A private loan can settle a site purchase before a competing buyer moves, fund head works while pre-sales build, or release equity to cover a tax liability. But speed should not mean signing the first term sheet put in front of you. This private lender review checklist helps Australian business owners, investors and developers assess whether a proposed facility is genuinely fit for purpose – not merely available.

Private credit is often assessed differently from a bank loan. The lender may place greater weight on the quality and available equity in the security property, the exit strategy and the commercial logic of the transaction. That flexibility can be valuable where bank policy, timing, impaired credit or an incomplete project has stalled a deal. It also makes the detail of the offer matter more.

Start with the purpose and the exit

Before reviewing a lender, define the transaction in plain terms. What must the funds achieve, how much is required, when is it required, and what repays the loan? A clear answer prevents a common problem: taking a short-term facility for a longer-term funding gap with no realistic refinance or sale pathway.

For example, a six-month caveat loan may suit a business awaiting settlement on a property sale. It is less suitable for funding a development that still needs planning approval, construction finance and a lengthy sales campaign. A second mortgage may release equity for working capital, but the first mortgage repayment must remain manageable throughout the loan term.

Your exit might be a sale of retained stock, a bank refinance after financials improve, construction completion and settlements, or a confirmed capital injection. It needs to be more than an intention. Review the dates, contingencies and evidence supporting it. If an exit depends on FIRB approval, a valuation uplift or future pre-sales, allow for delay and consider an alternative pathway.

Private lender review checklist: assess the offer

A competitive headline rate is only one part of the decision. Review the full economics, the security position and the conditions that control access to funds.

  • Loan amount and leverage: Confirm the approved amount, the lender’s valuation basis and the loan-to-value ratio. Ask whether the LVR is calculated against a current as-is value, a completion value or a conservative forced-sale assessment. For development funding, establish whether the lender will include interest, construction costs and contingency within the facility.
  • Interest, fees and total cost: Identify the interest rate, whether it is paid monthly, prepaid, capitalised or retained, and whether the rate can change. Add establishment fees, legal fees, valuation costs, line fees, risk fees, extension fees and discharge costs. A lower rate can be outweighed by a high upfront fee or retained interest that reduces the cash available at settlement.
  • Term and extension rights: Check the exact maturity date rather than relying on a stated six or 12-month term. Understand whether an extension is available at the lender’s discretion, what it costs and what conditions must be met. Extension fees are particularly relevant where the exit is tied to construction completion or property sales.
  • Security and priority: Establish whether the lender requires a first mortgage, second mortgage, caveat, general security agreement, director guarantee or another form of security. With a second mortgage, review the first mortgage balance, repayment obligations and whether the senior lender must consent. Security that appears straightforward can become restrictive if multiple properties, cross-collateralisation or broad guarantees are involved.
  • Drawdown conditions: A facility limit is not the same as accessible cash. For a construction or development loan, check what must be supplied for each drawdown: quantity surveyor reports, invoices, progress certificates, revised feasibility figures or presale evidence. Delays in drawdowns can create contractor and supplier pressure even where the facility is technically approved.
  • Default provisions: Read the events of default carefully. These may include missed interest, expired insurance, a material change in circumstances, incorrect representations or a breach of another finance agreement. Ask what default interest applies, when it starts and what enforcement rights the lender has. The objective is not to expect failure; it is to know the consequences if the project runs late or cash flow tightens.
  • Settlement certainty: Ask who is making the credit decision, whether approval is fully credit-approved or indicative, and what remains outstanding before settlement. A term sheet subject to valuation, legal review and lender committee approval is not a guaranteed settlement. This distinction matters when a deposit is at risk or a vendor deadline is close.

Look beyond the lender’s headline claims

A lender’s appetite should match the deal, not just the asset class. One private lender may be comfortable with a first mortgage over a commercial warehouse and a simple refinance. Another may specialise in residual stock, land banking, incomplete developments or mezzanine finance. Neither is automatically better. The right fit depends on the risk profile, loan size, timeframe and exit.

Ask direct questions about comparable transactions. Has the lender funded second mortgages behind a bank? Will it consider a company or trust borrower with a prior credit issue? Does it support regional security? Is it prepared to lend against vacant land, specialised property or an asset still requiring works? Clear answers are more useful than broad statements about flexible funding.

It is also worth understanding who is involved. Some funders lend from a mortgage fund or institutional capital source, while others rely on private capital. This does not determine quality on its own, but it may affect approval speed, loan size, documentation requirements and the capacity to fund staged drawdowns. Confirm the identity of the proposed lender before signing final documents and ensure the parties, security and payment instructions are consistent across the term sheet and legal paperwork.

Test the valuation and feasibility assumptions

Property-backed finance is only as reliable as the assumptions supporting it. If the lender relies on a valuation, ask for clarity on the value adopted and any qualifications that may restrict the loan amount. A valuation based on completion, leasing or subdivision may depend on assumptions that are not yet achieved.

Developers should pressure-test the feasibility. Allow for construction cost increases, selling costs, holding costs, interest during delays and a softer end value. Where development funding includes a contingency, confirm who controls it and the circumstances in which it can be released. A facility that works only under the original feasibility is not providing much margin for a live project.

Business borrowers should take the same approach to cash flow. If interest is payable monthly, identify the source of each payment. If it is capitalised, calculate the debt at maturity rather than focusing solely on the day-one advance. This is particularly relevant for bridging finance where a sale is expected but not yet unconditional.

Use advice and compare like for like

Private finance documents are commercial contracts secured against significant assets. Have your solicitor review the loan agreement, mortgage, guarantee and any priority deed before execution. They can explain the practical effect of enforcement provisions, guarantees and cross-default clauses. Your accountant or financial adviser may also help test tax treatment, entity structure and the capacity to service interest.

When comparing quotes, use a single worksheet that shows net funds at settlement, total expected cost, security required, maturity date, repayment method, drawdown restrictions and exit assumptions. This makes it easier to compare a first mortgage against a second mortgage, or a lower-rate offer with larger retained interest against a higher-rate facility that provides more usable funds.

A broker can add value where they understand both the transaction and lender appetite. No Doc Loans can assess business-purpose property and asset finance requirements across a broad private-lender panel, helping borrowers test structures rather than relying on one initial quote. The key is still transparency: you should understand the recommended lender, the proposed structure and why it suits your circumstances.

Know when to pause

Urgency is real in property and business. A settlement date, an ATO payment arrangement, wages or a construction programme may leave little room to manoeuvre. Even so, pause if key figures are missing, the exit is vague, the lender will not explain fees, or documents differ materially from the agreed term sheet.

The right private facility should give your transaction room to move, not create a more expensive problem at maturity. Ask the difficult questions before settlement, keep the exit plan active throughout the term, and make sure every dollar of the proposed loan has a clear commercial job to do.