Quick Summary
Don’t let outdated myths hold your business back. In this post, we cut through the noise to give you the facts about non-bank lenders for commercial finance. Here’s what we’re busting:
- Myth 1: They’re Unregulated & Risky. We’ll show you how non-bank lenders are regulated by ASIC, providing safe and legitimate funding solutions for Australian businesses.
- Myth 2: They’re Only for Bad Credit. Discover why businesses of all credit profiles turn to non-bank lenders for their flexible and asset-focused approach.
- Myth 3: They’re Always More Expensive. Learn how non-bank lenders offer competitive rates where the value of speed and flexibility often creates a better overall financial outcome.
- Myth 4: The Application is Complicated. We’ll break down how their streamlined, tech-driven processes can get you funded faster and with less paperwork than the major banks.
- Myth 5: They Only Fund Large Projects. Find out how non-bank lenders cater to a wide range of needs, from small, strategic capital injections to large-scale asset financing.
The landscape of commercial finance in Australia is undergoing a significant transformation. For decades, the Big Four banks have been the default port of call for businesses seeking capital. However, a new era is dawning, marked by the rapid rise of non-bank lenders. This evolution is not a fleeting trend but a structural market shift driven by changing regulations and the evolving needs of modern businesses.
As traditional banks face increasing compliance measures from the Australian Prudential Regulation Authority (APRA), their lending criteria have become more rigid. This has created a funding gap for many viable, successful businesses that no longer fit a standardized approval formula. In response, non-bank lenders have stepped in, offering a more flexible and tailored approach. Data from the Reserve Bank of Australia (RBA) shows that non-bank lending has grown at nearly twice the rate of bank lending in recent years, highlighting their increasing importance in the financial ecosystem.
Despite their growing market share, a cloud of misunderstanding and myth still surrounds non-bank lenders. These misconceptions can prevent business owners from accessing what could be their most effective funding solution. This article will bust the five most common myths and reveal the truth about how non-bank lenders operate as a powerful, strategic alternative for Australian businesses.
Myth 1: "Non-Bank Lenders Are Unregulated and Risky"
The Role of ASIC in Ensuring a Safe Lending Market
This is perhaps the most pervasive and damaging myth, suggesting that venturing outside the Big Four is like entering a financial “Wild West”. The reality is far more reassuring. Non-bank lenders in Australia operate within a robust and well-defined regulatory framework, making them a safe and trustworthy option for commercial finance.
The key difference lies in who regulates them and why. Banks, as Authorised Deposit-Taking Institutions (ADIs), hold customer deposits and are therefore prudentially regulated by APRA to protect those depositors’ funds. Non-bank lenders do not take deposits; they fund their loans through other channels like wholesale funding from institutional investors or by bundling loans and selling them on (securitisation).
Because of this different funding model, their primary regulator is the Australian Securities and Investments Commission (ASIC). ASIC’s role is to ensure all financial institutions, including non-banks, operate “efficiently, honestly and fairly”. Non-bank lenders must hold an Australian Credit Licence (ACL) and comply with the National Consumer Credit Protection (NCCP) Act, just as banks do. This framework ensures they adhere to responsible lending practices, assess a borrower’s ability to repay, and maintain transparency. The notion that they are unregulated is simply false; their regulation is just different, and appropriately tailored to their business model.
Myth 2: "They're Only for Businesses with Bad Credit"
A Lending Decision Beyond Just the Credit Score
Another common misconception is that non-bank lenders are a “lender of last resort,” exclusively serving businesses with poor credit histories that have been rejected everywhere else. While non-banks are an excellent solution for businesses that don’t fit the rigid banking mould, they are increasingly the first choice for prime, successful businesses seeking superior service, speed, and tailored financial products.
Many non-bank clients are “prime borrowers” with excellent credit scores. They turn to non-banks not because of poor credit, but because their business structure is complex. They might be self-employed without two years of perfect PAYG statements, operate in a niche industry, or have income streams that a bank’s automated credit-scoring model fails to understand. A traditional bank may reject a highly profitable business simply because it doesn’t tick the right boxes, not because it’s a credit risk.
Non-bank lenders specialise in this type of nuanced assessment. They look beyond a simple credit score to evaluate a business’s overall financial health, cash flow, and growth potential. Therefore, the typical non-bank borrower is not defined by “bad credit” but by a business model that requires a more sophisticated, human-led assessment. Choosing a non-bank is often a strategic decision to partner with a lender who truly understands the unique circumstances of your business.
