Private Credit Loans: Broker Assessment Guide

Private investor loans fund a borrower through a private individual, fund or other non-bank provider. For a business or property proposal, assess the actual lender, security, net funds, total cost and repayment exit before your client commits.

A large facility limit can leave much less cash available after existing debt, fees and retained interest. The borrower also needs enough money to repay the full debt when it falls due.

Clarify Which Side of Private Credit Applies

Private credit is non-bank lending, with this guide focused on the borrower’s business or property facility. The Australian Securities and Investments Commission (ASIC) uses a broad non-bank, non-consumer scope in Report 814: Private Credit in Australia. Its market assessment includes corporate lending, asset-backed lending and real estate, with substantial exposure to real estate finance.

“Private investor loans” can also mean investing money in a credit fund. A borrower receives funds and owes repayments. A fund investor supplies capital and takes investment risk.

This guide assesses the borrower’s loan. Fund returns, distributions, investor eligibility and investment suitability require a separate investment assessment.

ASIC’s Report 820: Private Credit Surveillance examines retail and wholesale fund practices. Its findings about fund valuations or investor disclosures don’t determine whether an individual borrower’s facility suits their needs. For the reports and warnings, read the ASIC private credit warning guide.

Start a generic private finance enquiry by asking who borrows, what the money pays for and what secures repayment. A private commercial mortgage or working-capital facility belongs in this business assessment. Personal-purpose finance follows the private-loan purpose and assessment guide.

A residential investment property’s loan purpose still needs the investment property loan assessment. Private funding describes where the money comes from, while investment-property lending describes what the borrower does with it.

Identify the Lender and Decision Makers

Identify the legal lender in the proposed documents and record who can approve, fund or change the loan. A brand, introducer or broker may have a different role from the entity lending the money.

Party	What to record	Evidence to retain
Legal lender	Full legal name and capacity, including any trustee capacity	Facility agreement and entity record
Fund or investing entity	Source of committed capital and its role in the transaction	Written funding structure and commitment conditions
Arranger	Who structures the proposal and earns arrangement fees	Engagement terms and fee schedule
Servicer	Who collects payments and handles statements or arrears	Servicing appointment or contact confirmation
Broker	Who acts for the borrower and how they are paid	Credit or commercial-finance engagement and remuneration disclosure
Beneficial decision maker	Person, investor or committee that ultimately controls approval, including anyone acting behind the named intermediary	Written approval authority and outstanding approval conditions
Document authority	Who can issue binding terms, approve an extension or vary the agreement	Delegation or authority confirmed by the lender

Use ASIC’s registers to match entity names and relevant professional authorisations. Record the search date, identifier and activity covered. A company registration alone doesn’t establish authority for a regulated credit activity or the capacity to fund the proposal.

Under ASIC’s credit licensing guidance, licensing depends on whether the National Credit Code applies and what activity each party performs. Authorisation under another licensee or an exemption can also affect the answer.

ASIC’s Regulatory Guide 203 distinguishes business-purpose credit from covered consumer credit. Residential investment credit can fall within the Code when its other conditions are met. Have the compliance or legal adviser classify the actual borrower and purpose before relying on a licence or exemption.

Classify Purpose, Structure and Security

Classify the private business loan by its use of funds and the assets exposed if repayment fails. Record the purpose from supporting evidence, including any mixed use, rather than relying on a “business loan” label.

Property acquisition, development, a short commercial bridge and working capital need different repayment evidence. A loan secured by a home can still finance a business purpose. Security alone doesn’t settle the purpose classification.

Create a security schedule from the proposed documents. Include every borrower and guarantor, each property and its owner, existing mortgages, proposed mortgages and any caveat. Add general security interests over business assets, priority arrangements and questions about required consents.

The Personal Property Securities Register covers security interests in personal property, including company assets. Land, buildings and fixtures sit outside that register. Keep property title searches and personal-property searches as separate evidence.

Ask the client’s legal adviser to explain each instrument’s reach, priority and enforcement consequences. A caveat, mortgage and general security agreement need their own legal analysis. A first-ranking commercial mortgage proposal also needs confirmation of the lender’s actual secured position.

For second-ranking security, use the second mortgage assessment. For general private residential lender selection or mortgage refinancing, use the private mortgage lender guide.

If the enquiry starts with “no credit check”, establish purpose and security before choosing the assessment. Once personal purpose is confirmed, follow the personal-loan route. Business or property facilities still need the lender’s stated assessment requirements recorded.

Test Valuation and Available Funds

Reconcile the valuation basis with the debt calculation and the cash the borrower actually receives. An “as is” value assesses the property in its present condition. An “as if complete” value assumes completion, so it cannot describe the same current security position.

Record the valuation date, instructed valuer, assumptions, independence and the lender’s right to rely on the report. Establish whether the lender accepts that report for this facility. Where needed, obtain current quantity-surveyor evidence, a feasibility assessment or other reports accepted for the proposal.

A quantity surveyor assesses construction costs and progress. Keep the detailed project assessment in the development-finance workflow, while recording here which reports the facility relies on.

A high loan-to-value ratio (LVR) private business loan needs a clear numerator and denominator. Record whether the lender’s debt measure includes fees, retained interest and other secured debt. State which property value forms the denominator.

Then reconcile the settlement statement line by line. Start with the gross advance, deduct debt being discharged and every withheld amount, then identify any undrawn limit. Funds reserved for future interest or construction aren’t cash available for today’s purpose.

If net proceeds fall short of the funding need, identify the borrower’s evidenced contribution or revise the facility amount before commitment. Increasing gross debt also changes cost and the exit amount.

Calculate Term and Total Cost

Calculate total cost from the proposed agreement, using its interest method and payment dates. Separate the stated rate from the balance it applies to and whether interest is paid, retained or added to debt.

