Should You Use A Private Lender to Buy A Business?

Should You Use A Private Lender to Buy A Business?

Short answer: sometimes. Private lending can be appropriate in some situations, particularly when speed or policy complexity rules out mainstream options. But it can cost more, so it is worth understanding the full terms before treating it as your only way forward.

The term “private lender” is used loosely, and the terms on offer vary widely. That is why it pays to ask specific questions rather than judge an offer on speed or headline rate.

Why do deadlines push people towards private lending?

When a settlement date is close and a mainstream lender hasn’t given an answer, a lender who says yes can feel like relief. Sometimes it is the right call. The risk is that speed becomes the only measure, and a deadline can make the cost of an offer harder to see.

What should you ask before accepting an offer?

• What is the total cost? Ask for every fee in writing, including establishment, risk, legal and valuation fees, not just interest.

• What is the maximum loan-to-value ratio? A lower ratio means the lender funds a smaller share, so you contribute more cash.

• What is the term, and what happens at the end? You need a plan for repaying or refinancing.

• What happens if the exit is delayed?

• What security is required? Understand exactly which properties are tied to the loan.

Not sure about your strategy? Book a 15-minute startegy call or take our free 2-minute quiz and Let's discuss your situation. 

Is the cheapest-looking option the cheapest?

Not necessarily. Two offers can look similar on rate and differ once fees, the cash you must contribute and the exit are counted. An option that needs more cash upfront can widen the gap you were trying to close. Compare total cost and total cash required, not rate alone.

Before you assume it’s your only option

Ask your broker whether the whole position has been compared across lenders: the properties you own, your existing debts, the purpose of the funds and the structure of the purchase. In the client story we’ve published, the clients had been advised that private lending might be the only path. A review of their full position led to a different structure. That won’t always be possible, but it is worth knowing before you commit.

Frequently asked questions

Is private lending riskier than a mainstream loan?
Terms vary widely, so compare total cost, term, security and exit rather than assuming either way.

Can a private loan be refinanced later?
Don’t assume it can. It depends on your position and lending policy at the time, so ask what happens if you can’t.

What if a mainstream lender has said no?
That reflects one lender’s policy. Ask whether other lenders and structures have been compared.

Should I involve my accountant and solicitor?
Yes. They can help you assess cost, contract conditions and tax implications.

Book a commercial and business finance strategy call before you commit to a lender.

Complete the Finance Square free 2-minute quiz to get a clearer read on your own position, or book a 15-minute commercial and business finance strategy call if you'd rather talk it through directly.

Priya Dey is the founder of Finance Square Group, a Melbourne-based finance broking firm specialising in self-employed borrowers, investors and business owners.

This article is general information only and does not take your objectives, financial situation or needs into account. It is not a recommendation that any product or lender is suitable for you, and it is not legal or tax advice. Lending policies referenced on this page are current as at October 2026 and are subject to change without notice. Every application is assessed case by case and approval is not guaranteed.

Finance Square Group is a trading name of Sioux Property Solutions Group Pty Ltd, Credit Representative 543438, authorised under BLSSA Pty Ltd, Australian Credit Licence 391237.