Private funding solves a timing problem, not a long-term one. The loan is secured against property you already own, runs for a short term and is repaid from a sale, a refinance or a payment you are already expecting.
Developers use it to close the gap between a site settlement and a construction loan, and a property development finance broker can line up the facility that repays the private loan. Business owners use it to meet a contract date or clear an Australian Taxation Office (ATO) notice before recovery action escalates.
Short-term private finance is not payday lending. Payday loans, known in consumer credit law as small amount credit contracts, are unsecured loans of up to $2,000 over 16 days to one year. A private loan is secured against real estate, usually runs into the tens of thousands or more and is written for business or investment purposes.
Tell our Melbourne brokers the amount, the deadline and the property on 1300 562 696, and we will tell you whether private funding is realistic before anything is lodged.
The structure depends on what is already registered on your title, how much you need and how quickly it has to settle:
The lender lodges a caveat on your title to protect its interest, without registering a mortgage. A caveat loan can often settle fastest and suits smaller amounts over a few months. It usually carries the highest cost and the tightest maximum loan to value ratio (LVR), because the lender’s security is weaker than a registered mortgage.
The private lender registers a first mortgage, either over unencumbered property or by paying out the existing loan. It supports larger amounts and usually costs less than a caveat loan, though registration adds time to settlement.
A registered second mortgage sits behind your existing home or investment loan, leaving that loan and its rate in place. Your first lender’s consent may be needed, which can add time.
A private bridging loan funds a purchase or settlement before an existing property sells, and is repaid from the sale. A bridging loan broker compares it with bank bridging, which is often cheaper where the timeline allows.
Developers holding completed but unsold units can release equity from that stock to repay construction debt or fund the next project. The loan is repaid as the units sell.
A private lender funds part of a development’s costs behind the senior construction lender, which reduces the equity the developer contributes. It is priced well above senior debt because it is repaid only after the construction lender.
Most urgent private finance covers one of a handful of deadlines:
Private funding works when the deadline is real and the repayment source has a date attached:
Private lenders ask for fewer documents than a bank but look closely at five areas:
A current valuation of the property sets how much can be lent. Maximum LVRs usually sit below bank levels, and sit lower again for caveat loans.
Lenders want a dated, evidenced way out, such as a contract of sale, a refinance approval or a confirmed payment. A vague exit can stop an application regardless of the equity.
Most private lenders write business or investment loans only and ask you to sign a business purpose declaration. Under section 13 of the National Credit Code, that declaration does not hold where the lender knew, or could have found out, that the money was for personal use. Expect questions about how the funds will be spent.
Lenders check what is already registered on the title and whether your current loan allows further security. Some first mortgages restrict additional charges, so the terms are checked before anything is lodged.
Every owner on the title is identified. Where a company or trust borrows, its directors or trustees are usually asked to back the loan personally.
This is a general guide only. Private lenders set their own criteria and change them often.
Private loans cost more than bank lending because the lender takes on more risk for a shorter time. Interest is commonly quoted monthly and may be prepaid, which means it is deducted from the funds at settlement, or capitalised, which means it is added to the balance and repaid when the loan ends.
Expect an establishment fee, a valuation and legal fees for both your solicitor and the lender’s. Default interest and extension fees apply where a loan runs past its term, and they are often what turns a reasonable loan into an expensive one.
Business-purpose private loans also sit outside the National Credit Code. The 48% annual cost rate cap that applies to regulated consumer credit therefore does not apply to them, which makes the total cost over the full term the figure to compare.
Any fee for arranging a private loan, and any amount a lender pays us, are disclosed in writing before you sign.
Paying for speed changes more than the rate:
|
Factor |
What Speed Buys |
What It Costs You |
|
Speed |
Settlement can happen in days where documents and the valuation are ready |
Paying for speed means a higher rate and upfront fees |
|
Assessment |
Approval rests mainly on the property and the exit |
Lower maximum LVRs limit how much you can borrow |
|
Credit history |
Recent credit issues or incomplete financials may not block approval |
Fewer consumer protections apply to business-purpose loans |
|
Term |
A short term limits how long the higher rate runs |
A missed exit triggers default interest and extension fees |
|
Security |
Existing loans can often stay in place |
Your property is at risk if the loan is not repaid |
Most private loans move through five stages, and the valuation and both sides’ solicitors set the pace:
You tell us the amount, the deadline, the property and how the loan will be repaid. We check whether the exit is strong enough for a private lender before approaching one.
We approach private lenders whose appetite fits the security, the amount and the purpose. You receive indicative terms showing the rate, fees, LVR and term for each option.
The lender orders a valuation and issues loan documents to your solicitor. This stage moves fastest when title details, identification and exit evidence are ready on day one.
Funds are released once documents are signed and the caveat or mortgage is lodged. Where everything is ready, this can happen within days of the valuation.
The sale or refinance that repays the loan is planned from the start, not in the final month. Where the exit is a bank refinance, we prepare that application while the private loan runs.
Settlement times are a general guide only. A slow valuation or a missing title document can add days.
Indicative terms come before anything is signed, so you can compare the full cost before committing.
Loanworx Group’s local Melbourne brokers arrange private funding from Level 15, 412 St Kilda Road, for property owners and businesses Australia-wide:
Our panel runs from the major banks to private funders. The refinance that repays a private loan often sits with a mainstream lender on the same panel.
Residential, commercial and asset finance sit under one roof. The private loan and the facility that replaces it can be arranged by the same team.
The team’s combined experience runs past 100 years and includes former bankers. That matters when a private loan must be repaid by a bank refinance on a fixed date.
Credit services are provided under Australian Credit Licence (ACL) 495267. We take you through the cost and the exit of each option before you commit.
Before you call, note the amount, the settlement or tax deadline, the property you can offer and exactly how the loan will be repaid. Phone our Melbourne team on 1300 562 696 with those four details, and we will tell you which private lenders could fund the loan.
It depends on the valuation, the title and both solicitors. Caveat loans can sometimes settle within a few days when documents are ready, while first and second mortgages usually take longer because the mortgage must be registered.
Usually, though recent defaults or a past tax debt matter less than they would to a bank. The security and the exit carry most of the weight.
Usually, though many private loans carry a minimum interest period, and prepaid interest may not be refunded. The early repayment terms are worth checking before signing, since they change the real cost of an early exit.
Default interest and extension fees usually apply, and the lender may move to enforce its security.
Raising the problem early often leaves more room to extend or refinance than waiting until the term has ended.
This information is general in nature and does not take into account your objectives, financial situation or needs. Private lending approval, rates, fees, LVR limits and terms are subject to lender assessment and can change. Business-purpose loans are not regulated by the National Credit Code, so some consumer protections do not apply. Legal and tax implications should be confirmed with your solicitor and accountant, and you may wish to speak with a qualified mortgage broker or financial adviser before acting.
