Funded in days, not months.

What is private lending?

Private lending in Australia is mortgage-backed or asset-backed credit funded by non-ADI lenders — private credit funds, family offices, HNW investors, and dedicated mortgage trusts — issued exclusively to business and commercial borrowers. The Australian private credit market reached approximately $230 billion in assets under management by early 2026 (EY-Parthenon: A$234.5b), growing roughly 9% year-on-year and nearly tripling over the past decade.

The defining feature is the funding source. A bank holds your loan on its own deposits-funded balance sheet and is constrained by APRA's prudential framework (LCR, NSFR, capital requirements). A private lender either holds your loan on its own equity or syndicates it to a closed pool of wholesale investors. That difference cascades into everything else — pricing, speed, flexibility, and (importantly) appetite for transactions banks won't touch.

In 2026, “private lending” in the Australian market typically refers to one of three structures:

1. Direct private credit — a single funder (HNW investor, family office, or boutique credit firm) lends from their own capital, secured by registered first or second mortgage. This is the fastest path: 5-10 business days, minimal credit committee, single decision maker. Pricing reflects the speed and risk: 10-14% pa is standard for first mortgages as at May 2026.
2. Mortgage trust / pooled funds — institutional or wholesale private credit funds that aggregate capital and deploy through a managed vehicle. Slower than direct (typically 2-4 weeks) but cheaper, often 8-11% for clean first-mortgage deals. AFSL-regulated when offered to retail; wholesale-only when not.
3. Brokered private — a credit-licensed broker assembles the lender from a panel. Combines access to multiple sources with NCCP/BID compliance protections. This is what our affiliated brand Esteb & Co does (ACL #389087) for deals where regulated credit assistance is appropriate.

Esteb Capital operates in lane 1 (direct private credit) and selectively lane 3 (matching to panel funders). We do not operate retail mortgage trusts, do not solicit retail wholesale capital, and do not offer consumer credit. Every loan we fund is for business, commercial, or investment purpose — which is the legal basis for our exemption from the National Consumer Credit Protection Act 2009 (Cth), Schedule 1, s5(1)(b).

Who uses private lending?

The typical Australian private lending borrower in 2026 is a property investor, developer, or SME operator who needs a defined dollar amount against tangible security, on a defined timeline shorter than a bank can deliver. They are not credit-impaired in the consumer sense — they are time-impaired or structurally outside bank serviceability templates.

In the deals we've structured over the past 12 months, four borrower profiles dominate:

Profile 1 — The settlement-shortfall buyer. Bank pre-approval evaporated mid-process (valuation came in low, serviceability tightened, the lender's policy shifted between submission and formal approval). Settlement is 7-14 days away. Walking away costs the deposit plus a re-purchase risk. Private bridging finance, secured against the asset being purchased plus an existing unencumbered or under-leveraged property, gets the deal across the line. The borrower then refinances to a bank product post-settlement when there's time to structure properly.

Profile 2 — The cash-out-against-equity operator. A business owner who holds material equity in property (typically a paid-down PPOR, an investment property, or commercial premises) and needs working capital, deposit funding, supplier payment, or transactional liquidity faster than a bank's commercial credit team can move. Bank business overdrafts and equipment finance lines are slow and conditional; private second-mortgage or first-mortgage refinances draw on existing equity in 5-10 days.

Profile 3 — The developer between projects. Land bank carry, residual stock funding after project completion, pre-DA holding finance, or short-term capital to cover GST and holding costs while strata titles register. Bank construction lending requires the development to be “in production”; private lenders fund the in-between states. (For deals where the development itself is the structure being funded, see our development finance pillar.)

Profile 4 — The opportunistic transactor. Off-market commercial property comes up at a discount to valuation and the buyer needs to settle in 21 days. Banks can't price the risk that fast. Private first-mortgage at 10-12% covers a 6-12 month hold while the borrower arranges either a bank refinance or an exit sale.

