Private credit now funds a large and growing share of Australian property development, usually at higher gearing and higher cost than a bank, and often with fewer or no presale conditions. If your project does not fit a major bank’s box, whether the sticking point is the presale hurdle, the timeline, a complex site, or your track record, a non-bank or private credit lender may be the difference between the deal proceeding and the site sitting idle. That flexibility is not free. This guide sets out who these lenders are, when they beat a bank, what they charge, how much they will advance, what they assess before they fund you, and how to model the extra cost so it does not quietly eat your margin.
The practical lens throughout is the developer’s: what a funding decision means for what you can build, what it costs, and what your profit looks like at the end. Private credit is often framed as an investor product, and most of what is written about it is aimed at the people putting money into these funds. This guide is written for the people borrowing from them.
What is private credit, and who are the non-bank development lenders?
Private credit is lending arranged outside the banking system. In a property development context it means a non-bank lender or a private credit fund providing the senior construction loan, a stretched senior facility, mezzanine debt, or in some cases the whole debt stack, in place of a bank. The corporate regulator’s own consumer site, Moneysmart, defines private credit as non-bank lending where the loans are not publicly traded. On the borrowing side, that capital reaches you through a few different channels: dedicated non-bank development financiers, private credit funds managing pooled investor money, family offices and high-net-worth mandates, and, increasingly, contributory mortgage schemes that syndicate a single loan across many investors.
The label covers a wide range. At one end sit established institutional non-bank lenders that fund senior construction debt at rates only a little above the banks. At the other sit short-term private lenders pricing higher-risk positions in the double digits. What they share is that they are not funded by retail deposits and are not subject to the same prudential capital rules as a bank, which is exactly why they can lend where a bank will not.
Because these lenders take a different view of risk, they tend to compete on the things a bank is slow or unwilling to offer: speed to a decision, higher gearing, reduced or nil presales, and a willingness to look at sites and structures a credit committee at a major bank would decline. You generally pay for each of those. The rest of this guide is about working out when that trade is worth making.
How big is private credit in Australian property, really?
Private credit has grown quickly, and property is the single largest use of it in Australia. The exact size depends on how you define it. The Reserve Bank of Australia (RBA) has estimated around $40 billion of private credit outstanding in Australia, roughly 2.5 per cent of total business debt, using a relatively narrow definition. Broader estimates run much higher: the report REP 814 Private credit in Australia, commissioned by the Australian Securities and Investments Commission (ASIC) and published in September 2025, put the market at around $200 billion in 2024. The gap between those numbers is mostly definitional, so treat any single figure with caution and look at the direction of travel instead, which is steadily up.
What matters for a developer is the composition. The report for the Australian Securities and Investments Commission (ASIC) found that roughly half of the Australian private credit market is invested in real estate related assets, a feature that sets Australia apart from overseas markets, with a notable concentration in higher-risk real estate construction and development. Property advisory analysis from CBRE similarly points to private credit funding a small but fast-growing slice of Australian real estate debt alongside the banks, and the Reserve Bank of Australia (RBA) has noted that non-bank lenders keep growing as a source of finance while still holding a relatively small share of total credit. In plain terms, a large share of the money in these funds is pointed directly at deals like yours. That is why non-bank finance is now a mainstream option for development rather than a last resort, and why the capital is generally available when a project stacks up.
Why have the banks pulled back from development lending?
Banks have not disappeared from development lending, but they lend more conservatively than they did before the last decade of prudential tightening, which is what opened the door for non-bank lenders. The core reason is capital. The Australian Prudential Regulation Authority (APRA) runs an “unquestionably strong” capital framework, and its prudential practice guide APG 112 on the standardised approach to credit risk sets out how much capital a bank must hold against different loans. Property development and construction lending attracts some of the heaviest capital treatment on a bank’s book, which makes it expensive for a bank to write and pushes banks toward the safest, most pre-committed deals.
Presales are the clearest expression of that caution. Following a market review in 2016 and 2017, banks tightened their settlement-risk protection, and it became common practice for a major bank to require qualifying presales covering close to 100 per cent, and in some cases more, of the committed debt before releasing a construction facility. The prudential regulator has since clarified that the reference to presales in its 2017 letter was a description of industry practice at the time, not a minimum requirement it imposes. The practical effect on developers was the same either way: if you could not pre-sell most of the project, a bank generally would not fund the build.
