Finance question
What exit strategy do I need for a private lender business loan?
You need a clear, dated way to repay on the due date: a sale of the security, a refinance to a cheaper lender once the reason for the private loan is fixed, or a defined cash event such as a settlement. Hoping that rates fall is not an exit. Most private lenders also want a combined loan-to-value under 70% to 75%, subject to lender assessment.
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The short answer
Every private lender asks how you get out before it asks anything else
Private and non-bank lenders price on the property, the exit and the speed, not on your trading history. That is why a business with a thin record, an ATO debt or credit issues can still borrow if the equity is there. But the loan is short, usually 1 to 24 months, and the lender needs to see the repayment before it lends. The accepted exits are a sale of the security, a refinance, or a defined cash event. If the exit is a refinance, the usual steps are lodged returns, a cleared ATO debt or a seasoned trading record, and a valuation that supports the amount.
Our private lender guide sets out what lenders publish. Maximum LVRs run from 65% to 75% on the lender pages, lower for commercial and rural security: 60% to 70% for commercial and industrial, 55% to 65% for rural and 50% to 60% for a development site without a DA. Terms run up to 24 months, and some facilities carry a minimum interest period of 3 to 6 months, so repaying early saves nothing. Establishment fees run from 1% to 3% on a first mortgage.
Build the exit into the application. Say what the loan is for, which exit applies and when it lands, and what happens if it is late. Ask for a written schedule that covers a late exit, because default fees and extension fees are extra. Ventas is a broker across 40+ lenders, not a lender, and there is no upfront fee to you; the lender pays us on settlement.
Do you qualify?
What a private lender looks for.
A dated exit
Sale, refinance or a defined cash event, with a date.
Enough equity
A combined LVR under 70% to 75% on the security.
A business purpose
A signed declaration that the funds are for business use.
Saleable security
Property the lender can sell, with less appetite for vacant land.
Why the exit decides the outcome
Short terms need a plan
Loans of 1 to 24 months leave little room to improvise.
A refinance needs a fix
Cleared tax debt or lodged returns make the next lender possible.
Late costs are extra
Default and extension fees sit on top of the quoted cost.
A worked example
A business owner borrows $500,000 against a $1.2 million property with no existing mortgage, a combined LVR of 41.7%. At a 70% cap the lender could go to $840,000, so there is headroom. The exit is a refinance in 12 months once the ATO debt is cleared and returns are lodged, with a sale of the property as the fallback. Illustrative only.
Common questions
Frequently asked questions
What counts as an accepted exit for a private lender?
A sale of the security, a refinance to a cheaper lender once the reason for the private loan is fixed, or a defined cash event such as a settlement. Hoping that rates fall is not an exit.
Is there a minimum interest period on a private loan?
Some lenders apply one, typically three to six months where it applies. If it does, repaying early does not reduce the interest you owe.
What if my exit is late?
Extension and default fees can apply, and they are extra to the quoted cost. Ask for a written schedule that covers a late exit, not only the clean case.
How much equity do I need for a private loan?
Many lenders cap the combined LVR at 70% to 75%, and lower for commercial, rural property and development sites without approval.