Private Lenders for Property Development in Australia

Before considering a private or non-bank development facility, you will need professional advice from a finance broker or debt adviser and a property finance lawyer, and the loan documents reviewed before signing rather than after. The terms in this market vary far more between lenders than they do in bank lending, the differences that matter sit in the guarantee scope, the default provisions and the extension rights rather than the headline rate, and the consequences of a facility that does not fit the project fall on the sponsor personally through the guarantees. Every deal, every sponsor covenant and every lender’s appetite is different. This guide sets out how the market works so that conversation starts further along. It does not recommend a lender, a facility or a structure, and there is a list of the questions worth putting to your broker and lawyer at the end.

Australian property developers may now find that the natural first call for construction finance is no longer a major bank. According to ASIC’s September 2025 report on private credit in Australia, the domestic private credit market is estimated at roughly $200 billion in assets under management, with commercial real estate debt understood to make up approximately half of that total. Understanding how this market prices and assesses a deal may be the difference between a feasibility that gets built and one that does not.

Rates, ratios and market figures in this guide were current at the date of writing and move with the cycle. Each is attributed to its source, and the source is the place to confirm it before you rely on it.

What “private lender” actually means in Australian development finance

In Australia, “private lender”, “non-bank lender” and “alternative lender” are often used interchangeably, but they describe a spectrum of capital providers sharing one feature: none is an Authorised Deposit-taking Institution (ADI) regulated by the Australian Prudential Regulation Authority (APRA) in the way the major banks are. Most are instead regulated by the Australian Securities and Investments Commission (ASIC) under the Corporations Act 2001 and the Australian Financial Services licensing regime.

A useful taxonomy of the categories a developer is likely to encounter, described by type rather than by name since mandates, ownership and appetite change frequently:

Institutional commercial real estate debt managers. Heavyweight managers running capital on behalf of superannuation funds, sovereign wealth investors, global pension funds, insurers, family offices and wholesale clients. Typically writing larger tickets, often from around $20 million upward, wholesale-client only, with institution-grade due diligence.

Mortgage funds and managed investment schemes. Pooled investment vehicles registered with ASIC, typically open to wholesale investors and in some cases retail. They operate as registered managed investment schemes or wholesale-only equivalents, subject to ASIC oversight, with retail-facing products also subject to design and distribution obligations.

Balance-sheet non-bank lenders. Lenders funding predominantly from their own balance sheet, parent capital, securitisation warehouses (often supplied by major banks) or institutional mandates rather than a discrete unit-trust pool. The line between these and mortgage funds blurs in practice, as many operate both warehouse-funded and fund-funded products.

Family offices and high-net-worth lenders. A significant share of capital flowing into smaller, shorter-duration property loans is private family money, deployed directly or through syndicates and club deals arranged by intermediaries. These tend to write smaller-ticket, faster-decision facilities, often bridging or pre-development.

Specialist shorter-term private lenders. The most heterogeneous group, typically lending for shorter terms (3 to 24 months), with faster settlements and higher pricing. Public disclosure varies widely across this group and much information is provided only on a deal-specific basis.

Fintech and marketplace lenders. Platforms using online origination, technology-led credit processes and, in some cases, wholesale investor marketplaces. Their economics resemble mortgage funds with a more digital front end.

Debt advisers and arrangers. Not lenders in their own right, but often the route a developer reaches the right capital pool. They place loans with banks and non-banks and advise on structure.

The post-Global Financial Crisis story shaped this market. After 2008, prudential regulators globally and APRA in Australia raised bank capital requirements for higher-risk lending, particularly land acquisition, development and construction. APRA’s 2017 macroprudential interventions and ongoing capital framework reforms constrained bank construction lending appetite, and private credit filled the gap. The Reserve Bank of Australia’s October 2025 Financial Stability Review observes that non-bank lenders continue to grow as a source of finance, with registered financial corporations expanding their market share of housing and business lending.

