The Australian construction and development finance market includes a wide range of lenders, from the major banks through to non-bank specialists and private credit providers. Each operates differently, assesses deals differently, and suits different borrower and project profiles.
This article focuses on non-bank and private lenders specifically. Not to suggest they are the right answer for every borrower or project, but to explain how they work, what types of scenarios they are sometimes relevant to, and what borrowers should weigh up carefully when considering all of their options.
As a broker, our role is to understand your situation and help you find the most appropriate solution across the full market. That may be a major bank. It may be a non-bank lender. It may be a private facility. The right answer depends entirely on the specifics of your deal.
What Are Non-Bank and Private Lenders?
Non-bank lenders are licensed credit providers that operate outside the traditional banking system. They are regulated under Australian credit law but are not authorised deposit-taking institutions. They raise capital through institutional investors, wholesale funding, and securitisation rather than customer deposits.
In construction and development finance, non-bank lenders typically work across a broader range of deal types than major banks and may have more flexible credit criteria in certain circumstances.
Private lenders operate in a similar space but are often smaller, more nimble, and can make decisions on a deal-by-deal basis. Private lending is typically funded by high-net-worth individuals, family offices, or private credit funds. Because decisions are made by people rather than automated credit systems, individual deal assessment is genuinely possible.
Both are a legitimate and established part of the Australian property finance landscape. They are not a last resort. They are one part of a broader market, and for some borrowers in some situations, they may be worth exploring alongside other options.
Scenarios Where Non-Bank or Private Lenders May Be Relevant
There is no universal rule about which borrower should use which lender. That said, there are some scenarios where non-bank or private construction finance sometimes comes up as part of the conversation.
Complex income structures. Some borrowers structure their financial affairs through trusts, companies, or investment entities. Where this makes it difficult to meet standard bank documentation requirements, non-bank and private lenders may be able to assess the deal differently, though this is not always the case and depends entirely on the individual lender and the specific situation.
Existing debt on the land. Where a borrower carries existing debt on land they intend to develop, some non-bank and private lenders may be able to consider refinancing that debt alongside the construction facility. Whether this is appropriate and achievable depends on the deal.
Time-sensitive projects. Planning permits expire. Builder contracts have commencement requirements. In situations where timing is genuinely critical, the faster assessment and settlement timelines that some private lenders offer may be a relevant consideration. This is not a reason on its own to pursue private finance, but it is sometimes a factor.
Non-standard project types. Mixed-use developments, boarding houses, build-to-hold strategies, and high-density residential projects do not always align neatly with major bank lending criteria. Non-bank and private lenders may consider these on a case-by-case basis.
Mid-construction situations. Where a project has stalled due to a builder dispute, cost overrun, or other issue, some lenders may consider rescue or completion finance. The Five Dock case study on this site is one example of how this type of situation can sometimes be resolved, though every scenario is different.
These are illustrative situations only. They do not mean that non-bank or private finance is automatically appropriate, or that it would be available in every case.
How Non-Bank and Private Lenders Typically Assess Construction Deals
Understanding how these lenders assess deals is useful context, regardless of whether they turn out to be the right fit for a particular project.
Gross Realisation Value (GRV). Many non-bank and private lenders assess loan size against the projected end value of the completed development, as determined by an independent valuer, rather than the cost of construction. This is referred to as gross realisation value lending. Depending on the lender, loans may be sized at 60 to 70% of GRV. This approach differs from total development cost (TDC) based lending, which anchors the loan to what the project costs to deliver rather than what it will be worth. Each method produces a different borrowing capacity, and the appropriate method depends on the deal and the lender.
Exit strategy. Non-bank and private lenders place significant weight on how and when they will be repaid. A clearly defined exit, whether that is a property sale or a refinance into a longer-term facility, is an important part of how these deals are assessed.
Project feasibility. Plans, permits, builder credentials, and construction budgets are all considered. The underlying viability of the project matters, regardless of the lender type.
Security quality. The property used as security, its location, and the level of existing debt on it all factor into the assessment.
Income verification requirements vary. Some non-bank lenders require low doc or alt doc evidence. Others, particularly in private lending, may lend on a no doc basis where the loan is assessed entirely on the security and project quality. This does not mean income is irrelevant; it means the lender has assessed the risk differently and priced accordingly.
Considerations Borrowers Should Weigh Up
Non-bank and private construction finance is not without trade-offs. Any borrower exploring this as one of their options should factor the following into their thinking.
Cost of capital. Non-bank lenders typically carry higher interest rates than major banks, and private lenders higher again. This reflects the additional risk these lenders take on by working with deals that fall outside standard criteria. Depending on the project timeline and exit strategy, this cost may or may not be manageable. It requires careful assessment.
Loan term length. Private construction loans are generally short-term facilities, typically 12 to 24 months. They are designed around a defined construction and exit timeline, not as long-term funding solutions. Borrowers need a credible plan for what happens at the end of the term.
Fees and establishment costs. These vary across lenders and deals. Understanding the full cost of a facility, not just the interest rate, is important when comparing options and assessing project feasibility.
Not all projects will qualify. Flexibility in credit assessment does not mean unlimited appetite for risk. Lenders still apply their own criteria, and projects with weak feasibility, limited security, or no clear exit may not meet the requirements of any lender in this space.
These are not reasons to avoid non-bank or private lending. They are simply the factors that need to be understood and assessed honestly before any decision is made.
The Importance of Exploring All Options
The most important thing any borrower can do before committing to a construction or development finance facility is to understand the full range of options available to them.
A major bank facility at a lower rate may be achievable with the right structure and preparation. A non-bank lender may offer something that a bank cannot. A private facility may be the only option given a particular project's timeline or the borrower's circumstances. Or a combination of approaches may be needed across different stages of a project.
No lender type should be dismissed or defaulted to. Every deal is different, and the best outcome comes from assessing what is actually available and most appropriate for that specific situation.
How Settled Funding Group Can Help
Settled Funding Group works across the full spectrum of construction and development finance. We have relationships with major banks, tier 2 and tier 3 non-bank lenders, and private lenders, and we assess each deal across the full panel to identify what options may be available.
We can assist you to source capital from $200K to $15 million to complete your build, drawing on a lender panel of 90+ bank, non-bank, and private lenders.
We do not favour any lender type. Our role is to understand your project and your circumstances and help you navigate the options that are genuinely available to you. If you have a construction or development project and want to understand what may be possible, speak to Settled Funding Group.
