This guide is general information only, current as at the 'last updated' date above. It is not legal, tax or financial advice and does not take your circumstances into account. Astro Capital Finance provides credit for business purposes only and is not a tax agent, lawyer or financial adviser. Seek advice from a qualified professional before acting. Lending is subject to assessment, security and an acceptable exit strategy.
The short answer
A private lender is a non-bank lender that funds loans from private capital, such as private credit funds and investors, rather than customer deposits. Private loans are usually short-term, business-purpose and secured by registered mortgage over property, and they are assessed mainly on the security and a clear exit strategy rather than long-form serviceability.
Private lending generally costs more than bank lending, so it suits a defined, time-sensitive need with a credible way out, such as an urgent settlement, bridging or clearing a tax debt, and does not suit long-term funding or personal-use purposes.
Private lender vs non-bank vs bank
| Private lender | Non-bank lender | Bank | |
|---|---|---|---|
| Speed | Fast; at Astro, approval in as little as 3 hours and settlement in as little as 72 hours, subject to assessment | Usually faster than a bank, but still policy-driven | Typically the slowest, with multiple credit stages |
| Term | Short term, often months rather than years (Astro: 1 to 24 months) | Short to long term | Usually long term |
| Assessment focus | Security, LVR and the exit strategy | Mix of serviceability, credit history and security | Serviceability, credit history and strict policy |
| Documentation | Lighter; low-doc and impaired credit may be considered | Moderate; alt-doc options are common | Full financials, tax returns and statements |
| Cost | Generally the highest of the three | Generally between bank and private | Generally the lowest |
| Typical use | Urgent settlements, bridging, cash flow, ATO debt, acquisitions | Self-employed borrowers, specialist property | Long-term investment and business lending |
General comparison only. Individual lenders vary, and every loan is subject to assessment.
What is a private lender, and how is it different from a bank or non-bank?
Banks lend customer deposits as authorised deposit-taking institutions, so their credit policy is strict and built for long-term loans. Non-bank lenders do not take deposits and typically fund loans through warehouse facilities and securitisation, giving more flexibility within fairly standardised policy.
A private lender sits further along that spectrum. It is a non-bank lender that funds individual loans from private capital and makes decisions case by case. Because decision-makers are close to the money, a private lender can often move quickly on scenarios outside bank policy, such as a tight settlement deadline.
Where does the money in private lending come from?
In general terms, private lending is funded by private credit funds, wholesale and sophisticated investors, family offices and the lender’s own capital. Investors expect a return, and the lender’s job is to protect that capital.
That is why private lenders focus heavily on the security property, the loan-to-value ratio and how the loan will be repaid.
How are private loans secured?
Most private loans are secured by a registered mortgage over real property. A first mortgage gives the lender first priority over the property if the loan is not repaid. Some lenders in the market also offer second mortgages, which rank behind an existing first mortgage, or caveat loans, where an interest is noted on title without a registered mortgage.
Astro Capital Finance lends on a registered first mortgage only. We do not offer second mortgages or caveat loans. Our Private mortgage finance loans range from $50k to $5M, with larger loans considered by exception, for terms of 1 to 24 months, Australia-wide excluding the Northern Territory.
What is LVR, and how is it calculated?
LVR, or loan-to-value ratio, is the loan amount divided by the property’s value as assessed by the lender’s valuer, shown as a percentage. A lower LVR means more equity sits behind the loan.
Illustrative example: a commercial investor owns a metro residential property valued at $1,000,000 and seeks a loan of $600,000. The LVR is $600,000 ÷ $1,000,000 = 60%. At a maximum LVR of 75%, the most that property could support is $750,000, before any existing debt that must be repaid at settlement is taken into account.
Astro lends up to 75% on metro residential; up to 65% on commercial, industrial and land; regional assessed case by case. You can find definitions of LVR and other terms in our glossary.
What costs should you expect on a private loan term sheet?
Private lending generally costs more than bank lending, reflecting speed, flexibility and short terms. Costs vary, so make sure every cost is itemised on the term sheet before you commit. Common items include:
- Interest, charged on the loan amount for the term. Depending on the lender and loan, interest may be paid monthly, prepaid from the loan at settlement, or capitalised and added to the balance.
- Establishment fee, for assessing and setting up the loan.
- Valuation fee, for an independent valuation of the security property.
- Legal fees, for the lender’s solicitor to prepare loan and mortgage documents.
- Any other charges, such as broker fees, discharge costs or default terms.
What is an exit strategy, and why do private lenders focus on it?
An exit strategy is how the loan will be repaid at the end of the term. Because private loans are short term, the lender needs confidence that the money will come back on time, so the exit is often as important as the security itself.
Common exits include the sale of a property, refinance to a bank or non-bank once a short-term issue is resolved, settlement of a business sale or contract, or incoming business revenue. A strong exit is specific, realistic within the term and supported by evidence, such as a signed contract of sale. A vague exit invites more questions or a decline.
When does private lending make sense, and when does it not?
Private lending tends to make sense when a business or investor has a defined, time-sensitive need and a clear way out. It is usually not the right tool when the need is long term, when there is no credible exit, or when the funds are for personal use.
- Makes sense: urgent settlements, including where bank finance has fallen through; business bridging; cash flow and working capital; ATO and tax debt such as DPNs, garnishees and BAS, GST, PAYG or super arrears; and acquisitions.
- Does not make sense: long-term funding that a bank could provide more cheaply, situations with no clear exit, and any personal-use purpose.
- Business purpose only: more than 50% of funds must be used for business or commercial purposes. Astro does not provide consumer loans or owner-occupied home loans. See business lending for more.
How should you compare private lenders?
Compare the total cost and conditions of each offer, not just the headline interest rate. Ask for a written term sheet, check that every fee is listed, and make sure the final loan documents match the term sheet. Also ask what happens if the exit takes longer than expected, and who makes the credit decision.
At Astro, every fee is on the term sheet and the term sheet matches the loan documents. Brokers get a same-day indicative answer and direct access to decision-makers; see our broker page. It is sensible to have your accountant and solicitor review any offer before you sign.
Frequently asked questions
Under the National Credit Code, credit used predominantly (more than 50%) for business or investment purposes is generally outside the Code. Astro lends for business purposes only and does not hold an Australian Credit Licence, which is not required for business-purpose lending. Astro is not an AFCA member and has an internal complaints process.
At Astro, approval can come in as little as 3 hours and settlement in as little as 72 hours, subject to assessment.
Astro considers low-doc and impaired credit applications, subject to assessment.
Capitalised interest is added to the loan balance instead of being paid monthly, and is repaid at the end of the term with the principal. Whether interest is capitalised, prepaid or paid monthly depends on the lender and loan.
Not with Astro. Our loans are business purpose only, with more than 50% of funds used for business or commercial purposes. We do not offer consumer loans or owner-occupied home loans.
Call 1300 278 761, email loans@astrocapital.com.au or use our [contact page](/contact). Office hours are Monday to Friday, 8:30am to 5:30pm Sydney time.
This guide is general information only, current as at the 'last updated' date above. It is not legal, tax or financial advice and does not take your circumstances into account. Astro Capital Finance provides credit for business purposes only and is not a tax agent, lawyer or financial adviser. Seek advice from a qualified professional before acting. Lending is subject to assessment, security and an acceptable exit strategy.