MFAA, Pepper Money, LMG and Simplicity give the lowdown
A lot has been written in MPA about private lending lately, but it seems the swiftly growing sector is on the Mortgage and Finance Association of Australia (MFAA)’s radar too.
The industry body’s National Equipment and Commercial Finance Forum (ENCF) has voiced a rallying cry for brokers tapping private credit, warning them that the benefits also come with substantial risks and complexities.
“Brokers are leveraging private lending solutions to address specific client needs, such as non-conforming loans or funding gaps for property transactions,” said MFAA chief executive Anja Pannek.
“As traditional lenders pull back due to regulatory and economic pressures, demand for credit hasn’t gone away – and that’s where the flexibility of private lending is proving its value.”
However, the MFAA also warned that many private lenders operate under lighter regulatory frameworks. This has prompted the Australian Securities and Investments Commission (ASIC) to ramp up its scrutiny over the sector.
Read more: The growing legitimacy and persistent risk of private credit
While private credit comprises just 2.5% of overall business lending (per Reserve Bank of Australia data), it is growing faster than other forms of business, having grown just under 10% in 2024.
Clare George, mortgage aggregator LMG’s associate director commercial and ENCF Forum member, said that the sector's growth comes off the back of increasingly risk-averse banks.
“Following the GFC (Global Financial Crisis) and the Banking Royal Commission, banks became subject to stricter capital adequacy requirements and more conservative lending practices,” said George. “Private credit providers have stepped in, offering tailored loan structures, flexible repayment terms, and faster execution times.”
Understanding the differences
There is often confusion about the distinction between private and non-bank lending.
Jean-Pierre Gortan (pictured), managing director of Simplicity Loans & Advisory and ENCF forum member, said: “Non-bank lenders are institutional in nature. They're regulated, have formal credit policies, and often resemble banks in their operations.
“Private lenders, on the other hand, can range from high-net-worth individuals to boutique funds. They are less regulated, more nimble and often priced for risk. That flexibility is an advantage, but it demands more caution.”
According to non-bank lender Pepper Money, further distinctions include:
|
Feature |
Private Lender |
Non-Bank Lender |
|---|---|---|
|
Who they are |
Individuals or small private groups |
Licensed financial institutions (but not banks) |
|
Examples |
Wealthy individuals, SMSFs, private investors |
|
|
Scale |
Small to medium |
Medium to large |
|
Regulation |
May not be formally regulated, especially if lending is occasional |
Regulated by financial authorities (e.g., ASIC in Australia) |
|
Licensing |
May not require a credit license (depending on activity and structure) |
Must hold an Australian Credit Licence (ACL) |
|
Consumer Protections |
Limited or none |
Must comply with responsible lending laws and consumer protections |
|
Capital Source |
Personal or pooled private funds |
Institutional capital, securitisation, wholesale funding |
|
Loan Volume |
Typically lower |
Can fund large volumes of loans |
|
Loan Types |
Short-term, bridging, asset-backed, niche loans |
Home loans, personal loans, car loans, asset finance, commercial real estate, SMSF |
|
Flexibility |
Case-by-case terms |
Structured products with flexibility in terms/features of the loan |
|
Speed |
Very fast (can approve in hours) |
Fast, but with more formal processes |
|
Interest Rates |
Higher (to offset risk) |
Competitive, generally only slightly higher than banks due to cost of funds |
|
Risk Profile |
Higher risk tolerance |
Moderate risk tolerance |
|
Borrower Type |
Often unconventional |
Near-prime, self-employed, or non-standard borrowers, credit impaired (specialist) |
|
Best for |
Unique, urgent, or high-risk scenarios |
Borrowers who don’t qualify for banks but want structured products and options close to a bank solution |
|
Main Advantage |
Speed and flexibility |
Broader product range and regulatory protection |
|
Main Disadvantage |
Higher cost, less oversight |
Less flexible than private lenders |
Private lenders don’t always hold an Australian Credit Licence (ACL), George said. As such, they may not be bound by the National Consumer Credit Protection (NCCP) Act.
This makes due diligence extremely important, said experts. But what should brokers look out for?
According to the ENCF, the following checks should be made:
- Vet the lender thoroughly – investigate their track record, dispute processes (e.g. AFCA membership), and funding stability
- Check documentation carefully – watch for hidden fees, one-sided clauses, and rollover conditions
- Clarify the total cost – consider not just interest, but all associated fees and charges
- Ensure client understanding – explain the risks and lack of consumer protections and get written confirmation
- Document everything – for a residential loan, how the loan meets the client’s needs under Best Interests Duty
- Plan for an exit strategy – evaluate the client’s ability to repay or refinance.
- Consult your aggregator – if a lender is off-panel, apply extra scrutiny and seek support
“Education is key. Brokers must go beyond the surface, ask the right questions, and never assume a loan structured as business credit removes consumer Protections,” George said.
“ASIC's focus is increasing, and brokers should expect more oversight. The best way to prepare is to hold yourself to the highest standard.”