This picture is now shifting, and it is worth watching. The Australian Prudential Regulation Authority (APRA) is consulting on changes to bank risk weights designed to support lending, with residential property development named as a specific focus. The package would make risk weights more granular and, as reported through the consultation, would roughly halve the qualifying presale expectation used for residential development lending. The prudential regulator intends to finalise the credit risk capital changes in the second half of 2026 for a proposed start date of 1 April 2027. If that lands as proposed, banks may regain some ground on development lending. It does not remove the reasons a developer reaches for non-bank finance today, and the timeline means it will not help a project you are funding this year.
When does a non-bank or private credit lender beat a bank?
A non-bank or private credit lender tends to win when the deal needs something a bank cannot easily give: speed, higher gearing, fewer presales, or comfort with a site or borrower a bank finds hard to categorise. A bank almost always wins on price. The decision is rarely about which is “better” in the abstract. It is about which constraint is binding on your particular deal, and what that constraint is worth to you.
Speed is the most common reason. A non-bank credit team can often issue indicative terms in days and settle in weeks, which matters when you are chasing an option expiry, an auction, or a vendor who wants certainty. A major bank’s development credit process can run for months. If missing the acquisition window kills the deal entirely, a more expensive loan that settles on time can be the cheaper outcome.
Gearing is the second. Non-bank senior lenders will generally advance more against the same project than a bank, which reduces the equity you have to find and can lift your return on equity even after the higher interest cost. A stretched senior facility from a non-bank might reach materially higher against cost than a bank’s senior debt, and mezzanine can push total gearing higher again.
Presales are the third, and often the decisive one. Where a bank wants most of the project pre-sold, the Reserve Bank of Australia (RBA) has noted that competition in commercial real estate lending has led some lenders to loosen covenants or lower presale requirements for residential developments. Non-bank and private credit lenders have led that shift, and many will fund construction with limited or nil presales where the project and the sponsor stack up. For a developer building in a market with weak off-the-plan demand, or holding stock to sell into a completed market, that can be the whole reason to go non-bank.
The fourth is fit. Complex sites, staged englobo deals, residual stock loans, borrowers with a thin balance sheet or a recent restructure, unusual security, or a project that simply does not match a bank’s product set can all find a home with a non-bank lender that a bank would decline. You pay for that flexibility, but flexibility is sometimes the only thing that gets the deal done.
Against all of this sits cost. A bank remains the cheapest source of senior debt, and for a straightforward, well-presold project with a strong sponsor, a bank is usually the right answer. The craft is in reading which constraint actually binds, then pricing the alternative honestly in your feasibility rather than assuming the cheaper headline rate is the cheaper deal.
What does private credit development finance actually cost?
Non-bank and private credit development finance costs more than a bank loan, and the total cost is built from several charges, not just the interest rate. As an indicative guide for 2026, non-bank senior construction facilities have commonly been priced in the high single digits to low double digits per annum, while higher-risk private and shorter-term positions can sit well into the double digits. Rates move with the cash rate and with competition, and every deal is priced to its own risk, so treat any range as a starting point for your own enquiries rather than a quote.
The interest rate is only the beginning. A typical facility may also carry an establishment or line fee on the facility (often in the order of one to a few per cent of the limit), a valuation fee, legal and documentation costs, an exit or completion fee, and sometimes a separate fee for any mezzanine or second-mortgage tranche. Default interest, if the project runs late, is usually a much higher rate again and is one of the most important numbers to check in the term sheet. On most development facilities the interest is capitalised inside the loan, so you make no monthly cash payments during construction and the interest is instead drawn against the facility and repaid from sale proceeds. Our guide on capitalised versus serviced interest explains how each treatment flows through a feasibility.
Why the line fee matters more than the headline rate
A line fee is charged on the full facility limit, not on the amount you have actually drawn, so its true cost is higher than the percentage suggests. A construction facility fills up gradually as the build progresses and is not fully drawn until near completion, so the average balance outstanding across the term is well below the limit. A common modelling assumption is that around 55 per cent of a facility is drawn on average over its life. If only 55 per cent of the limit is drawn on average but the line fee is charged on 100 per cent of it, then a fee quoted as, say, 3 per cent of the limit behaves more like an extra 5 per cent or so on the money you are actually using. When you compare two term sheets, convert every fee to its effect on your average drawn balance before you decide which is cheaper. A lower interest rate paired with a fat line fee can easily be the dearer facility.
