The private lending sector is rapidly expanding, stepping up to fill the void left by traditional banks, according to GAP Business Loans.
Peter Arnold (pictured above), who oversees GAP Business Loans’ broker relationships and sits on the company’s credit assessment committee, highlighted this shift, noting that non-bank lenders are emerging as viable alternatives to conventional banks.
“Traditional banks have long been the go-to institutions for borrowers, but we’re seeing a growing number of non-bank lenders filling the gaps,” the GAP director said.
Data reflected this rise in private credit.
A recent Citi estimate from July revealed a 45% increase in private lending since 2019, compared to just 25% growth in traditional lending.
The Reserve Bank’s Financial Stability Review further supported this trend, reporting that private credit providers now supply around 11% of business lending and 25% of small business lending in Australia.
According to Arnold, heightened regulations have made traditional lenders increasingly cautious, prompting them to tighten lending criteria.
“Traditional lenders have responded to heightened regulations by tightening their lending criteria to reduce their risk exposure,” he said. “They have become more selective, demanding higher levels of documentation, stronger credit profiles, and more substantial security.”
This risk aversion has made it difficult for many small business owners and investors to secure the funding needed for growth.
In contrast, non-bank lenders are stepping in with more adaptable financing solutions.
“Unlike traditional lenders, we are not bound by the same regulatory restrictions as banks,” Arnold said.
This flexibility allows non-bank lenders to provide funding for projects with high potential, even if they lack immediate cash flow – projects traditional banks might deem too risky.
Non-bank lenders focus on the unique aspects of each project, offering tailored loan terms and personalised service.
Private lenders often streamline their approval processes, making it easier and faster for businesses to access capital.
“We take the time to understand our clients’ industries and growth cycles,” Arnold said. “This means we can move quickly, providing access to capital that allows businesses to seize opportunities and continue their operations without interruption.”
For small and medium-sized businesses facing slow, complex approval from traditional banks, these expedited services offer a welcome alternative.
In previous articles, Arnold noted the significant role private lenders play in supporting SMEs, particularly as they face high borrowing costs and rising operational expenses. As Australia’s economy evolves, mid-market businesses – those with 20 to 200 employees or a turnover between $10 million and $250 million – are essential drivers of innovation and job creation.
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