August 17, 2026 Business Loans 0

Private Credit in Australia in 2026: A Borrower’s Guide to Non-Bank Business and Property Finance

Private credit has moved from a specialist corner of Australian finance into the mainstream business conversation.

The Reserve Bank of Australia says business credit has grown faster than its post-global-financial-crisis average in recent years. It also identifies specialist non-bank and private credit lenders as an important source of competition, particularly in smaller loans to small and medium-sized enterprises (SMEs) and in real-estate-related finance.

That does not mean private credit is easy money. It is commercial lending with negotiated terms, enforceable security and a defined repayment obligation. The difference is that a private lender may assess the complete transaction rather than requiring every application to fit a standard bank scorecard.

For an Australian business owner, property investor or developer, the useful question is not simply, “Can a private lender approve this?” It is:

Does the proposed loan solve a defined commercial problem, at an acceptable cost, with enough time and a credible exit?

This guide explains how private credit works in Australia, why it is attracting attention in 2026, what lenders assess, and how borrowers can compare an offer properly.

The short answer

Private credit is lending provided outside the traditional deposit-taking banking system. Funding may come from private credit funds, mortgage funds, family offices, institutional capital, high-net-worth investors or specialist non-bank lenders.

For borrowers, private credit may provide:

Faster and more commercially flexible assessment
Short-term or transitional funding
First mortgage, second mortgage, caveat or other approved security structures
Property-backed working capital
Development, construction or residual-stock finance
Consideration of complex credit, tax debt or limited financial statements
A pathway to complete a transaction before refinancing or selling an asset

Approval is never automatic. The lender still needs to be satisfied with the borrower, purpose, security, total leverage, documentation, risks and repayment strategy.

Why private credit is trending in Australia

Three developments explain the current attention.

1. Business credit demand and lender competition remain strong

The RBA reported in February 2026 that business credit had been growing consistently faster than its post-GFC average. It attributed the increased supply partly to stronger competition among established lenders and partly to the growth of specialist non-bank and private credit providers.

The RBA also observed that non-banks had increased their share of smaller SME loans. This matters because specialist lenders may participate in transactions that banks consider too complex, too urgent, too specialised or too capital-intensive.

2. Australian private credit is closely connected to real estate

Private credit can support many industries, but Australian activity is particularly concentrated in real-estate-backed lending. That includes commercial property, land, construction, development, bridging and business loans secured by property.

Property security does not replace a viable transaction. It does, however, give a lender an asset against which value, leverage and recovery risk can be assessed.

3. Regulators are increasing scrutiny

Rapid growth has brought greater attention from the Australian Securities and Investments Commission (ASIC). In June 2026, ASIC said the sector was entering a more demanding phase involving tighter liquidity, emerging borrower stress and signs of credit deterioration. Private credit practices remain an ASIC enforcement priority in 2026.

Much of ASIC’s work is directed at fund operators and investor protection. Borrowers should still take a practical lesson from it: lender governance, valuation methods, fees, conflicts, documentation and enforcement practices matter. A fast term sheet should be reviewed with the same care as any other material business obligation.

What is private credit?

Private credit is debt negotiated privately rather than issued in a public bond market or provided through a conventional bank product.

The term describes a broad funding channel, not one standard loan. Two private credit proposals can differ substantially in:

Loan amount and term
Interest rate and default rate
Establishment, exit and line fees
First or second mortgage ranking
Maximum accepted loan-to-value ratio (LVR)
Interest payment or capitalisation method
Valuation requirements
Drawdown controls
Financial covenants
Conditions before settlement
Extension rights
Enforcement provisions

A borrower should therefore compare the complete facility, not assume that every “private loan” works in the same way.

