Finance · Australia
Commercial Private Credit in Australia — How It Works, What It Costs, and When to Use It
How commercial private credit works in Australia — who provides it, how deals are assessed, what it really costs, and when it may (or may not) be the right tool.
Quick answer
Commercial private credit is funding provided outside traditional bank lending channels, often secured by commercial property or other business assets. In property-backed transactions, lenders typically focus heavily on security, leverage, transaction purpose and the credibility of the proposed exit.
Why Private Credit with OzyLoans
- First and second mortgage scenarios considered
- Time-critical settlements routed to suitable lenders
- Banks, non-banks and private credit on one panel
- Exit strategy engineered before settlement
Who this may suit
Private credit generally suits borrowers with a strong asset and a clear exit whose scenario doesn't fit bank timing or policy — time-critical settlements, incomplete financials, ATO or credit-history complications, transitional assets, or facilities maturing faster than a bank can refinance.
It is generally not the cheapest form of capital available, but it may provide greater speed and structural flexibility where conventional bank policy or timing does not suit the transaction.
It is a tool for executing a plan, not for deferring one. The section on risks below covers when private credit is usually the wrong answer.
Who provides commercial private credit
Private credit in Australia is written by private credit funds pooling wholesale investor capital, family offices, high-net-worth syndicates and specialist non-bank originators.
Mandates differ materially. Some lenders only write first mortgages at conservative gearing; others accept second mortgages, caveats or mezzanine positions at higher pricing. Matching the scenario to the right mandate — rather than shopping a single term sheet — is most of the work.
First and second mortgages, senior and subordinated debt
First-mortgage private credit generally sits at the senior end of the capital stack and is typically priced below subordinated private debt, subject to lender, security and transaction risk. Second mortgages and caveat facilities rank behind existing debt, carry more risk for the lender, and price accordingly.
Priority position drives almost everything: the advance available, the pricing, the conditions and the appetite. A clean first mortgage over a saleable asset is a very different proposition to a second mortgage behind an unsupportive senior lender — even on the same property.
For maturing second-mortgage facilities specifically, see caveat and second-mortgage refinance.
Term, and how interest is paid
Private credit terms are usually measured in months, not decades — commonly 1–24 months depending on lender and purpose. The facility is designed around an event that repays it, not around long-term amortisation.
Some private-credit facilities may allow interest to be paid monthly, prepaid or capitalised, depending on the lender and transaction. Where interest is capitalised or prepaid, it can materially reduce the borrower's net proceeds at settlement. That trade-off is covered in the net proceeds section below.
What private lenders assess
Many private lenders place significant weight on the realisable value of the security and the credibility of the exit, while still assessing the borrower, purpose, leverage and overall transaction risk.
- Security quality and saleability — how quickly and cleanly the asset could realistically be sold
- Priority position — first mortgage, second mortgage or caveat
- Exit strategy — how, specifically, the loan ends (what makes an exit credible)
- Valuation support — an independent valuation on an appropriate basis
- Borrower and sponsor position — track record, contribution and conduct
- The story — why this loan, why now, and why the timeline is realistic
LVR and valuation
Advertised LVR maximums are a ceiling, not a promise. The actual advance depends on the valuation basis, the asset's liquidity and location, the priority position and the certainty of the exit — and it varies by lender and transaction.
Valuation basis matters as much as the number: an “as-is” value, a forced-sale range and an “on completion” value can differ materially for the same asset. Private lenders typically lend against the basis that matches their risk, not the most optimistic figure.
When a valuation comes in below expectations, the usual outcome is a lower advance or a restructured deal — additional security, a smaller facility or a revised exit — rather than an automatic decline.
Fees and the all-in cost
Private credit pricing is more than the headline rate. Facilities commonly involve establishment fees, legal and valuation costs, and in some cases line or commitment fees, extension fees and default-rate provisions.