What none of these borrowers are: distressed consumers seeking debt consolidation, first-home buyers locked out of the bank market, or low-income earners with no demonstrable exit. Private lending is not a sub-prime consumer product in Australia. It is structurally a wholesale / commercial product, and any responsible private lender — including Esteb Capital — will decline a deal where the exit isn't credible regardless of how strong the security looks on paper.

How much does private lending cost?

First-mortgage private lending in Australia is priced between 8.0% and 13.5% per annum as at May 2026 for clean, low-LVR commercial deals; second mortgages and caveat loans run 12-18% pa; establishment fees are 1.0-2.5% upfront. Total all-in cost on a 12-month deal is meaningfully higher than the headline rate — borrowers should solve for IRR, not nominal coupon.

Pricing in the Australian private credit market sits in three broad bands as at May 2026:

These ranges reflect the broader RBA cash rate environment. The RBA cash rate sits at 4.35% as at May 2026, following a 25-basis-point increase on 5 May 2026 — the third consecutive rise this year. Private credit pricing has held broadly steady through this cycle: first-mortgage rates remained in the 10-13% band for clean commercial deals while bank funding costs rose. Australian small business variable lending rates (RBA F7 series) sit at approximately 6.9% as at early 2026, so the private premium for fast-and-flexible execution is roughly 200-400 basis points over equivalent bank pricing.

The all-in cost most borrowers underestimate:

A $1,000,000 first-mortgage deal at 11% pa, 12-month interest-only, 1.5% establishment fee, $5,000 legal fees, and $2,500 discharge fee has a stated “rate” of 11% but a borrower IRR of approximately 13.0-13.5% when fees are amortised across the term and exit costs are included. On a 6-month deal, the same fee structure pushes the borrower IRR to approximately 14.5-16% because the establishment fee amortises over half the term.

Discharge clauses matter more than rate.

A clause we've seen on multiple deals — including one that nearly slipped through unchecked at signing in March 2025 (see Case Study 1 below) — requires an additional month of interest at discharge regardless of whether 30 days notice was provided. On a $1.6M loan at 11%, that's roughly $14,700 in penalty interest for paying out on time. Borrowers focused only on the headline coupon miss this. Always model the discharge schedule before signing.

How does private lending differ from a bank loan?

A bank loan is funded from regulated deposits, priced against a wholesale cost of funds curve, underwritten against APRA-prudential serviceability templates, and approved by a credit committee process measured in weeks. A private loan is funded from equity capital, priced against the funder's risk-adjusted return target, underwritten against the asset and an exit, and approved by a single decision maker measured in days.

Five practical differences:

1. The decision maker. A bank's credit decision is made by a credit committee applying a policy matrix. The committee answers a Yes/No question against pre-defined parameters: serviceability ratio, debt-to-income, time in business, security category, post-code restrictions. A private lender's decision is made by the funder (or in our case, the principal of Esteb Capital) answering a different question: “If everything goes wrong, do I get my capital back from the security?” That question is resolved at the LVR and exit-credibility level, not the serviceability level.

2. Underwriting basis. Banks underwrite borrower serviceability — verified income, sustained capacity to meet repayments, debt-to-income ratios. Private lenders underwrite deal viability — security value, LVR, exit pathway, and the borrower's ability to execute the exit. A self-employed developer with lumpy income and no recent payslips can struggle for bank approval but be entirely fundable in the private market against the same property.

3. Speed. As at May 2026, the median time from application to settlement for an SME secured business loan at a major bank is 8-12 weeks. The same deal at a competent private lender settles in 5-15 business days. The speed difference is structural, not a matter of effort — banks have to layer compliance, internal policy, and committee process; a private lender doesn't.

4. Flexibility on use of funds. Banks ring-fence loan purpose: a business loan must demonstrate a business use, a construction loan funds against a defined construction schedule, a working capital line has draw conditions. A private first-mortgage against unencumbered property is generally agnostic on use of funds within the business — provided the loan purpose is documented, the deal structure can accommodate cash-out for working capital, deposit funding, GST liabilities, supplier payments, or any genuinely commercial purpose.