Why developers turn to private lenders

Banks generally remain the cheapest source of construction debt, so the decision to approach a private lender is usually driven by one or more of these triggers:

• Speed. A bank construction facility commonly takes 8 to 12 weeks or longer from application to settlement, and frequently more for first-time or non-relationship borrowers. Private lenders often settle in 2 to 6 weeks, with some bridging products faster again.
• Lower or no presales. Major banks providing residential construction finance have commonly required qualifying presales covering a large share of the debt facility. Industry survey data suggests most lenders now accept materially lower presale cover, with almost all of that flexibility coming from non-banks.
• Pre-Development Application (DA) and land acquisition. Banks rarely fund speculative pre-approval site purchases. Private lenders may provide pre-development and land bank facilities at 40 to 55 per cent Loan to Value Ratio (LVR) of as-is value.
• Borrowers below bank thresholds. Many major banks effectively will not look at projects below around $10 million total development cost. Private lenders routinely fund smaller deals, and institutional private credit funds well above that.
• Foreign borrowers, complex sites, irregular history. Foreign Investment Review Board (FIRB) affected sponsors, sites with contamination or heritage overlay, non-standard product mix, or borrowers with credit blemishes are typical private-lender territory.
• Construction underway or refinance in distress. Where a build is mid-flight and a bank facility has hit covenant breaches or builder issues, private lenders are often the only path forward.
• Residual stock loans. Where a project completes with unsold units, private lenders may refinance the residual stock at higher leverage than banks.

The trade-off is consistent: speed, flexibility and certainty in exchange for cost. Whether that trade works is a feasibility question, and the comparison worth running is the all-in cost of capital, including rates, line fees, establishment fees, exit fees and capitalised interest, against the bank alternative and a realistic probability of bank approval. The property development finance guide and construction finance guide cover the bank side of that comparison.

What private lenders actually look at when assessing a deal

Private lenders evaluate development finance applications on broadly similar lines, though the weighting varies. The core checklist typically includes:

Sponsor track record and experience. The first read on most files. A first-time developer doing a six-townhouse project is generally read very differently from a sponsor with three completed projects of similar scale and typology. Track record may offset weaker site economics or thinner equity, and is one of the most influential variables in pricing.

Equity contribution. Most private lenders look for 20 to 35 per cent equity of total development cost. Files with equity below that band tend to be priced up or declined, on the basis that thin developer equity asks the lender to take most of the risk. Mezzanine and preferred equity layers may reduce required cash equity, at meaningfully higher pricing.

Project feasibility quality. Lenders increasingly want clean, defensible feasibility models covering acquisition costs (including duty, GST margin scheme treatment and finance costs), construction, professional fees, contingency, sales revenues and timing. A residual project margin in the region of 18 to 25 per cent on cost is commonly described as the threshold sitting comfortably inside private credit appetite, with margins below that band tending to push files toward decline regardless of sponsor pedigree.

Site control and approval status. A site with development approval in hand or a clear pathway is generally funded on different terms from a speculative pre-approval acquisition. Pre-approval loans are commonly sized at 40 to 55 per cent of as-is land value.

Builder selection and contract. A licensed, insured builder with completed projects of comparable typology and an independent contractor rating is generally a strong positive. A fixed-price head contract and realistic contingency are generally preconditions. Following the wave of builder collapses, almost all lenders now require detailed builder due diligence including financial statements, project pipelines and credentials.

Presales. For senior bank construction loans, substantial qualifying presales have commonly been required. For non-bank senior, materially less is common, and stretch senior or specialist private lenders may accept none with a strong exit story.

Exit strategy. Heavily weighted, especially on no-presales deals. Lenders typically need a credible repayment story at practical completion, either a sell-down with current absorption evidence and a clear sales programme, or a refinance into a residual stock or commercial investment loan with documented serviceability.

Quantity Surveyor (QS) reports and independent valuations. An independent Quantity Surveyor (QS) report is generally standard, both at credit decision and as the basis for progress-claim drawdowns. “To be constructed” and “on completion” valuations from a panel valuer are typically standard, and many lenders also commission an “as-is” valuation.

Personal and corporate guarantees. Almost all private development facilities are at least limited recourse against the borrowing special purpose vehicle with personal and corporate guarantees from sponsors and holding entities. Full non-recourse is rare in private credit. The scope of personal guarantees, whether a limited dollar cap or unlimited, and whether “all monies” cross-collateralisation or project-specific, is a key negotiation point and a frequent source of borrower regret where it is not fully understood.

Loan to Value Ratio (LVR) and Loan to Cost (LTC) ratios

Private lenders generally express leverage two ways: against Total Development Cost (TDC), as Loan to Cost (LTC), and against Gross Realisation Value (GRV), as Loan to Value Ratio (LVR). Bands commonly quoted in the market:

These ranges are indicative; actual leverage is a function of sponsor, location, product, builder and exit. Most private lenders size to whichever ratio produces the lower facility, which generally means the borrower’s equity contribution is the binding constraint.

Typical deal economics

The cost structure of an Australian private development facility involves several components, which are best modelled together to reach the real cost of capital. Figures below are indicative market ranges rather than quotes from any particular lender, and move with the cycle.