Private credit versus a bank business loan

Issue	Traditional bank	Private credit lender
Credit policy	Usually standardised	Often transaction-specific
Assessment focus	Historical financials, servicing and policy fit	Security, purpose, leverage, current position and exit, alongside available financial evidence
Documentation	Commonly full financial statements and standard forms	Full-doc or alternative-document pathways may be considered
Timeframe	Can be longer for complex files	Urgent files may be prioritised when information is complete
Loan term	Often suited to longer-term amortising debt	Frequently short-term or transitional
Pricing	Generally lower for qualifying borrowers	Generally higher to reflect risk, flexibility and shorter duration
Structure	Standard products and security rules	Bespoke first mortgage, second mortgage, caveat, bridging or controlled-draw structures may be available
Exit	Ongoing servicing is often central	A defined refinance, sale, completion or cash-flow event may be central

Neither channel is automatically better. Bank finance may be more suitable when the borrower qualifies, timing permits and a long-term facility is required. Private credit can be useful when the transaction is viable but does not fit standard policy or cannot wait for a conventional process.

How large is the Australian private credit market?

Published estimates vary because “private credit” is defined differently and market-wide reporting remains incomplete.

The RBA estimated approximately $50 billion of private credit outstanding in Australia as at December 2025. It also cited a separate industry estimate of approximately $224 billion in assets under management in late 2025. These figures are not directly comparable: assets under management and credit outstanding measure different things, while data coverage varies.

The safer conclusion is that private credit is growing strongly but remains a relatively small part of the total financial system. In its March 2026 Financial Stability Review, the RBA estimated private credit at less than 2% of Australian financial-system assets and non-bank lenders at around 6%.

For an individual borrower, market size matters less than lender fit. A large sector can still contain lenders with different appetites for location, asset type, loan size, mortgage ranking, development stage and exit strategy.

When businesses use private credit

Private credit is usually most effective when it funds a defined event rather than an open-ended shortfall.

Working capital with a clear commercial purpose

A business may use property-backed working capital finance for stock, suppliers, payroll, equipment, a confirmed contract or a time-sensitive growth opportunity.

The lender will want to understand how the facility creates value and how the debt reduces or is repaid. Borrowing simply to cover recurring losses without a turnaround plan is a much weaker proposition.

Bridging a settlement or refinance gap

Bridging finance may connect an urgent acquisition, refinance or settlement with an expected sale, longer-term loan or other verified liquidity event.

The exit date should include a realistic buffer. Property sales, valuations, construction work and refinances can all take longer than expected.

Property development and construction

Private lenders may consider land acquisition, pre-development costs, construction, residual stock and project-completion funding. The RBA has reported modest easing in some non-bank property-development standards, including presale and collateral requirements, but this should not be confused with a lack of assessment.

Property development finance normally requires a credible feasibility, cost plan, valuation, approvals, builder position, contingency and exit.

Releasing property equity for business use

Where an eligible borrower has usable real-estate equity, a property equity release loan may provide capital for an approved business, commercial or investment purpose.

The amount available depends on the lender-accepted value, existing secured debt, permitted LVR, mortgage ranking, interest provision and transaction costs—not simply the owner’s estimate of equity.

Tax debt and creditor pressure

Selected lenders may consider refinancing or consolidating ATO debt and other eligible business liabilities. The proposal needs to explain the balance, lodgement status, payment arrangements, current creditor action and how the new facility improves the position.

Replacing tax debt with property-secured debt is a serious decision. It can create time and control, but it also introduces loan costs and places the secured asset at risk if the facility is not repaid.

Complex credit or limited financial statements

A private lender may consider a borrower with defaults, arrears, irregular earnings or unavailable current financial statements. Alternative evidence can include bank statements, BAS, management accounts, leases, contracts, accountant information and property documentation.

“Alternative documentation” does not mean “no assessment.” The lender must still understand the transaction and be satisfied that the proposed exit is credible.

What a private credit lender assesses

1. The borrower and borrowing entity

The lender will identify the borrower, directors, guarantors, related entities and beneficial owners. It may review experience, credit history, legal disputes, insolvency history and the reason for any adverse events.

