwork problems, and using them to fix paperwork is the expensive mistake.
When do mezzanine, preferred equity or a joint venture make sense?
Mezzanine, preferred equity and joint ventures make sense when the senior loan is already as large as the first lender will go and the project margin is strong enough to carry a more expensive layer of capital. They are mostly development and value-add tools, not ways to buy a standard owner-occupied premises.
Mezzanine finance is debt that ranks second behind the senior lender. It carries interest, it has a fixed end date and it needs the senior lender's consent, usually through a priority or intercreditor deed. From the underwriter's seat, that consent is the first gate: if the senior lender will not allow a second-ranking lender on title, mezzanine is off the table regardless of the numbers. The full mechanics are in the mezzanine finance guide.
Preferred equity is not a loan. The investor takes an equity position that is paid its return before you see yours, but after every lender. There are usually no monthly repayments; the investor is paid out from the sale or refinance at the end. It can suit a senior lender that will not accept a second mortgage behind it.
A joint venture trades interest for profit share. A capital partner, or a landowner contributing the site, takes a share of the result instead of charging a rate. It costs nothing while the project runs and can cost the most of all three if the project does well, so the agreement on decisions, deadlines and exit matters more than the price.
When do vendor finance or a sale and leaseback beat a loan?
Vendor finance or a sale and leaseback beat a loan when the problem is better solved by the other party to the property than by a lender. Vendor finance works when the seller wants the sale more than the cash today; a sale and leaseback works when you want the capital locked in your premises more than you want to own them.
With vendor finance, the seller defers part of the price and takes security for it, so a buyer with a deposit gap or thin paperwork can still settle. It usually needs a credible refinance path within the agreed term, because few sellers want to be a lender for long. See how vendor finance works and, for property deals specifically, vendor finance on property.
With a sale and leaseback, there is no debt at all. You sell the premises to an investor and sign a lease to stay, so the business keeps trading from the same site and the equity becomes working capital or debt reduction. The trade-off is permanent: you pay rent for the lease term and lose any future growth in the property unless you negotiated a buy-back option. The sale and leaseback guide covers lease terms and pricing. The tax and GST effect of the sale, and the legal terms of a vendor finance contract, belong with your accountant and solicitor.
What does each option need from you: documents, speed and security?
What each option needs from you shifts along the menu: the closer an option is to a bank loan, the more documents it wants and the longer it takes; the further away, the more it leans on the property and the exit. Here is how the main options compare.
- Non-bank lenders. Documents: full doc, low doc or lease doc, with an accountant's declaration, BAS or bank statements common on low doc. Speed: usually quicker than a major bank, slower than a private lender. Security: a first mortgage, as with a bank. The non-bank lender policy matrix shows how policies differ.
- Private lenders and funds. Documents: light on income, heavy on valuation and exit evidence. Speed: typically the quickest to a decision on the menu. Security: first or second mortgage, sometimes with a caveat or guarantees. Before you sign, ask who is actually funding the loan; see private lender term sheets and who is funding.
- Second mortgages, caveat and bridging loans. Documents: proof of equity, the first mortgage statement and a written exit. Speed: fast by design. Security: ranks behind the first lender, which is why it costs more.
- Mezzanine and preferred equity. Documents: a full project feasibility, budget, approvals and the senior loan terms. Speed: slower, because two funders and a deed have to line up. Security: second mortgage for mezzanine; an equity interest for preferred equity.
- Vendor finance and sale and leaseback. Documents: whatever the contract requires, plus your solicitor's review. Speed: set by negotiation, not by a credit team. Security: the seller's mortgage or caveat for vendor finance; none for a leaseback, because you no longer own the property.
A borrower who arrives with a written exit tends to get cleaner terms than one who arrives with a hope. If you want a read on which part of the menu you belong in before you talk to anyone, check eligibility first.
How does each option end, and what is the exit?
Each option ends in one of three ways: you refinance it, you repay it from a sale or profit, or, for a leaseback, the lease runs its course. Every option ends in an exit, so pick the exit first, then choose the option that suits it. Your exit strategy drives the term, the cost and which funder will say yes.
- Name the exit before the funder. A sale, a refinance once tax returns are lodged, or project profit. Write it down with a date.
- Match the term to the exit. Short-term money for a long exit is the most common way alternative finance goes wrong.
- Cost the whole path. Establishment and exit costs, typically higher than a bank and varying by funder, matter as much as the rate on a short loan.
- Test the backup exit. If the sale is slower or the valuation lower, what is the second way out?
- Diarise the refinance window. Start the refinance well before the term ends; see how to refinance a commercial property loan.
For many borrowers, the exit from a non-bank loan is a move back to a bank once the file is clean again; when that move makes sense is covered in non-bank lender vs bank. For every other property lane we broker, start at the Property Lending Hub.
Alternative property finance is a menu, not a product. The lender side runs from non-bank lenders, which are close to a bank, through private lenders, second mortgages, caveat and bridging loans, to mezzanine debt and vendor finance. The equity side covers preferred equity, joint ventures and sale and leaseback. The right choice comes from why the bank said no and how you will repay, and the cheapest mistake to avoid is using short-term, high-cost money to solve a paperwork problem a non-bank loan would fix.
Key takeaway: write down your exit and its date first, then pick the option on the menu that fits it.Frequently Asked Questions
The alternatives to a bank loan for property include non-bank lenders, private lenders and private credit funds, second mortgages, caveat and bridging loans, mezzanine finance, vendor finance, preferred equity, joint ventures and sale and leaseback. Non-bank lenders are the closest to a bank and usually the first option to test. Private lenders, covered in the private mortgage lenders guide, suit short-term needs with a clear exit.
A self-employed person can often get property finance without tax returns through a low doc loan, which uses other evidence of income such as an accountant's declaration, BAS or business bank statements. Non-bank lenders offer most of these products, and the evidence they accept varies by lender. Pricing is typically higher than a full doc loan, and many borrowers refinance once their returns are lodged.
The protections borrowers have with private credit lenders depend mostly on the purpose of the loan, because consumer credit laws generally cover personal and household lending, not business-purpose property loans. A lender that only writes commercial loans may not need an Australian credit licence, so check whether it is a member of the Australian Financial Complaints Authority, which can consider small business complaints against its members. ASIC still oversees conduct in the sector; its view is set out in REP 814, and how private lending works is in the glossary.
Preferred equity in property is an equity investment in a project that is paid its return before the owner's or developer's own equity, but after every lender. It is not a loan, so there are usually no monthly repayments; the investor is paid out from the sale or refinance. It is often used where a senior lender will not allow a second mortgage, as the mezzanine finance guide explains.
How long you can stay on alternative property finance depends on the option: non-bank loans can run full terms like a bank loan, while private, caveat and commercial bridging finance are short-term by design. Extensions on short-term loans are typically at the lender's discretion and come with fees. Plan the exit before you draw down, because the term is set around it.
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