An indicative all-in cost example
A worked example shows how the pieces add up, though the numbers are illustrative and every deal differs. Take a senior facility with a $10,000,000 limit over an 18-month term. Assume a 9.5 per cent interest rate, a 2 per cent establishment fee, a 1 per cent per annum line fee on the limit, and roughly 55 per cent average drawdown across the term. Capitalised interest might run in the order of $10,000,000 multiplied by 9.5 per cent, by 1.5 years, by 0.55, or about $784,000. The establishment fee adds $200,000. The line fee on the full limit adds roughly $150,000 across the term, and valuation, legal and monitoring costs might add tens of thousands more. That is well over $1,100,000 of finance cost on a single $10,000,000 facility, before any mezzanine tranche. Expressed against the money you actually use, the effective cost of capital is meaningfully higher than the 9.5 per cent coupon. The point of the example is not the precise figure. It is that finance is often the second or third largest line in a development budget, and a non-bank facility makes it larger, so it deserves the same scrutiny you give construction cost.
How much will a non-bank lender actually advance? (Loan to Value Ratio, Loan to Cost, and Gross Realisation Value)
Non-bank lenders generally advance more than banks, and they express the limit in the same two ratios: a Loan to Value Ratio (LVR) against the finished value and a Loan to Cost (LTC) against your total spend. As an indicative guide, non-bank senior construction lenders have commonly funded up to around 65 to 75 per cent of Gross Realisation Value (GRV), and sometimes higher, alongside a Loan to Cost (LTC) of roughly 65 to 80 per cent of total development cost. Add a mezzanine tranche and total gearing can climb further again. A bank’s senior debt typically sits below those levels, which is a large part of why developers accept the higher non-bank cost: less equity in the deal.
The valuation basis matters as much as the percentage. A Loan to Value Ratio (LVR) can be struck against the “as is” land value, the “as if complete” or Gross Realisation Value (GRV) figure, or the net realisable value after selling costs, and each basis produces a very different dollar limit from the same headline percentage. Gross Realisation Value (GRV) is the total sales revenue the finished project is expected to produce, and lenders usually work from a valuer’s figure that can be more conservative than your own sales assumptions. Our guides on how a Loan to Value Ratio is set and capped and on the difference between Loan to Cost and Loan to Value work through those valuation bases in detail.
The binding constraint is whichever ratio produces the smaller loan. A lender might quote 75 per cent of Gross Realisation Value (GRV) and 80 per cent of cost, but if the valuation comes in light, the Gross Realisation Value (GRV) test may cap the facility below the cost test, leaving you to fund the gap with equity or mezzanine. Model both, and model them against the valuer’s likely figures rather than your own optimistic ones, so you are not surprised at credit approval.
What does a private credit lender assess before funding you?
A private credit lender assesses the project, the sponsor, and the exit, and it does so faster and often with fewer rigid rules than a bank, but not with less scrutiny on the things that protect its money. Understanding what sits on their checklist lets you present a deal that prices well rather than one that gets declined or loaded with risk margin.
The feasibility comes first. Expect the lender to want a credible development feasibility showing the total development cost, the Gross Realisation Value (GRV), the margin, and the cash flow across the project. Many will also commission or require an independent quantity surveyor (QS) report to validate the construction budget and to certify progress claims during the build. A feasibility that is internally consistent and stress-tested tends to move through credit faster and on better terms.
The valuation is the second pillar. An independent valuer will usually assess the “as is” value of the site and the “as if complete” value, and the lender will size the facility off those figures rather than your contract price or your sales expectations. A conservative valuation is the single most common reason a facility ends up smaller than the indicative terms promised.
Presales, or the deliberate absence of them, sit alongside the valuation. A non-bank lender that offers nil presales is pricing that risk into the rate, so decide whether the higher cost of a nil-presale facility is worth more to you than pre-selling stock at a discount to hit a bank’s hurdle. The Reserve Bank of Australia (RBA) has flagged that easing presale requirements is one of the ways lending standards have loosened, which is useful context but also a reminder that the lender carries that risk and charges for it.
The sponsor matters more than many first-time borrowers expect. Lenders look hard at your track record, your experience with the product type, your balance sheet, and your team, including the builder and the strength of the building contract. A fixed-price contract with a capable builder de-risks the deal in the lender’s eyes. A thin track record does not rule you out with a non-bank lender, but it will show up in the price.
