Non-Bank Funding: Where Non-Bank Lenders Get Their Money
Non-bank lenders take no deposits. See how warehouse lines, securitisation and private credit fund their loans and shape your price and approval.
Business Owners Hub
Non-Bank Funding · Warehouse Facilities · Securitisation
Non-bank lenders take no deposits, so every loan they write is funded by someone else first. Here is where that money comes from, who sets its rules, and how it shows up in your price and in the loans a non-bank will write.
Quick Answer
Non-bank lenders do not take deposits, so they fund loans with bank warehouse lines, securitisation, wholesale investors and their own capital, and the cost and rules of that money shape the price and the loans they will write. For what a non-bank lender is, and how short-term private lending is funded differently, start with those two pages.
Also called: non-bank finance, non-bank lending, alternative finance. Searchers use "non-bank funding" both for how lenders are funded and for a loan from a non-bank; this insight answers the first, and whether a non-bank suits your own file is a separate question.
What does non-bank funding mean?
Non-bank funding means the money a non-bank lender borrows or raises before it can lend to you, because it has no customer deposits to lend from. A bank funds most of its lending from deposits. A non-bank has to find the money first, from banks, bond investors, funds or its own shareholders, and only then write your loan. Every non-bank loan is funded twice: once by whoever funds the lender, and again by the lender to you.
The same phrase is also used for a loan from a non-bank. This insight is about the first meaning. If you are deciding whether a non-bank suits your own file, the non-bank lender glossary entry, our non-bank lender policy matrix and non-bank lender or bank are the better starting points.
Who provides the money
- Banks, through warehouse facilities
- Investors who buy securitised loan pools
- Wholesale investors and private credit funds
- The lender's own capital and corporate debt
Where the borrower feels it
- Loan types outside the funder's rules are declined
- Pricing moves with the lender's own funding cost
- LVR caps can be set by the funder, not only the lender
- Appetite can narrow quickly when markets tighten
The Reserve Bank's bulletin on non-bank lending in Australia and the implications for financial stability notes that a greater share of non-banks' lending goes to borrowers who are self-employed. That is why the funding chain matters to business owners in particular: it decides which files a non-bank can take at all, and on what terms.
How do warehouse facilities fund a non-bank's loans?
A warehouse facility funds a non-bank's new loans with a credit line, usually from a bank, until those loans are refinanced or sold. The RBA notes that non-banks' warehouse facilities are mostly provided by banks. The lender writes your loan, the loan sits in the warehouse, and the warehouse funder lends against it at an agreed advance rate, with the lender's own money covering the rest.
The warehouse sets the rules. The funder's eligibility criteria spell out which loan types, security, borrower profiles and loan sizes qualify, and they set limits on concentrations such as one postcode, one industry or one loan size band. A loan that falls outside those criteria cannot go into the warehouse, so the lender usually cannot write it, however sound it looks on its own merits.
Why does a non-bank lender's policy sometimes look rigid?
A non-bank lender's policy often looks rigid because part of that policy belongs to the warehouse funder, not the lender alone. When a credit manager says a file sits outside policy, the real question is often whether the loan fits the funding line it would sit in. That is also why a non-bank's lender matrix can change during the year without any change in the lender's own view of risk.
| Funding source | Who provides it | What it means for the borrower |
|---|---|---|
| Warehouse facility | Usually a bank, lending to the non-bank against a pool of new loans | Sets eligibility criteria, loan types and limits; typically the first money behind a newly settled loan |
| Securitisation | Investors who buy securities backed by a pool of loans | Refinances the warehouse; pricing and appetite tend to follow investor demand |
| Private credit and wholesale investors | Pooled funds, family offices and wholesale investors | Common behind short-term property and business lending; terms and speed vary by fund |
| Corporate debt and equity | The lender's shareholders and its own corporate lenders | Usually covers the lender's retained share and first losses; supports loans that fit no funder's pool |
Indicative only. How each lender combines these sources varies by lender and changes over time.