Myth 3: "Their Interest Rates Are Always Exorbitant"
Understanding the True Value of Speed and Certainty
The belief that non-bank lenders universally charge exorbitant interest rates is an oversimplification that overlooks the total value proposition. While some non-bank loans may have a headline interest rate that is slightly higher than a traditional bank’s, this is not always the case, and the rate is only one piece of the puzzle.
Firstly, many non-bank lenders, especially online-focused ones, have lower overheads than banks (e.g., no physical branches), which can translate into more competitive rates and fees. Secondly, the rate reflects the lender’s specific risk assessment and the flexibility offered. A slightly higher rate might be attached to a loan that requires less documentation or is approved in a fraction of the time.
Most importantly, sophisticated business owners understand that the true cost of finance extends beyond the interest rate. Consider a time-sensitive opportunity, like purchasing equipment to win a major contract. A bank might offer a lower rate but take up to 90 days to approve the funds, by which time the opportunity is lost. A non-bank lender might approve the loan in days, allowing the business to secure the contract and start generating revenue immediately. The return on investment from this speed and certainty can far outweigh the marginal difference in interest payments. In many cases, non-banks may even offer lower overall costs when factoring in reduced establishment fees and closing costs. When faced with a critical deadline like a looming commercial balloon refinance in Perth, the value of a fast and flexible solution becomes paramount.
Myth 4: "You Get Fewer Options and Products"
Cutting Through the Red Tape with a Modern Approach
This myth is the exact opposite of reality. Non-bank lenders don’t try to be everything to everyone like a major bank. Instead, they thrive by carving out niches and developing deep expertise in specific areas, resulting in a wider and more specialised range of products for business borrowers.
While a traditional bank may offer a standard secured business loan or line of credit, the non-bank market is filled with diverse and innovative solutions. This includes:
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Specialised Asset Finance:
Funding for specific types of equipment, from transport and construction to medical and IT hardware. -
Low-Doc and Alt-Doc Loans:
Solutions for self-employed individuals or businesses that verify income using alternative documentation like BAS statements or an accountant's letter instead of traditional tax returns. -
Development Finance:
Tailored loans for property developers, which may include features like zero-presale funding that banks are unwilling to offer. -
Debtor and Trade Finance:
Products that allow you to borrow against your unpaid invoices or purchase orders to improve cash flow. -
SMSF Lending:
Loans specifically structured for Self-Managed Super Funds to purchase commercial property, a market many major banks have retreated from.
This specialisation is a core competitive strategy. Non-banks compete by being the absolute best at solving a specific problem for a specific type of customer, offering a depth of choice that broad-based banks cannot match.
Myth 5: "You Should Only Apply for a Loan When You Need a Large Amount of Capital"
Strategic Funding for Every Business Need, Big or Small
A common misconception circulating in the business world is that lenders are only interested in multi-million dollar deals. This leads many small and medium-sized business owners to believe they shouldn’t bother seeking finance unless they’re planning a massive expansion, a major acquisition, or a complete operational overhaul.
The reality, especially in the non-bank lending sector, is the exact opposite. Non-bank lenders have built their reputation on serving the real-world needs of Australian SMEs, which often involve smaller, more strategic injections of capital. They specialise in flexibility, offering a wide spectrum of funding amounts that can range from as little as a few thousand dollars to much larger sums. This accessibility is a core part of their business model, designed to provide the right amount of funding at the right time, whether it’s for purchasing new inventory, investing in a marketing campaign, or covering an unexpected operational expense. They understand that not every business needs a mountain of cash; sometimes, a small, targeted loan is the most prudent and effective solution.
This flexibility opens up a world of strategic possibilities for your business. It means you can be agile, seizing opportunities as they arise without having to commit to a massive debt facility. It also provides practical solutions for managing existing financial obligations. For instance, if you have a significant final balloon payment coming due on a piece of equipment, you don’t need to drain your working capital to pay it off. A non-bank lender can provide a tailored solution to manage this specific liability, and for businesses in Western Australia, exploring a commercial balloon refinance in Perth can be an effective way to restructure that debt, improve cash flow, and keep your assets working for you without the stress of a large lump-sum payment.
The Reality: The Strategic Advantages of Non-Bank Flexibility
With the myths busted, the true picture of non-bank lenders emerges: they are agile specialists who use flexibility as a strategic tool. This translates into three core advantages for your business: speed, flexibility, and personalised service.