The number that matters is the all-in cost over the realistic life of the loan — including what an extension would cost if the exit slips. Exact fees and their treatment vary by lender and transaction. How OzyLoans is remunerated is disclosed in our Credit Guide.
Net proceeds: the number that matters
If interest is capitalised or prepaid, the lender holds it back within the facility limit. A $1,000,000 facility does not deliver $1,000,000 in cash — after prepaid interest and costs, the usable amount at settlement can be materially lower. Always model the net cash, not the headline limit.
If the transaction needs $900,000 in cash to complete, the facility above doesn't get there — and discovering that at settlement is expensive. Working backwards from the required net proceeds to the facility size is one of the most valuable pieces of structuring done before any application is lodged.
| Facility limit | $1,000,000 |
| Less capitalised / prepaid interest (indicative) | − $100,000 |
| Less establishment fee (indicative) | − $20,000 |
| Less valuation, legal and other permitted costs (indicative) | − $10,000 |
| Indicative net proceeds at settlement | $870,000 |
Indicative example only, using round figures for illustration. Exact deductions and their treatment vary by lender and transaction — not every lender calculates or deducts these costs in the same way.
Borrower contribution and the exit
Even in asset-led lending, private lenders generally expect the borrower to have genuine equity in the outcome — real contribution, additional security or demonstrable value in the transaction. It aligns interests, and it matters at credit.
Every private facility is approved with an exit in mind: a refinance to longer-term debt, a sale, or completion of a project. The exit is scrutinised harder than the entry — what makes an exit strategy credible to a private lender covers this in detail. Where the plan is a bridge between two positions, see bridging finance; where the funds build something, see development funding.
In private credit, the credibility of the exit can be as important as the value of the security itself.
Key risks — and when private credit may not be appropriate
Private credit is usually the wrong tool when the exit is speculative, when the all-in cost erodes the economics of the transaction, when a bank could realistically fund within the available time, or when expensive short-term debt is being used to defer a decision rather than execute a plan.
OzyLoans routes enquiries across banks, non-banks and private credit — the team's banking background means scenarios are assessed the way a credit desk assesses them, and private credit is recommended only where it is genuinely the right tool. This page is general information only and doesn't take your circumstances into account; all finance is subject to lender assessment and approval.
- Extension and default pricing can escalate quickly if the exit slips
- Capitalised interest compounds against remaining equity the longer the facility runs
- A facility sized to the headline limit rather than net proceeds can leave a funding gap at settlement
- Exits dependent on a single buyer, an unexchanged sale or an unevidenced refinance carry real risk
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Frequently asked
What is commercial private credit?+
Funding provided outside traditional bank lending channels, often secured by commercial property or other business assets. It's commonly used where timing, structure, leverage or credit complexity doesn't fit bank policy. Terms vary by lender, security and transaction.
How fast can private credit settle?+
Materially faster than bank finance in most cases — private lenders can move quickly once valuation and legals are in hand. Actual timing depends on the lender, the security, the state of the title and how prepared the borrower's information is.
Why can private-credit pricing be higher than bank finance?+
Private lenders fund faster, accept more structural complexity and rely more heavily on the security and exit than on demonstrated servicing. That risk and speed is reflected in the pricing — which is why the all-in cost should always be weighed against what the speed or flexibility is actually worth in the transaction.
What security do private lenders take?+
Most commonly a registered first or second mortgage over real property, sometimes supported by caveats, general security agreements or guarantees. The security package varies by lender, priority position and transaction.
How does capitalised interest affect net proceeds?+
Capitalised or prepaid interest is retained inside the facility limit, so the cash available at settlement is the limit less interest and costs. The worked example above shows the logic — always confirm net proceeds before committing, as treatment varies by lender.
When might private credit be unsuitable?+
When the exit is uncertain, when the cost outweighs the benefit of speed, when a bank could fund within your real deadline, or when the loan defers a hard decision instead of executing a plan. It is a short-term execution tool, not long-term debt.