Is EOFY Speed Worth the Cost of Private Lending?
Private Lending: EOFY Speed vs Cost | Switchboard Finance
Manufacturing
Private Lending · EOFY Timing · Cost of Speed
Is EOFY Speed Worth the Cost of Private Lending?
A bank deal that will not settle before 30 June is frustrating, and the temptation is to reach for something faster. Private lending can move in a fraction of the time, but that speed is never free. The honest question is not whether you can go faster, it is whether the faster path is worth it for the deal in front of you.
Quick Answer
Whether EOFY speed justifies the cost of private lending comes down to your exit strategy. Fast, property-backed funding can settle a deal the banks cannot reach in time, but the higher cost only makes sense when the deal, and the way out, genuinely stack up.
Why the EOFY clock pushes manufacturers toward private lending
The end of financial year clock pushes manufacturers toward private lending for one reason: speed. When a factory contract or a high-ticket machinery deal is signed in mid-June, a standard bank facility often cannot clear valuation, approval and settlement before 30 June. A short-term and property-backed facility from a private lender usually can, which is why the phone starts ringing this time of year.
But speed is only half the story. If a bank commercial property loan can still settle in time, that is almost always the cheaper road, and our guide on whether a commercial property loan can settle before EOFY walks through the realistic timeline. Across the manufacturing finance deals we see each June, private lending earns its place only when the bank road has genuinely run out of time. The deadline is a planning input, not a reason to commit to a purchase that does not stack up.
The cost of speed: when it earns its keep, and when it does not
The cost of speed earns its keep when it buys you a deal you would otherwise lose, and not much else. Private lending is priced above a bank because it is faster, more flexible and willing to look past the paperwork a bank insists on, so the rate and fees reflect that. Paying for speed is rational when the alternative is losing the asset or the premises; it is hard to justify when the deal could simply wait a few weeks for cheaper money.
Read the comparison honestly. Because private lending is short-term and property-backed, the lender is really underwriting your security and your exit strategy, not just the asset you are buying. When the deal is time-critical and the exit is real, the cost of speed is usually money well spent. When the only driver is the calendar, that same cost is a warning sign rather than a price worth paying.
Do not let the tax tail wag the dog
Borrowing at a higher cost purely to claim a deduction is the clearest way of letting the tax tail wag the dog. A deduction reduces the tax on a purchase you still have to fund in full; it is not a discount, and it is not a reason on its own to take on dearer finance. What I tell clients first is that the deduction follows the decision to buy, it should never be the decision.
If servicing the loan would leave the business stretched, the deal is already telling you something. ASIC's Moneysmart sets out practical guidance on managing debt that is worth reading before you take on a faster, dearer facility, and it is always worth confirming the timing and suitability with your accountant or broker before you commit. Where this commonly lands is a borrower who chased the write-off and inherited a repayment they never needed, on an asset that would still have been there in July.
What a credible exit actually looks like
A credible exit strategy is the specific, evidenced way you repay or refinance the loan, not a hope that something turns up. The common exits are a refinance to a mainstream term facility once your figures are in order, the sale of an asset, or a known receivable landing on a date you can point to. Because the loan is short-term, capitalised interest can build up where an exit slips, which is indicative and varies by lender, so the strength of the plan matters more than the headline rate.
This is the work a broker should do before you sign anything: stress-test the exit, not just price the loan. If you are weighing the structure, our look at how borrowers compare a private lender against a second mortgage covers the trade-offs, and the manufacturing loan pack sets out what to have ready so a fast deal stays a good one.
Private lending is a tool for buying time you genuinely cannot get any other way, not a shortcut to a tax deduction. For a manufacturer staring down 30 June, the cost of speed is worth paying when the deal is time-critical, property-backed and carries a credible exit, and it is a red flag when the only thing driving it is the calendar. Judge the move on the exit and the security, and let a cheaper bank path win whenever it can still settle in time.
Key takeaway: pay for the speed of private lending only when the deal cannot wait and the exit is real, never just to beat the EOFY clock for a deduction.Frequently Asked Questions
Borrowing at a higher cost just to claim a tax deduction is rarely worth it on its own, because a deduction only reduces the tax on a purchase you still have to fund in full. It can make sense when the asset genuinely earns its keep and you have a clear way to repay or refinance, but chasing the write-off alone is letting the tax tail wag the dog. Confirm the timing and suitability with your accountant first, and weigh how your exit strategy changes the maths.
Private lending can typically settle a commercial deal in around one to two weeks from a complete submission, which varies by lender and is far quicker than a standard bank facility. That speed is exactly why manufacturers turn to private lending when a contract will not settle before 30 June through ordinary channels. The trade-off is cost, so it is worth checking first whether a commercial property loan can still settle before EOFY.
A credible exit strategy is the specific, evidenced way you will repay or refinance a short-term private loan, not a vague hope that something will turn up. Common exits include refinancing to a mainstream term facility once your figures are in order, the sale of an asset, or a known receivable landing. Lenders price and approve on the strength of that exit, so it is worth understanding how security and the exit work together before you sign anything.
Private lending for this kind of EOFY deal is almost always short-term and property-backed, meaning the loan leans on real estate rather than the equipment itself. That property security is what lets a private lender move quickly and look past the paperwork a bank would demand. If your security is a business asset rather than property, a chattel mortgage is usually the better fit.
If you cannot refinance a private loan before its term ends, the usual outcomes are an extension at a higher cost, a forced sale of the security, or capitalised interest eating into your equity, which is why a credible exit matters more than the headline rate. This is where weak plans come unstuck, and where a broker earns their keep by stress-testing the way out first. It helps to see how borrowers weigh a private lender against a second mortgage when planning that exit.
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