Interest rates by lender tier

Fees and structures

• Establishment fees commonly run 1.0 to 3.0 per cent of facility limit, capitalised at settlement. Institutional lenders often sit at the lower end, shorter-term private lenders at the higher end.
• Line fees are often nil on a non-bank development facility, with interest calculated on the drawn balance only. On bank and stretched-senior facilities, line fees on undrawn limits are not uncommon.
• Exit or break fees may range from nil to around 1.0 per cent of the original facility.
• Capitalised versus serviced interest. Most private development facilities capitalise interest into the facility and repay at exit, so there is no monthly servicing burden during the build, but the LVR and LTC must accommodate the interest reserve.
• Term lengths typically run 12 to 24 months for senior construction facilities, often with an extension option subject to satisfactory performance. Shorter-term private products may be 3 to 18 months.
• Default interest is often quoted at the contracted rate plus a margin uplift of 4 to 6 per cent, occasionally higher on shorter-term products. Default rates may apply on covenant breach, presale shortfall, missed milestones, builder default or sunset breach, and can compound quickly.

Total cost of capital

As a rough framework: a $20 million senior facility at 70 per cent LTC for an 18-month build, at a non-bank rate around 10 per cent with a 1.5 per cent establishment fee and capitalised interest, may produce an all-in cost to the project in the order of 11 to 13 per cent per annum. A major bank facility at 7.5 per cent with a 1 per cent establishment fee and a line fee on undrawn portions might produce 8.5 to 9.5 per cent all-in, but only where the developer can meet the bank’s presale and equity hurdles. Where the bank deal is unattainable, the relevant comparison becomes private finance against not proceeding.

The application process, in practice

Private lender processes vary, but the structure is typical of project finance:

Indicative term sheet stage. The borrower prepares a high-level information memorandum containing site details, approval status, sponsor track record, builder, feasibility summary and capital ask, issued to a curated list of lenders. Indicative term sheets typically come back within 48 hours to two weeks, usually non-binding and subject to credit.

Selection and term sheet acceptance. The borrower accepts a term sheet and pays a commitment fee or due diligence deposit, typically refundable against the establishment fee.

Full credit package. A complete submission, typically including full feasibility, cash flow model, contract of sale, fixed-price building contract, builder profile and financials, sponsor group financials, approval conditions and planning constraints, and an exit strategy.

External diligence. The lender commissions a panel valuer, Quantity Surveyor (QS), environmental or contamination report where relevant, legal review, and builder-specific due diligence.

Credit approval and formal letter of offer, subject to credit committee.

Settlement. Loan documents executed, security registered, settlement effected. Total elapsed time for a well-prepared private development facility may run 4 to 8 weeks, against 12 weeks or more for a typical major bank deal.

Common reasons deals are declined

• Sponsor track record inadequate for the scale of the project
• Developer equity below 20 per cent of total development cost, or “soft” equity based on uplift in land value
• Project margin below the lender’s threshold, or a weak feasibility
• Builder concerns: no fixed-price contract, weak balance sheet, no independent rating
• Exit strategy not credible, with insufficient sales evidence or no refinance path
• Leverage outside the lender’s appetite
• Site complexity such as heritage, contamination or easements without a clear mitigation plan
• Planning risk, including appeals and sunset risk
• Concentration limits, since many private credit funds cap exposure by location, builder or sponsor

Risks and red flags for borrowers

Many of the following are normal features of private development finance, but are amplified at the smaller, less institutional end of the market.

Sunset and long-stop dates. Most private development loans contain hard repayment dates with limited extension rights. A construction overrun pushing practical completion past the long stop may trigger default interest, refinance pressure or enforcement.

Default interest rates. A 4 to 6 per cent default margin on top of a double-digit headline rate compounds quickly, and the worst-case cost over a 3 to 6 month enforcement window is worth modelling before signing rather than after.

Refinance risk if an extension is needed. Where a project overruns and the lender will not extend, the borrower must refinance, often at higher rates into a market with different appetite. Construction delays of 6 to 18 months have been widely reported on projects initiated in the 2021 to 2023 period, and capitalising interest through a delay erodes equity positions materially.

Personal guarantee scope. Limited guarantees with a dollar cap and project-specific scope operate very differently from “all monies” or unlimited guarantees that may cross-default to other facilities. The wording is generally negotiable, and is one of the items a lawyer or debt adviser most reliably improves.

Cross-collateralisation. Some lenders may seek security over a sponsor’s other completed projects or unrelated property. Where that is unavoidable, the release mechanics on each project’s payout are the detail that matters.