How does securitisation refinance a non-bank's loans?
Securitisation refinances a non-bank's loans by pooling them and selling securities backed by the pool to investors, which repays the warehouse and frees it for new lending. Once enough loans have built up, the lender places them in a trust that issues residential or commercial mortgage-backed securities, or asset-backed securities for vehicle and equipment loans. Investors buy the securities, the trust repays the warehouse, and the line is free to fund the next round. Securitisation is the exit for the warehouse.
For a borrower, the loan contract does not change when the loan moves into a securitised trust. The repayments, the rate setting and the terms stay as written, and the lender or its appointed servicer usually keeps managing the loan.
Why are business loans securitised less often than home loans?
Business loans are securitised less often than home loans because they vary more in size, security and terms, which makes them harder to pool and rate. The RBA has noted that only a very small share of non-banks' business loans are securitised. For business owners, that means many non-bank business loans stay funded by warehouse lines, private credit or the lender's own balance sheet, so appetite for business lending can shift with those funders rather than with bond markets.
If you want a read on which funding lane your file is likely to land in before any lender sees it, you can check eligibility first.
Where do private credit funds and balance-sheet lenders fit?
Private credit funds and balance-sheet lenders fit at the faster, less standardised end of non-bank lending, funding loans from pooled investor money or the lender's own capital rather than through warehouses and securitisation. Much of the short-term property and business lending that sits under private lending is funded this way, by wholesale investors, pooled funds and family offices.
How a fund-funded loan behaves between approval and settlement is a separate question, covered in our insight on how a private mortgage fund funds your loan. The investor side, including how these funds work for the people putting money in, sits in our private credit funds guide.
Private credit is still small next to the banks, but the regulators are watching it. The RBA's March 2026 Financial Stability Review says private credit has continued to grow strongly.
| Measure | Figure | Source and as-of |
|---|---|---|
| Non-bank lenders' share of financial system assets | 6 per cent | RBA, March 2026 |
| Private credit's share of financial system assets | Less than 2 per cent | RBA, March 2026 |
| Domestic private credit | Around $200 billion, about 3 per cent of the size of the Australian banking system | APRA, May 2026 |
Sources: Reserve Bank of Australia, Financial Stability Review March 2026, Resilience of the Australian Financial System, published 19 March 2026, last updated 7 May 2026. Australian Prudential Regulation Authority, APRA's System Risk Outlook, May 2026, published 21 May 2026. Both read 9 October 2026.
How do funding costs and the cash rate flow into the price you pay?
Funding costs flow into your price because a non-bank's rate is built on what its own money costs, plus a margin for risk, running costs and profit. That base is set by the cash rate and by the spread that warehouse funders and bond investors charge over it. When investors demand a wider spread, or a warehouse reprices, the non-bank's cost rises even if the cash rate has not moved.
The RBA has found that banks hold a funding advantage, particularly when compared with non-bank lenders with no access to deposit funding. Non-banks make up for it with narrower product ranges, sharper policy niches and pricing for risk the banks will not take. That is why a non-bank's variable rate can move on a different timetable from the banks, and why non-bank pricing for a comparable file usually sits above a bank's, by an amount that varies by lender and loan type.
When a non-bank reprices, the number driving it is usually its blended cost of funds across warehouse, securitised and investor money, not the headline cash rate on its own. The timing and size of any change is indicative only and varies by lender.
What happens to non-bank borrowers when funding markets tighten?
When funding markets tighten, non-bank borrowers usually see appetite narrow before they see prices rise: lenders pause loan types, tighten criteria and reprice new loans. The RBA notes that securitisation is vulnerable to disruptions during periods of stress, such as during the GFC and the pandemic. When investors stop buying securities, warehouses fill up and stay full, and the lender has less room to write new loans.