Finally, the exit and the security. The lender wants a clear repayment path, whether that is settlements from off-the-plan or completed sales, or a refinance onto a lower-cost facility or a term loan once the project is built and leased. Expect a first registered mortgage over the site, general security over the borrowing entity, and personal guarantees from the principals. Because most development borrowing is done through a company and for a business purpose, these guarantees and securities are negotiated commercially rather than under consumer protections, which is the subject of the next section.
Where does private credit sit in your capital stack?
Private credit can occupy almost any layer of the capital stack, and it is most visible in the senior and mezzanine positions where banks are absent or cautious. The capital stack is the order in which each source of money is repaid, from the safest and cheapest at the bottom to the riskiest and dearest at the top. Non-bank money shows up in three main places.
As senior debt, a non-bank lender simply replaces the bank in first position, often at a higher Loan to Cost (LTC) and with fewer presale conditions. This is the “stretched senior” position: one facility, first mortgage security, more gearing than a bank would offer, priced accordingly.
As mezzanine debt, private credit sits behind the senior lender and fills the gap between the senior facility and your equity. Mezzanine is repaid after the senior debt and before equity, so it carries more risk and a higher rate, sometimes with an equity-style return attached. It is a common way to reduce the cash equity a deal needs. Our mezzanine finance guide works through how the tranche is priced and where it becomes too expensive to be worth it.
As preferred equity or a co-investment, some private credit providers will take a position that behaves like equity, ranking behind all debt but ahead of your ordinary equity, in exchange for a preferred return and sometimes a profit share. This blurs the line between lending and investing, and it is where the “private capital” description is most literal.
Each layer you add lifts total gearing and total finance cost, and each pushes your break-even higher. Stacking a mezzanine tranche on top of a stretched senior facility can get a deal to settlement with very little of your own cash in it, but it also thins the margin and raises the funding exposure you carry through the build. Seeing the deepest point of that funding exposure before you commit is essential, because an over-geared deal that meets a cost overrun or a slow sales run can be the one that runs out of room to finish.
How is private credit regulated, and what does that mean for you as a borrower?
Private credit is regulated by the corporate regulator rather than the banking regulator, and business-purpose development loans generally fall outside consumer credit protections, so you carry more responsibility to do your own due diligence. This is one of the most important and least understood parts of borrowing from a non-bank lender, and it cuts both ways.
Non-bank lenders and private credit funds are not authorised deposit-taking institutions and are not subject to the Australian Prudential Regulation Authority (APRA) capital and liquidity rules that govern banks. Instead, a fund that pools investor money is typically a managed investment scheme operating under an Australian Financial Services Licence (AFSL) supervised by the Australian Securities and Investments Commission (ASIC), and a lender writing loans in its own right may need an Australian Credit Licence (ACL) only where it is doing regulated consumer lending. Most development lending is not consumer lending. The Australian Securities and Investments Commission (ASIC) sets out when the credit legislation applies: loans made for a business or investment purpose, and loans to companies, generally sit outside the National Consumer Credit Protection Act (NCCP Act). Because most developers borrow through a company and for a business purpose, the responsible-lending obligations that protect a consumer home borrower usually do not apply to your development facility.
For you as the borrower, that has real consequences. There is no responsible-lending safety net, default interest and enforcement terms are whatever you agreed to, and the strength of your position rests on the contract you negotiated and the advice you took, not on a regulator standing behind you. It also means the onus is on you to assess the lender. A private credit fund relies on continuing investor inflows to fund its commitments, and if those inflows slow, a lender’s ability to honour future drawdowns or a rollover can come under pressure. Ask how the facility is funded, how certain the undrawn commitment is, what happens at expiry if your project runs late, and how the lender has behaved with borrowers whose projects slipped.
The regulator has been sharpening its focus here. The Australian Securities and Investments Commission (ASIC) ran a surveillance of private credit funds and, in its follow-up report REP 820, signalled an opportunity to lift standards on fees, conflicts of interest, valuation practices and disclosure. It has since put private credit funds on notice over their asset valuations and reporting. None of that changes your loan contract, but it tells you the sector is uneven, and that picking a lender with sound governance and honest valuations is part of protecting your own project.
Does any of this change by state or territory?
