Australian banks decline commercial loan applications for reasons thatfrequently have nothing to do with the credit quality of the applicant, and understanding why determines whether the same application is likely to succeed elsewhere, or whether you need to consider an alternate path, like private credit lenders.

The most common causes include:

  • Sector appetite: where a bank has closed orrestricted lending to sectors such as construction, hospitality, developmentfinance or any other category they choose, regardless of individual borrowerquality; serviceability calculated on standardised metrics that penaliseseasonal, lumpy or transitional cash flow;
  • Security: he security provided that fallsoutside bank policy, including partially complete assets, specialised propertyand businesses whose value sits in areas such as contracts rather than realestate;
  • Compliance and conduct: a history of loanpayments in arrears, tax debt or tax lodgement gaps, director penalty notices,prior liquidations or bankruptcy of directors; and
  •  Timing: the credit process cannot produce ananswer inside the transaction deadline.

A serviceability decline from a bank can often be addressed byrestructuring the request or presenting the financials and other supportingdocuments properly, whereas a sector appetite decline will not be reversed atthat bank at any price or on any presentation.

The market that exists beyond the banks has grown substantially, drivenby regulatory capital requirements that make bespoke and higher risk lendingexpensive for banks to hold. ASIC's independent review of the sector, published as Report 814 in September 2025, estimated private credit in Australia ataround $200 billion in assets under management. The RBA's estimates this is much lower, with credit outstanding that was facilitated by asset managerstotalling around $50 billion as at December 2025.

 

How is a Loan from a Private Credit Lender Different?

A non-bank lender in the senior secured space typically takes the samefirst ranking security a bank would take, over the same asset classes, at comparable or slightly higher leverage. The differences between banks and non-bank lenders lies in process and price. Beyond senior secured lendingsits stretch senior and mezzanine facilities, which fund above conservativesenior parameters at higher rates, and special situations capital, for transactions involving complexity, urgency or borrower distress.

Pricing in private lending reflects the lender's cost of capital, therisk position, the lenders expertise in certain sectors and the speed of execution. Warehouse funded non-bank lenders may carry a blended cost ofsenior, mezzanine and equity capital that banks funded by deposits do not.

What borrowers weigh when deciding whether a loan from a private creditlender will suit their business, is the cost of that capital against the costof the alternatives available to them, which may include raising equity,deferring the transaction, or accepting the consequences of inaction. That assessment is a commercial decision for each business and its own advisers.

Current financial information, including management accounts, accountant preparedor audited historical financials, aged debtors and creditors and tax portalrecords, will determine the speed at which the lender can make their credit assessment. Disclosure of adverse history before it is discovered preserves credibility, since undisclosed mortgages, caveats, PPSR registrations, tax in arrears,failure to lodge activity statements, and related party arrangements are the most common cause of files failing after commencement.

How the borrower intends to exit the facility determines whether afacility is written at all. Private credit lenders will ask if the borrowerintends to refinance to a major bank and whether there has been any positive discussions with any lenders, whether an asset will be sold to payout the loan,whether the company will refinance with another private lender, will the lender need to wait for project completion and the sale of property or will amortisation from cash flow be sufficient to pay down the entirety of the loan over time. Facilities written without a documented exit rely on conditions continuing topermit repayment, and lenders applying proper credit discipline decline them.

The frequent sequence in a business loan funded outside the banks is that the facility funds a transition the bank could not, the business executes against the plan, and the exposure refinances back to a bank at lower pricing once the credit profile supports it.

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Sources

●       ASIC, REP814 Private credit in Australia (September 2025):https://download.asic.gov.au/media/z2tnnasb/rep814-published-22-september-2025.pdf

●       RBABulletin, Recent Changes in Credit Markets (February 2026):https://www.rba.gov.au/publications/bulletin/2026/feb/recent-changes-in-credit-markets-and-their-implications-for-monetary-policy.html

●       RBABulletin, Growth in Global Private Credit (October 2024):https://www.rba.gov.au/publications/bulletin/2024/oct/growth-in-global-private-credit.html

●       GlobalLegal Insights, Private Credit Laws and Regulations 2026, Australia:https://www.globallegalinsights.com/practice-areas/private-credit-laws-and-regulations/australia/

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