When funding tightens, appetite tightens first. Loans already settled keep running on their contract terms, but new applications can meet lower LVR caps, fewer accepted loan types, slower turnaround or a pause on a product altogether. In March 2020 the federal government set up a structured finance support fund, run by the Australian Office of Financial Management, to keep credit flowing to smaller lenders through securitisation markets.
How do non-bank lenders spread their funding now?
Non-bank lenders now spread their funding across more than one warehouse funder, regular securitisation programs and, increasingly, private credit, so that losing one source does not stop lending. The RBA has also observed that loan warehouse limits enforce discipline on loan quality, because the funder can cut or reprice a line if the loans in it underperform. For a borrower with a deal in progress, the practical step is to ask early whether the approval sits against a funded line, and to keep a second option open on a tight settlement.
Why do two non-bank lenders price the same file differently?
Two non-bank lenders price the same file differently because each is funded by different money with different rules, so their costs, LVR caps and appetite for your loan type differ. Two lenders, two funders, two prices.
- Funding cost. One lender's warehouse and investors may simply cost more than another's.
- Eligibility rules. A file inside one warehouse's criteria may sit outside another's, so one lender prices it as core business and the other treats it as an exception or declines it.
- Loan-to-value caps. The funder can cap the loan-to-value ratio by security type or location, which changes the price at each LVR step.
- Appetite. A lender close to a concentration limit for an industry or postcode may price higher to slow that lending.
In practice, those funding differences explain most of the gap when two lenders give different indicative pricing for the same borrower and security. Our policy matrix sets out what each lending lane accepts, and for short-term lending our insight on who is funding a private lender term sheet covers the questions to ask before you rely on an offer. If you are weighing finance options for your business, the Business Owners Hub is the place to start.
Non-bank lenders do not lend deposits. They borrow from bank warehouses, refinance through securitisation and raise money from wholesale investors and private credit funds, then lend that money to you. Those funders set much of the policy, part of the price and the lender's appetite, which is why non-bank criteria can shift without the lender changing its view of your file, and why the same file can price differently at two lenders.
Key takeaway: before you compare non-bank offers, ask what funds each one, because the funder explains the policy, the price and how steady the offer will stay.Frequently Asked Questions
Non-bank funding means the money a non-bank lender raises from warehouse lines, securitisation, wholesale investors and its own capital before it lends to you, because it takes no deposits. The phrase is also used loosely for any loan from a non-bank. For what a non-bank lender is and how it differs from a bank, start with our glossary entry.
In lending, a non-bank liquidity provider is a source of funding that is not a deposit-taking bank, such as a securitisation investor, a private credit fund or a wholesale investor, that supplies money for lenders to lend on. Banks still provide most warehouse lines for non-bank lenders, while securitisation investors and private credit funds supply much of the longer-term money. Our insight on how a private mortgage fund funds your loan shows how one of these funders sits behind a loan.
Non-bank lenders are regulated differently from banks rather than unregulated: a lender writing consumer credit needs an ASIC credit licence and AFCA membership, and APRA collects data from non-bank lenders and can make rules for their lending. For a borrower, the bigger practical risk is the lender's appetite changing before settlement, not the loan disappearing after it, because loans already settled run on their contract terms. Whether a non-bank suits your own file is covered in non-bank lender or bank.
A non-bank lender can pause or slow new lending if its funding dries up, because it cannot lend money it has not raised. It typically narrows loan types, lowers LVR caps or pauses a product rather than stopping outright, and loans already settled continue on their terms. On a deal with a fixed settlement date, ask whether your approval is backed by funded capacity; our insight on who is funding a private lender term sheet covers the questions to ask.
A warehouse facility in lending is a credit line, usually from a bank, that funds a non-bank lender's new loans until they are refinanced through securitisation or sold. The warehouse funder sets eligibility criteria and limits that shape which loans the lender can write. That is why a non-bank's lender matrix often reflects its funder's rules as much as its own.
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