5. Term and exit assumptions. Banks assume long-term tenure: 25-30 year amortising loans on residential security, 15-25 years on commercial. Private lenders explicitly underwrite to a short defined exit: refinance to a bank, sell the asset, complete the project and exit through end-buyer settlements. An 11% rate looks expensive next to a 6.5% bank loan until you factor in that the private deal exists for 12 months, not 25 years.

What does not differentiate them in 2026 is regulatory legitimacy. Both products are legal, both are widely used, and both serve real economic purposes. The choice is matching the structure to the deal — not assuming one is “better” in the abstract.

When does private lending make sense?

Private lending makes sense when (a) the deal is genuinely time-constrained, (b) the borrower has credible exit capacity within 6-24 months, (c) the asset security supports an LVR that absorbs the higher carry cost, and (d) the cost of not doing the deal exceeds the price differential to bank pricing. It does not make sense for routine, time-flexible, long-tenure borrowing where bank pricing is accessible.

Case Study 1 — Cross-collateralised commercial purchase, settled March 2025

When it does not make sense

Private lending is the wrong tool when:

• The borrower has time on their side and qualifies for bank pricing — the rate differential isn't worth paying for speed they don't need
• The exit pathway isn't credible inside the loan term — taking a 12-month private loan with no realistic refinance or sale exit is how borrowers end up rolling at higher rates and worse terms
• The asset security doesn't comfortably absorb the carry cost — high-LVR private deals against marginal security compound risk for both lender and borrower
• The use of funds is consumer in nature — household debt consolidation, owner-occupied home purchase, personal-purpose borrowing. Esteb Capital cannot lend for these purposes; our affiliated brand Esteb & Co is the right entry point for NCCP-regulated consumer credit assistance

What security do private lenders take in Australia?

Australian private lenders predominantly secure loans by registered first or second mortgage over real property — residential, commercial, and industrial — with caveat and equitable mortgage structures used for short-duration deals. Personal property security is taken under PPSR registration. The dominant security instrument in 2026 remains registered first mortgage over real property.

The hierarchy in declining order of lender preference:

1. Registered first mortgage over freehold real property — the cleanest position. Lender ranks ahead of all subsequent encumbrances, has full power-of-sale on default, and the security is recorded on title.
2. Registered second mortgage behind a bank or major lender first — common for cash-out-against-equity transactions. The second-mortgagee accepts subordinated recovery position in exchange for higher pricing. Where the subordinated position is part of a structured capital stack (debt only, not equity), see our mezzanine debt pillar.
3. Caveat loan — an equitable interest registered against title without full mortgage formalities. Cheaper and faster to register, but provides weaker enforcement rights. Used predominantly for short-duration (≤6 month) loans where speed of registration matters more than enforcement strength.
4. Personal property security (PPSR) — vehicles, plant, equipment, marine vessels, registered IP, accounts receivable. Lower lender comfort than real property because of valuation volatility, but appropriate for asset-finance use cases.
5. General security agreement (GSA) — typically supplementary to a primary security, covering “all present and after-acquired property” of a corporate borrower. Useful for ranking in an insolvency scenario but rarely the primary security.

Esteb Capital's preferred security is registered first mortgage over Australian real property, with a clear title path and a fall-back valuation that supports the loan amount at a comfortable LVR. Where deal structure requires it, we work with second mortgages and caveat structures, and we lend against well-titled vehicles and marine assets case-by-case for short-term transactional needs.

What's the typical process — application to settlement?

A clean Esteb Capital private lending deal moves from initial enquiry to settled funds in five to ten business days. The pathway is: 48-hour indicative decision → terms acceptance → solicitor instruction in parallel with valuation (where required) → loan documents → execution → settlement and disbursement.

