What is non-bank lending?
Non-bank lending refers to finance provided by institutions that are not authorised deposit-taking institutions (ADIs) — that is, they are not traditional banks. In Australia, non-bank lenders operate under the regulatory framework set by ASIC and, in some cases, hold an Australian Financial Services Licence (AFSL) or an Australian Credit Licence (ACL).
Unlike banks, non-bank lenders do not accept deposits from the public. Instead, they source capital through wholesale investors, private credit funds, or institutional funding lines. This structure allows them to assess and fund transactions that may not meet the specific criteria applied by traditional banks — even where the underlying credit quality is sound.
Why are borrowers turning to non-bank lenders?
The Australian property finance market has evolved significantly over the past decade. Regulatory changes — including the introduction of stricter capital adequacy requirements and tighter lending standards under APRA’s oversight — have led many banks to narrow the scope of their property lending, particularly in construction and development finance.
This has created a gap in the market. Not all projects or borrowers that meet sound credit criteria align with the lending policies of major banks. Non-bank lenders fill this gap by applying their own documented assessment criteria, independent valuations, and risk-based pricing to assess each application on its individual merits.
How non-bank lending supports property development
For property developers, the key advantages of non-bank lending typically include faster turnaround times on credit decisions, direct engagement with experienced decision-makers, and a willingness to consider project-specific factors that may fall outside standardised bank assessment models.
Loan sizes in the non-bank sector can range from several hundred thousand dollars to tens of millions, with terms generally structured between 12 and 24 months. Security is typically provided by way of a registered mortgage over Australian real property, with loan-to-value ratios assessed conservatively.
The role of non-bank lending in the broader market
Non-bank lenders now represent a meaningful part of Australia’s property finance ecosystem. According to industry estimates, non-bank lending accounts for a growing share of commercial real estate debt — a trend that reflects both the structural changes in banking regulation and the increasing professionalism of the non-bank sector.
For wholesale investors, non-bank lending funds offer exposure to property-backed credit with the potential for regular income, typically distributed monthly. For borrowers, they offer an alternative pathway to capital that complements, rather than replaces, the traditional banking system.
Related resources from Granor Capital
Learn more about how non-bank lending compares to bank lending for property developers, or explore Granor Capital’s lending services for construction and development finance across Australia. If you’re a wholesale investor, find out how pooled mortgage funds work and how non-bank lending generates returns for investors.
This article is provided for general information purposes only and does not constitute financial advice. Readers should seek independent professional advice before making any financial decisions.