Early disclosure is important. A late-discovered liability, mortgage, default or dispute can delay or end an application.

2. The loan purpose

“Working capital” is not enough by itself. A strong application states the exact use of funds, required amount, deadline and expected commercial outcome.

3. The security

The lender may assess:

Property type and location
Current condition and permitted use
Vacant possession, leases or tenancy position
Existing mortgages, caveats and other interests
Valuation evidence and acceptable valuation method
Saleability and recovery period
Environmental, planning or construction issues

The lender’s accepted value may differ from a real-estate agent appraisal, purchase price or owner estimate.

4. Total leverage

LVR is generally calculated as total secured debt divided by the lender-accepted property value.

For example, if a lender accepts a property value of $2 million and total secured debt after settlement would be $1.2 million, the total LVR is 60%.

The calculation must include existing debt that remains in place. It may also need to account for capitalised interest, retained interest, establishment costs, valuation costs, legal fees and other funded amounts.

5. Interest and cash flow

Interest may be serviced periodically, prepaid, retained from the advance or capitalised into the facility. Each method changes the borrower’s cash position and the amount of usable funds.

A capitalised-interest structure can reduce immediate cash-flow pressure, but it increases the payout balance over time.

6. The exit strategy

The exit is how the complete debt—including interest and costs—will be repaid.

Common exits include:

Refinance to a bank or longer-term non-bank lender
Sale of the secured property
Sale of another identified asset
Completion and sale of a development
Settlement of contracted receivables
A documented capital event

“The business will improve” is not a complete exit. The lender will want evidence, timing, dependencies and a fallback.

First mortgage, second mortgage or caveat?

The security structure affects price, control and risk.

First mortgage

A first mortgage lender holds the first-ranking registered mortgage. This may allow the transaction to refinance the existing secured debt and provide additional funds under one facility.

Second mortgage

A second mortgage loan sits behind an existing first mortgage. It can preserve an attractive first facility, but combined LVR, priority arrangements, consent requirements and both lenders’ terms must be reviewed.

Caveat or other short-term security

A caveat loan may be considered for selected short-term business or investment transactions. A caveat is not interchangeable with a registered mortgage, and legal advice is important when reviewing the proposed structure and enforcement rights.

What private credit costs

Private credit commonly costs more than qualifying bank finance because it may involve greater risk, shorter terms, more intensive assessment and bespoke capital.

The complete cost can include:

Interest
Default interest
Establishment or line fee
Brokerage or advisory fee
Valuation fee
Lender and borrower legal costs
Due-diligence or quantity-surveyor costs
Monthly administration fee
Extension fee
Early repayment or minimum-interest provisions
Discharge costs

Borrowers should request a dollar-based funding table showing:

Gross facility amount
Existing debt and liabilities to be paid
Interest retained or capitalised
Every fee and third-party cost
Net funds available at settlement
Estimated payout at planned exit
Estimated payout if the exit is delayed

A headline rate does not show the full economics of a short-term loan.

How to compare private credit offers

Two term sheets should be compared across the same dimensions:

Net cash delivered, not just gross loan amount
Total repayment at the expected exit date
Default rate and when it applies
Extension availability and cost
Mortgage ranking and consent requirements
Valuation assumptions
Conditions precedent
Financial and non-financial covenants
Drawdown controls
Personal guarantees
Events of default
Enforcement rights
Minimum interest and early repayment rules
Whether the lender has committed funds

An apparently cheaper offer can be less useful if its conditions cannot be satisfied by the deadline.

Questions to ask before accepting a term sheet

Who is the lender, and who has authority to approve the loan?
Are funds committed or still subject to investor approval?
What valuation will be used?
What is the maximum total LVR?
How is interest calculated and paid?
What fees apply at establishment, during the term and at discharge?
What conditions must be satisfied before settlement?
What happens if the exit is delayed?
Is an extension available, and on what terms?
What events trigger default interest or enforcement?
Can the loan be repaid early without a minimum-interest cost?
What independent legal, financial or tax advice should be obtained?