The five-step process mirrors how the Case Study 1 deal moved (with the security restructure being the exceptional case rather than the norm):

Day 0 — Enquiry. Borrower submits the basics: requested amount, security offered, purpose of funds, target settlement date. Five fields, not a 40-page application.

Day 1-2 — Indicative decision. Within 48 hours we come back with a yes/no, an indicative rate, indicative loan amount, and the conditions we'd attach. Not a formal letter of offer — a conversation that becomes formal once both sides agree the structure works.

Day 3-5 — Documentation in parallel. Solicitor instructed. Valuation ordered if required (sometimes waived for clean unencumbered first-mortgage deals). Borrower provides ID and proof of ownership. Title searches lodged.

Day 5-8 — Loan documents. Lender's solicitor drafts. Borrower's solicitor reviews. This is the highest-leverage step for the borrower — discharge clauses, default interest rates, security release conditions, and notice periods all sit in these documents and all matter more than the front-page rate.

Day 8-10 — Execution and settlement. Documents executed by all parties, security registered, funds disbursed to the borrower's nominated trust account. Interest accrues from settlement date.

The deals that take longer than 10 days take longer for one of three reasons: (1) title or probate complications like Case Study 1 above, (2) valuer access delays in regional or specialised property, or (3) borrower-side document delays. None of these are failures of the private credit model — they're constraints inherited from the underlying transaction.

More frequently asked questions

These expand on the FAQ above with additional depth.

Is private lending regulated in Australia?

Yes, but not under the National Consumer Credit Protection Act 2009 (Cth) when the loan is for business or commercial purposes. Private lenders dealing exclusively in business credit operate under the NCCP exemption at Schedule 1, s5(1)(b). Where a private lender deals in retail consumer credit, they require an Australian Credit Licence (ACL). Where they offer wholesale managed investment products to retail investors, an Australian Financial Services Licence (AFSL) and a registered managed investment scheme apply. Esteb Capital operates exclusively in the business-credit space and therefore does not require (and does not hold) an ACL or AFSL.

What's the minimum and maximum loan size?

Esteb Capital writes loans from $100,000 to $5,000,000 directly. Larger transactions are typically syndicated or referred. There's no rigid minimum at the market level — some private lenders write down to $25,000 caveat loans, though pricing rises sharply at the small end because the legal and administrative cost is largely fixed.

What credit score do I need?

Private lenders weight asset and exit far more heavily than credit score. A 600-650 credit score with a clean unencumbered property and a credible exit will typically be funded at standard pricing. A 750+ score with marginal security may not. There is no minimum credit score gate — every deal is assessed on the security and exit rather than the file score.

Can I get a private loan for a residential investment property?

Yes, where the borrowing entity and purpose are commercial. A property investor with an investment portfolio borrowing against equity for further investment, deposit funding, or portfolio working capital is a valid business borrower under the NCCP exemption. A homeowner borrowing against their owner-occupied home for personal purposes is consumer credit and outside Esteb Capital's scope — that's where Esteb & Co's NCCP-licensed credit assistance applies.

Do you charge default interest? What about late fees?

Default interest rates on Australian private loans typically run 2-6% above contract rate, applied on the day of default. Late fees and recovery costs are charged on a pass-through basis. These rates are set by contract and disclosed in loan documents — they are not a hidden cost, but they are material and warrant legal review at signing.

What happens if I can't repay at the end of the term?

The standard outcome is renegotiation. A reasonable private lender will work with a borrower whose exit has been delayed for documentable reasons (sale fell through, refinance approval pending, project completion timeline slipped). Extensions typically come with a fee and revised terms. The unreasonable outcome is enforcement — and that path exists, but it's expensive and slow for the lender too, which is why renegotiation is usually the first move.

Can I prepay the loan early without penalty?

Depends entirely on the loan documents. Some private lenders charge a minimum interest period (3-6 months guaranteed even if you discharge early). Some require additional months of interest at discharge regardless of notice. Some allow free prepayment after a defined lockout period. Read this clause specifically before signing. It's the single most negotiable economic term after the rate itself.