Five questions to ask before referring a deal to a private lender
The instinct with a complex deal is to send everything. It is the wrong instinct. A private lender who has been sent a full data room cold will read none of it; a private lender who has been sent four data points will answer within the day.
The five questions
1. Who actually needs the finance?
Not the introducer’s contact — the true borrower, and the entity that will sign. On development and construction deals the borrowing entity must generally be a company or trust, with individuals only able to guarantee. Confirm this at first enquiry rather than discovering it after a term sheet.
2. What exactly does the requested amount comprise?
A round number is a warning sign. Break it into payout, arrears, statutory debts to clear, works to fund, fees and interest. Round-number sizing consistently falls short once deductions apply — on one purchase, rebuilding the waterfall properly moved the second-mortgage request from $328,000 to roughly $400,000.
3. What is the real term?
Not the maximum available, the one the exit actually needs. Then check the minimum: private facilities carry a minimum term with that period’s interest prepaid, so a six-month facility with a four-month minimum and a three-month exit means the client paid for four.
4. What specifically repays the lender, and when?
Write it as one sentence naming the event, the date, the counterparty and the evidence. An unconditional contract of sale awaiting settlement is the easiest exit to place. “We will refinance” with no named lender, no LVR and no valuation basis is not an exit — it is a hope, and credit reads it that way.
5. Who holds the existing first mortgage?
This decides placement before anything else does. Many private investor groups will only lend behind an institutional bank, not behind another private fund. Some require the first to sit with a tier-one bank at 70% LVR or below before they will write a second to 75%. Others will not write a standalone second at all — only their own combined stretched first-and-second — which means the deal should be routed as a full refinance rather than a second-only request.
On a hybrid property-and-business deal, ask four instead
Where an operating business comes with the freehold, the triage set is shorter and more specific:
- Site address
- The valuation split — freehold value against going-concern value
- Amount sought
- Approximate EBITDA
Four data points produced a fast, structured response on a $20m aged-care acquisition where a full data room would have sat unread.
Then ask whether private is the right answer at all
Convert both options into effective, fee-inclusive annualised cost over the actual holding period, and weigh facility term and settlement speed alongside it.
A worked comparison on a $1.2m unencumbered commercial security at 60–70% LVR, needed for a genuine three-to-six month bridge:
- Private: 11.99% p.a., 2.20% establishment, a true six-month facility with a three-to-four month minimum, two-day approval, seven-day settlement, $6,000 legals.
- Bank-style commercial: 8.69% p.a., 1.00% establishment, but wrapped in a five-year facility (the maximum interest-only term, even though only months were needed), a 0.60% introducer fee, five-day approval, fifteen-day settlement, $1,000 legals.
The second is cheaper on rate and fees. It is also a five-year commitment the client does not want, approves more slowly and settles eight days later. If the exit is a sale in four months, the private structure matches the need and the cheaper one creates a break problem.
The comparison is all-up dollar cost over the expected hold, plus whether the facility’s shape matches the exit. Not the rate.
Before you spend time on it
Three more screening questions on an inbound development or bridging referral: the status and timing of any construction tender; the number of lots or stages the project will yield; and whether there are presales, and who is marketing them.
And two integrity checks that save credibility later:
- Disclose prior declines. A site declined by one fund weeks earlier, re-pitched as fresh by a different introducer, wastes everyone’s time and surfaces eventually. It always surfaces.
- Check whether an application already exists. A prospect describing themselves as a lender’s existing client with “another broker working on it” may have a live application lodged directly with no broker attached. Ask the relationship manager to clarify before submitting a competing one.
Match the format to the funder
Several private lenders will only respond properly to their own template, tied to their internal approval stages. Others want a single consolidated submission email following a fixed structure: background, reason for funds, security, corporate structure, serviceability, exit, deal summary table.
If a funder has given you their format, use it. Defaulting to a generic one with a funder who has supplied theirs is a self-inflicted delay — and on at least one large commercial refinance, sending a three-page valuation summary where the full report was required contributed to a decline on documentation grounds rather than merit.
General information only, prepared for finance industry professionals. It is not credit assistance, financial product advice, or an offer of finance. Terms and figures are de-identified observations over 2024–2026.