Warning signs for borrowers

Be cautious when a proposal relies on:

“Guaranteed approval” before full assessment
No explanation of the lender or source of funds
Large non-refundable upfront payments without a clear service and engagement scope
An unexplained valuation or LVR
Missing default, extension or enforcement terms
Pressure to sign without independent advice
A loan amount that does not leave enough net cash to achieve the purpose
An exit that depends on an unverified future event
Repeated refinancing without a credible path to lower-cost or fully repaid debt

Fast finance should still be transparent finance.

How to prepare a stronger application

A concise transaction summary can improve both speed and lender matching. Include:

Borrower and guarantor details
Exact loan amount and purpose
Required settlement date
Property addresses and ownership
Current mortgage balances and payout figures
Estimated values and available valuation evidence
Credit issues, tax debt and legal matters
Available financial or alternative documents
Proposed term
Primary exit and fallback exit
Supporting contracts, leases, permits or sale evidence

The objective is not to overwhelm the lender with documents. It is to provide the right evidence for each material part of the credit decision.

Private credit in 2026: flexibility with more scrutiny

Australia’s private credit market is growing because borrowers and transactions do not all fit conventional bank processes. Specialist capital can support SMEs, property owners and developers when speed, complexity or structure makes a standard loan difficult.

At the same time, 2026 is bringing greater regulatory attention and a more demanding credit environment. That makes disciplined loan selection more important, not less.

A suitable private credit facility should have:

A legitimate and specific purpose
A structure matched to the transaction
Transparent pricing and conditions
Enough net funding to achieve the objective
A realistic term with timing buffer
A primary and fallback exit
Risks that the borrower understands and can accept

Frequently asked questions

Is private credit the same as a private mortgage?

Not always. Private credit is a broad category of non-bank lending. A private mortgage is one form of private credit secured by real property.

Can SMEs obtain private credit in Australia?

Yes, selected private and non-bank lenders consider SME transactions. Eligibility depends on the purpose, amount, security, financial position, documentation and exit.

Does private credit require property security?

Not every private credit loan is property-backed, but real-estate security is common in the Australian market and central to many Zip Funding transactions.

Can a private lender consider bad credit?

Selected lenders may consider defaults, arrears, tax debt or previous credit events. The circumstances must be fully disclosed, and approval remains subject to the complete assessment.

Can I apply without current financial statements?

Some lenders accept alternative evidence for eligible transactions, such as bank statements, BAS, management accounts, leases, contracts and property information. Requirements vary.

How quickly can private credit settle?

Timing depends on valuation, security, legal documents, payout figures, lender capacity and the completeness of the application. Urgent transactions may be prioritised, but approval and settlement should not be treated as guaranteed.

Is private credit regulated in Australia?

The applicable legal and regulatory framework depends on the lender, fund, borrower, loan purpose and product structure. ASIC is increasing its scrutiny of private credit fund practices. Borrowers should obtain independent advice on their specific transaction.

What is the biggest risk?

The central risk is being unable to repay at the agreed exit. This can lead to default interest, enforcement costs and loss of secured property. The exit should be tested before the loan is accepted.

Discuss a private credit scenario with Zip Funding

Private credit works best when the complete transaction is presented clearly: purpose, amount, deadline, security, current debts, available evidence and exit.

Zip Funding works with Australian business owners, property investors, developers and advisers to assess property-backed private and non-bank funding scenarios.

Discuss your scenario with Zip Funding or call 0439 462 664.

General information only. This article does not constitute financial, credit, legal or tax advice. Eligibility, loan amount, LVR, pricing, fees, documentation, timing and approval vary by lender and applicant circumstances. Borrowers should obtain independent advice before entering a loan. Property offered as security may be at risk if the facility is not repaid.

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