Private funding loans are a specialist form of finance in Australia. They are provided by the private lending market. They are also known as private loans, private mortgages, or non-bank loans. Read on to find out:

  • What private funding loans are.
  • Who they are designed for.
  • Key differences between private funding loans and traditional loans from banks, building societies and credit unions.
  • How private funding loans work.


At DFS, we are private funding specialists. We help business clients to get quick, hassle-free finance from our panel of private lenders.


What are private funding loans?

Private funding loans are provided to businesses by private individuals or other private, non-traditional lenders. In other words, it’s finance that isn’t provided by a bank, credit union, building society or other financial institution.

Who are private funding loans designed for?
They are ideal for business owners who may not be able to meet the strict approval criteria of traditional lenders.

  • Property developers/investors.
  • Builders.
  • Business people with a bad credit history who need more working capital.
  • Entrepreneurs who need access to quick capital to exploit an opportunity.


As you can see, they can be used for a range of business purposes. They also have some key differences and benefits over traditional loans in Australia.


The key differences between private funding loans and traditional loans

There are key differences between private funding loans and the traditional loans offered by banks, building societies and credit unions.


Private Funding Loans Traditional Loans
No credit checks Strict approval criteria including credit checks
Bad credit history OK Need a good credit history
Fast approval time Longer approval time
For business purposes only For both individual and business purposes
Available for very short terms if necessary (e.g. months) Very short terms not as readily available
Suitable for self-employed Less suitable for self-employed
Flexible repayment terms and conditions to suit your business cash flow Strict repayment terms and conditions


As you can see, private funding loans can provide you with many benefits. That’s why it’s a fast-growing sector of the Australian lending market.


How do private funding loans work?


Private funding loans require you to provide your property as collateral security for the loan. This removes the need to check your credit score and allows for quicker approvals. If you don’t make your repayments, the lender can repossess your property to recoup the amount you owe.


Traditional loans may (or may not) have property as security. Either way, a traditional lender will check your credit score as part of assessing your application. This score is compiled by credit reporting agencies in Australia like illion. The higher the score, the better. Your score is based on several factors, including those listed below.

  • Whether you’ve made all your credit repayments on time for up to the last seven years. If you haven’t, your score will be reduced.
  • How much other debt you currently have.
  • How many credit applications you’ve made. If you’ve made a lot of applications and had them declined by traditional lenders, this will negatively affect your credit score.


Even if you can provide property as security, a traditional lender may still decline your application if you have a bad credit score.

Private funding loans are legal contracts just like loans from traditional lenders are. That means both you and your lender have contractual rights and obligations. It’s worthwhile to have the contract checked by a legal professional before you sign so that you understand it. If you’re not sure about anything, ask.


Private funding loans can also be principal and interest loans or interest-only loans, just like traditional loans can. Different private lenders will have different maximum loan-to-value ratios (LVRs) that they are prepared to accept. An LVR is the value of your loan expressed as a value of the property that secures it. For example, some private lenders may be prepared to lend you up to 90% of the value of your property.


The bottom line


The most suitable private funding loan for you will depend on your individual circumstances as well as your business goals.

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