Compare establishment, management and broker fees, plus legal and valuation costs. Record any minimum interest period, early-exit charge and extension fee. Read default triggers, default interest, compounding and enforcement costs with the client’s legal adviser.

Fictional Example: Net Funds and a Late Exit

This fictional Australian-dollar example illustrates arithmetic only. Its assumed terms belong to no lender, and every amount includes any applicable tax. Assume the full $1,000,000 principal is advanced at settlement for nine months.

Interest is simple at 12% a year on that principal. All nine months of interest are withheld at settlement. There are no management or early-exit fees in this example.

Settlement item	Amount	Treatment
Gross principal advanced	$1,000,000	Full principal owed at maturity
Existing debt discharged	$400,000	Paid from the advance
Establishment and broker fees	$20,000	Withheld from the advance
Legal and valuation costs	$10,000	Paid from the advance
Nine months of retained interest	$90,000	$1,000,000 multiplied by 12% multiplied by 9/12
Net funds for the borrower’s purpose	$480,000	$1,000,000 less all four deductions

The borrower receives $480,000 for the new purpose and owes $1,000,000 at month nine. The $90,000 reserve pays the original term’s interest. Financing costs are $120,000, comprising interest and the $30,000 of fees and costs.

Assume a sale produces $1,100,000 and selling costs are $50,000. Net sale proceeds of $1,050,000 repay the $1,000,000 loan, leaving $50,000.

Now assume the sale settles three months late. For this calculation, the lender and borrower sign a three-month extension before maturity. It charges simple interest on $1,000,000 and a $10,000 extension fee, both payable at the extended maturity.

Extra interest is $30,000, calculated as $1,000,000 multiplied by 12% multiplied by 3/12. With the extension fee, repayment becomes $1,040,000 and total financing costs become $160,000. The same net sale proceeds now leave $10,000.

If the sale price falls to $1,050,000, the assumed $50,000 selling costs leave $1,000,000. The extended loan has a $40,000 repayment shortfall. The borrower needs an evidenced source for that amount.

An extension is a separate approval, so don’t assume these fictional terms apply to a real late repayment. Without an agreed extension, use the actual contract’s maturity and default provisions in the assessment.

Prove the Exit and Fallback

Prove the repayment exit by matching the expected event to the debt due at maturity. A property valuation or the borrower’s intention to refinance doesn’t establish that repayment money will arrive on time.

Exit	Evidence to assess	Stress to test
Sale	Contract status, expected settlement date, selling costs and other amounts paid from proceeds	Later settlement or a lower net sale price
Refinance	Proposed replacement lender, assessed repayment capacity, security value and approval conditions	Reduced lending capacity or unfinished conditions at maturity
Development completion	Completion programme and the proposed sale or refinance repayment	Delayed completion or a funding gap before completion
Trading cash flow	Current accounts, bank statements, cash forecast and amounts required for operating expenses	Slower collections or weaker trading receipts

Calculate a repayment amount for the base case and the delayed or weaker case. Deduct other claims on sale proceeds and normal business expenses before treating money as available for the private loan.

Name a fallback that the client can actually execute. It might use documented cash reserves, another sale with supportable timing or a separately assessed refinance. An extension dependent on the existing lender’s discretion remains conditional.

Record the trigger date for the fallback, who must act and what it costs. If both exits rely on the same sale price or refinancing assumption, they share the same failure risk. Show the shortfall and the contractual consequence if repayment remains unavailable at maturity.

Route the Detailed Credit Assessment

Route the facility by purpose after its lender, funding amount, security and exit facts are recorded. Keep those common facts consistent when the specialist assessment adds detail.

Private lenders for construction loans can fit borrowers whose project needs a funding structure outside the bank proposals available to them. Fit still depends on the actual construction terms, usable funds and an exit that covers the debt. A private construction loan doesn’t solve a project funding deficit by itself.

Before selecting a named construction lender, obtain its current written terms for the specific project. Match the staged funding, conditions and term to the project assessment. Take full feasibility, equity, presales, construction controls and drawdown analysis to the property development finance guide.

For a short-term commercial funding gap, follow the business bridging loan assessment. For second-ranking security, use the second mortgage assessment. Carry the same legal lender, cost calculation and repayment event into each file.

Prepare the Broker Evidence Record

Prepare one evidence record that connects each facility fact to a current document and names anything unresolved before commitment. The record must make competing proposals comparable on the same funding need.

Evidence	What the broker records
Identity and entity documents	Borrower, guarantors, legal lender, trustee capacity and authorised decision makers
Purpose evidence	Use-of-funds schedule, contracts or invoices and any mixed purpose
Financial information	Accounts, bank statements, existing liabilities and repayment capacity appropriate to the facility
Security documents and searches	Asset ownership, existing debt, mortgages, caveats, personal-property interests and priority questions
Valuation and project reports	Basis, date, independence, assumptions and lender acceptance
Cost and facility documents	Gross advance, net proceeds, interest method, fees, term, default provisions and repayment schedule
Legal and consent evidence	Advice on guarantees, document authority, priority, required consents and unresolved conditions
Exit evidence	Base repayment amount, event timing, stressed shortfall and executable fallback

Compare proposals using the same gross amount, net proceeds, security, term and repayment event. Calculate each proposal’s total cost through the same expected exit date, then show its delayed-exit cost separately. List unresolved approval, valuation and legal conditions beside each proposal.

For example, a lower rate can still produce less usable cash if more interest is retained or fees are higher. Compare the amount the borrower receives with the debt they must repay, as well as the rate.

Before your client commits, reconcile the final agreement with that comparison and the legal adviser’s answers. Resolve any funding shortfall or unsupported exit, and retain the documents behind the decision.