Conduct at the shorter-term end. ASIC’s Report 814 identifies the wholesale “sophisticated investor” segment and real estate construction lending as an area of priority for regulatory attention. Indicators worth watching in any lender’s behaviour include establishment fees that are non-refundable on decline, term-sheet repricing late in the process, opaque borrower-paid fees, and an aggressive default and enforcement posture.

Fund structure and liquidity. Where the lender is a mortgage fund with active redemptions, a borrower may be exposed to indirect liquidity risk: a fund hit by investor redemptions may be slower to fund drawdowns or may seek early repayment. Balance-sheet lenders do not typically carry this risk in the same form. ASIC’s Report 820, published 5 November 2025, noted that only two of the eight wholesale funds reviewed performed stress testing as part of liquidity risk management.

The post-2022 environment

Three forces have reshaped the Australian private lender landscape since 2022.

Bank retreat from construction lending. Following APRA’s macroprudential settings and global capital framework reforms, the major banks materially reduced construction lending, competing more selectively for prime, presold deals with experienced sponsors. Survey data suggests bank appetite is selectively returning, but to a higher quality bar.

The builder insolvency wave. ASIC data shows 3,217 construction-firm insolvencies in 2024, up from 2,546 in 2023 and 1,793 in 2022. The lender response has been a permanent re-rating of builder risk, with independent contractor ratings, builder financial statements, project-pipeline visibility and tighter contingency requirements now standard. The RBA’s October 2025 Financial Stability Review observes that company insolvencies have risen to be “at the top of the range observed in the 2010s”, with spillovers to the financial system limited given the firms’ limited bank debt and small size.

Institutional private credit growth. As banks pulled back, institutional private credit raised aggressively, with international capital entering through acquisitions and strategic stakes in domestic managers. The effect is that a mid-market developer’s natural first call may now be a private credit manager or non-bank lender rather than a major bank, with banks remaining in the picture for the cleanest deals.

Regulatory landscape

Australian non-bank lenders are not regulated by APRA but sit under ASIC’s oversight, and where consumer credit applies, under the National Consumer Credit Protection (NCCP) regime via Australian Credit Licences. Wholesale-only commercial property lending generally sits outside the NCCP regime but inside the Corporations Act and Australian Financial Services licensing framework, with managed investment schemes either registered with ASIC for retail or operating under wholesale-investor exemptions.

Two ASIC reports from 2025 set out the regulator’s current concerns:

Report 814 (22 September 2025) is a commissioned external report on private credit in Australia. It puts the market at approximately $200 billion with commercial real estate roughly half, describes the institutional end as generally well run, and raises greater concerns at the wholesale and retail-facing end, particularly real estate construction and development funds. Four concern areas are identified: conflicts of interest; inconsistent terminology (such as “investment grade” and “senior debt”); valuation and impairment practices; and disclosure variability.

Report 820 (5 November 2025) is based on a review of 28 private credit funds, 20 retail and 8 wholesale. ASIC found “inconsistent practices and, in some cases, material deficiencies” in reporting and terms, interest margin and fee disclosure, governance and conflicts, valuation, and stress testing. ASIC noted that some retail funds had described themselves as suitable for investors with a “low risk tolerance” or for “core” portfolio allocation, characterisations ASIC does not consider accurate for many real estate construction-exposed funds.

ASIC has signalled further work including review of adviser distribution of private credit and updates to regulatory guidance for wholesale funds. For developers, the practical implications may include lender governance and disclosure quality becoming a more visible differentiator, increased scrutiny of borrower-paid fees, and the possibility that smaller funds face liquidity stress if redemption pressure rises, with knock-on effects on their ability to fund future drawdowns.

State and territory patterns

Development finance markets are not uniform across the states, and the differences are matters of market depth rather than law, since the licensing framework is federal.

New South Wales is the largest market by deal volume and lender concentration, with Sydney metro deals dominating large-ticket private credit lending. Independent builder ratings are most widely used here, and presale flexibility is most often available for quality sponsors.

Victoria is the second-largest market and was the most volatile from 2022 to 2024 given the concentration of builder collapses. Melbourne metro and inner-ring townhouse markets are well served by mid-market private credit, and planning system delays may add execution risk to feasibilities.

Queensland is a growing market with strong appetite for Brisbane infill, Gold Coast and Sunshine Coast product. Regional Queensland pricing tends to widen 100 to 200 basis points over metro.

Western Australia is a recovering market following a multi-year downturn, with renewed lender appetite in Perth metro. State-specific construction sector conditions affect builder due diligence.

