Private lender or bank: who should I ask first?

Why do banks and private lenders behave so differently?

Because they’re built differently. Banks lend large volumes under tight, standardised policies. That makes them good at straightforward deals and not so good at anything outside the lines. business.gov.au notes that non-bank lenders offer similar products with potentially more flexible approval criteria — and often at higher cost. That one sentence captures the whole trade-off.

A private lender can look at your situation as a whole: the property you’re offering, the reason you need the money, the event that will repay it, and why your file looks the way it does. It’s less “does this fit the box?” and more “does this make sense?”

When should I ask the bank first?

Mr’s honest view: if all of these are true, start with your bank.

• You’ve traded for a couple of years or more.
• Your financial statements and tax returns are current.
• Your BAS is lodged and your ATO account is clear or on a plan.
• Your credit file is clean.
• You’re not under time pressure.
• The loan purpose fits the bank’s appetite.

A bank is often the cheapest money available for a clean file. It may also be the slowest and most document-heavy. That’s fine when you have time.

When does a private or non-bank lender make more sense?

• The bank said no. Often for policy reasons — industry, trading time, a credit blemish — rather than because the deal is unsound. Read why business loans get declined to work out which.
• Time is tight. A settlement date, an ATO deadline, a supplier offer that expires Friday.
• Financials are missing or out of date. Private lenders may lean on bank statements, BAS and security instead.
• The file is untidy. ATO debt, defaults or a past insolvency are considered case by case rather than screened out.
• The need is short. A bridge until a sale, refinance or big payment lands.
• You need security-based lending. Equity in residential or commercial property can carry much of the weight.

How do they compare?

	Bank	Private / non-bank lender
Policy	Standardised, strict	Flexible, case by case
Paperwork	Full financials common	Often bank statements, BAS, security
Speed	Can be weeks	Often quicker
Untidy files	Frequently declined	Considered on their merits
Price	Often lower for clean files	Usually higher, reflecting flexibility
Good for	Long-term, low-risk borrowing	Bridging, untidy or time-critical needs

Mr doesn’t quote rates for either, because the real price depends on your circumstances. What matters is the total cost in dollars and whether the loan solves the problem — our page on what a business loan actually costs shows how to compare.

Can a private loan be a stepping stone?

Yes, and that’s often the smartest use of one. An illustrative example: a Logan electrical contractor has a large ATO debt and a bank that won’t lend until it’s cleared. A secured private loan over the director’s home clears the debt and stops the interest building. Twelve months of clean trading and lodgements later, the business refinances to its bank at a lower cost. The private loan did a specific job, then stepped aside.

The key is an exit plan from day one. Before taking short private money, write down how and when it gets repaid or refinanced.

Does applying to both hurt my credit?

It can. Each formal credit application can leave an enquiry on your file, and a cluster of them in a short time can make the next lender nervous. That’s why working out the likely route first matters. Enquiring with Mr doesn’t touch your credit file — see whether asking about a loan hurts your credit score.

What should I ask any lender before applying?

Whichever door you choose, a few questions sort the good fits from the poor ones quickly:

1. Do you lend to businesses like mine? Industry, structure, trading time and location all matter to policy.
2. What will you need from me? A clear document list up front saves days.
3. How long does your process usually take for a loan like this, from complete application to settlement?
4. What security and guarantees would you expect?
5. What are all the costs, not just the headline price?
6. What happens if I want to repay early?

If a lender can’t answer these plainly, that tells you something too. Our guide to the questions to ask before signing a loan offer goes further once an offer is on the table.

Does the size of the loan change who to ask?

It can. Very small amounts are often quicker through an unsecured lender that specialises in them. Very large, straightforward property-backed loans may be cheapest through a bank if your file suits its policy. The middle ground — larger amounts with an untidy file or a tight deadline — is where private lenders tend to earn their keep. A specialist who knows the market can tell you which part of it your request falls in.

Which door should you knock on?

If you’re not sure, let a real person look before you apply anywhere. Tell Mr about your situation in 60 seconds — the amount, purpose, property, timing and any ATO or credit issues. There’s no credit check to enquire, your details stay with one specialist instead of being sprayed across lenders, and you’ll hear straight whether your bank is the better first stop or a private lender fits. Honest answers on the form get you the right door the first time. Ask Mr now.