For the most part, no. Non-bank and private credit development finance is a national market, and the core terms, the ratios, the fees, and the assessment process do not vary in any material way between New South Wales, Victoria, Queensland, South Australia, Western Australia, Tasmania, the Australian Capital Territory, and the Northern Territory. A lender in Sydney will fund a project in Perth or Brisbane on broadly the same framework, priced to the deal rather than the postcode. This is unlike planning and duty, which are genuinely state-by-state.
There are two second-order differences worth noting once. First, lenders form a view on market risk by location, so a project in a thinner or more cyclical market, including some regional and resource-exposed areas, may be priced more cautiously or capped at a lower Loan to Value Ratio (LVR) than the same project in a deep metropolitan market. That is a pricing and appetite difference, not a different product. Second, when a facility is enforced, the lender relies on state-based property and security law to realise its mortgage, and enforcement timelines differ across jurisdictions. Neither of these changes how you shop for or model the finance. They sit in the background of how a lender prices your particular site.
What about New Zealand?
New Zealand runs a very similar pattern: banks are the cheapest source of development finance but are conservative on presales and gearing, and a non-bank sector fills the gap at higher cost. New Zealand developers reach for non-bank construction and development finance for the same reasons their Australian counterparts do, and the lenders behave in much the same way, with higher rates, higher gearing, and more flexibility on presales than a trading bank.
The regulatory frame differs in its detail. Most non-bank development lenders in New Zealand are not deposit takers; they are funded through wholesale mandates and contributory mortgage or managed investment schemes, which sit under the Financial Markets Conduct Act 2013 and are overseen by the Financial Markets Authority. Deposit-taking non-banks are moving under a single new regime: the Deposit Takers Act 2023, administered by the Reserve Bank of New Zealand, brings banks and non-bank deposit takers under one prudential framework and introduces a Depositor Compensation Scheme protecting eligible deposits up to NZ$100,000 per depositor, with the core standards being issued through to 2027 and taking effect from late 2028. The Reserve Bank of New Zealand publishes data on the non-bank lending sector, which remains a small share of total lending but a meaningful source of development and business finance. As in Australia, most development lending to a company for a business purpose sits outside consumer credit protection, so the same message applies: read the facility, assess the lender, and price the cost honestly into your project.
How to model private credit in your feasibility
Model private credit the way it is actually structured: as separate facilities with their own rates, fees and priority, with interest capitalised, and test what the higher cost does to your margin before you sign. The mistake to avoid is treating a non-bank facility as a bank loan with a bigger number in the interest cell. The extra gearing changes your equity and your return on equity, the fees change your all-in cost, and the capitalised interest compounds inside the facility across the term.
A feasibility platform such as Feasly lets you set a senior facility and a mezzanine facility as distinct sources, each with its own interest rate, fees, and priority in the funding stack, size them from a Loan to Value Ratio (LVR) or Loan to Cost (LTC) against the basis you choose, and capitalise the interest inside the facility so it draws down and repays realistically. Because you can duplicate a scenario and change only the funding, you can put a bank case and a non-bank case side by side and read the difference in profit and margin directly, then stress both with a sensitivity analysis to see which structure survives a cost blowout or a softer sales market. That comparison, in dollars of margin rather than basis points of rate, is the number that should drive the decision. Modelling the cash flow month by month also shows your funding exposure and break-even under the more expensive structure, which is where over-geared deals get into trouble.
Whatever tool you use, the discipline is the same. Put every fee in, not just the rate. Capitalise the interest. Model the binding ratio against the valuer’s likely figure, not your own. Then look at the margin and the peak funding exposure, and decide whether the flexibility a non-bank lender offers is worth what it costs on this specific deal.
The bottom line for developers
Private credit and non-bank lenders have become a mainstream source of Australian development finance, not a fallback, and roughly half of the sector’s money is pointed at real estate. They win where a bank is too slow, too conservative on gearing, or too demanding on presales, and they lose on price. The right question is never “bank or non-bank” in the abstract. It is which constraint binds your deal, what the alternative genuinely costs once every fee and the capitalised interest are in the model, and whether the margin still holds after that cost is taken out. Borrow through a company for a business purpose and you carry more of the due-diligence load yourself, so assess the lender as carefully as the lender assesses you, and price the whole thing into your feasibility before you commit.
This guide is general information for property developers and does not take your circumstances into account. It is not financial, legal, or credit advice. Rates, terms, thresholds, and regulatory settings change, so confirm the current position with the relevant lender, a licensed finance professional, and the primary sources before you rely on any figure here.