South Australia is a smaller market with thinner private lender presence, focused on Adelaide infill and inner-ring townhouse product.

The Australian Capital Territory and Tasmania are the smallest markets, and most private lenders treat them as opportunistic rather than core. Regional Australia generally requires both a sponsor track record premium and a pricing premium, and many institutional lenders explicitly cap lending to metro or tier-one regional markets.

Where private development finance fits

For a developer at the smaller end of the market, private finance is often the only finance available, and a realistic feasibility framework may assume non-bank pricing, higher LTC, capitalised interest and a substantial equity contribution.

For a mid-market developer, the choice between bank and non-bank turns on presales, time and sponsor strength. Modelling both options side by side at indicative pricing, including all fees, capitalised interest and timing, is the way to compare them, and it is worth noting that a bank scenario assuming substantial presales achieved within 12 months of launch and a non-bank scenario assuming construction starting immediately are fundamentally different projects rather than two prices for the same one.

At larger scale, institutional private credit managers compete with major bank syndicates, stretch senior structures and syndicated tranches become available, and pricing tightens accordingly.

The shift that tends to help most is treating capital structuring as a deliberate part of the feasibility, modelled, stress-tested and compared, rather than a procurement exercise at the end of a planning process.

What to ask your broker and lawyer

These questions decide whether a private facility fits a project, and each turns on the specific deal and the specific loan documents. They are set out here so the first conversation starts further along.

• What is the all-in cost of this facility over the expected term, and over a term three and six months longer, including establishment, line, exit and any default interest?
• What exactly repays this facility, and what happens if that exit slips past the long-stop date?
• Are there extension rights, are they at our election or the lender’s discretion, and at what rate and fee?
• What is the default interest rate, what events trigger it, and does it compound monthly or annually?
• Is the personal guarantee capped in dollar terms and limited to this project, or is it “all monies” and cross-collateralised against our other assets?
• What security is being taken, over which entities and which properties, and what are the release mechanics on payout?
• Is this lender funding from its own balance sheet or from a fund with redemption exposure, and what happens to our drawdowns if that fund faces redemptions?
• Are establishment or commitment fees refundable if the lender declines after due diligence?
• Can the lender reprice or withdraw late in the process, and what does “subject to satisfactory due diligence in the lender’s absolute discretion” allow them to do?
• Can the lender substitute a different funding entity after signing?
• Are drawdowns tied to Quantity Surveyor (QS) sign-off or to lender discretion?
• Does this facility sit inside or outside the National Consumer Credit Protection regime, and what does that mean for the protections available to us?

Frequently asked questions

What is the difference between a private lender and a non-bank lender?

The terms are often used interchangeably. “Non-bank lender” technically means any lender that is not an ADI regulated by APRA. “Private lender” generally refers to non-bank lenders that are not publicly listed or that fund themselves through private capital pools. In practice almost all private development lenders in Australia are non-banks, though not all non-banks are private in the colloquial sense.

How long does a private lender take to settle a development loan?

Indicative term sheets commonly take 48 hours to two weeks. Full credit approval and settlement typically run 4 to 8 weeks for a well-prepared deal, against 12 weeks or more for a major bank. Shorter-term private lenders may move faster, at higher cost.

Do private lenders require presales?

It depends on the lender and the deal. Senior bank construction loans have typically required substantial qualifying presales. Non-bank senior facilities frequently accept materially less, and stretch senior or specialist private lenders may accept none with a strong sponsor and exit story.

What Loan to Value Ratio (LVR) will a private lender go to on a development loan?

Senior non-bank construction loans commonly reach 70 to 80 per cent of total development cost, or 65 to 70 per cent of on-completion value, with some higher on quality residential. Stretch senior may extend further. Pre-approval land loans commonly sit at 40 to 55 per cent of as-is value.

Are private lenders regulated in Australia?

Yes, but differently from banks. They are typically regulated by ASIC under the Corporations Act 2001 and the Australian Financial Services licensing regime, and where consumer credit applies, under the NCCP regime via Australian Credit Licences. They are not subject to APRA’s prudential standards in the way ADIs are. ASIC increased scrutiny of private credit funds through Reports 814 and 820.

What is the biggest mistake developers make with private lenders?

Three recur: overstated Gross Realisation Value (GRV) in the information memorandum, which the panel valuer typically unwinds quickly; accepting blanket personal guarantees without dollar caps or project-specific scope; and underestimating default interest exposure if the project overruns its long-stop date.

Lender panels, rates, ratios and regulatory settings change. The figures in this guide were indicative at the date of writing, and a current term sheet is the place to confirm any of them.