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Unmatched Speed to Funding
- Non-bank lenders are built for efficiency. With streamlined digital applications and a focused approach, they can often process applications and provide funding in a matter of days, compared to the weeks or months it can take with a traditional bank. -
Flexible and Customised Loan Structures
- Unbound by the rigid policies of APRA-regulated banks, non-bank lenders can tailor loan terms and conditions to a borrower's unique situation. They assess applications on a case-by-case basis, looking at the whole story rather than just a scorecard. -
Deep Industry and Asset-Specific Expertise
- Many non-banks pride themselves on offering a higher level of service, with dedicated loan specialists who take the time to understand your business goals and financial circumstances.
Feature
Non-Bank Lender
Traditional Bank
Primary Regulator
Non-Bank Lender
ASIC
Traditional Bank
APRA & ASIC
Funding Source
Non-Bank Lender
Wholesale & Institutional Investors
Traditional Bank
Customer Deposits
Approval Speed
Non-Bank Lender
Fast (Days/Weeks)
Traditional Bank
Slow (Weeks/Months)
Lending Criteria
Non-Bank Lender
Flexible, Case-by-case
Traditional Bank
Rigid, Scorecard-based
Product Focus
Non-Bank Lender
Niche, Specialized
Traditional Bank
Broad, Mass-market
Key Advantage
Non-Bank Lender
Speed, Flexibility, Customisation
Traditional Bank
Brand Recognition, Bundled Services
How a Broker Helps You Navigate the Non-Bank Landscape
The greatest strength of the non-bank market – its vast choice and specialisation – can also be its greatest challenge. With dozens of lenders, each with unique products and credit appetites, how do you find the right one for your business?
This is where a specialist commercial finance broker like Varlo becomes an invaluable partner.
A broker’s role is to act as your expert guide, navigating this complex landscape on your behalf. They maintain deep relationships with a wide panel of lenders, including niche and industry-only funders that you couldn’t access directly. This provides several key benefits:
- Saves Time and Effort:
Instead of you spending countless hours researching and applying to multiple lenders, your broker does the legwork. - Expert Matching:
They understand the specific lending criteria of each non-bank and can match your unique profile to the lender most likely to approve your application on favourable terms. This prevents failed applications that can negatively impact your credit file. - Better Outcomes:
Leveraging their relationships and market knowledge, brokers can often negotiate a better deal—whether that’s a lower rate, more flexible terms, or reduced fees—than you could achieve on your own.
In essence, a broker transforms the non-bank market from a confusing maze into a curated menu of strategic financial solutions tailored to your business.
Frequently Asked Questions
What is the main difference between a bank and a non-bank lender in Australia?
The main difference is that banks are Authorised Deposit-Taking Institutions (ADIs) that can accept customer deposits, while non-bank lenders are not. This means they are regulated differently (banks by APRA, non-banks by ASIC) and have different funding sources, which gives non-banks greater flexibility in their lending criteria.
Are non-bank lenders safe to borrow from for commercial finance?
Yes. Reputable non-bank lenders in Australia are regulated by ASIC, must hold an Australian Credit Licence, and must adhere to responsible lending laws. They are a secure and legitimate part of the financial system.
Do I need an Australian Credit Licence to get a business loan?
No, the borrower does not need a credit licence. The lender (the non-bank) is the entity required to hold an Australian Credit Licence (ACL) to legally provide credit.
Will applying with a non-bank lender hurt my credit score?
Applying for any type of credit, whether from a bank or a non-bank, will result in an enquiry on your credit file. Too many enquiries in a short period can lower your score. This is why using a broker is beneficial; they match you with the right lender first, reducing the risk of multiple, unsuccessful applications.
Are non-bank loans only for short-term needs?
No. While some non-banks specialise in short-term loans, many others offer a full range of medium and long-term financing, including commercial property loans with terms up to 30 years.
Why would a business with good financials choose a non-bank lender?
A business with strong financials might choose a non-bank for reasons of speed, service, or product suitability. They may need funding faster than a bank can provide, require a specialised loan product a bank doesn’t offer, or simply prefer the personalised service of a niche lender.
How do non-bank lenders get their money if not from deposits?
Non-bank lenders raise capital through various channels, including wholesale funding lines from larger financial institutions (including banks), issuing bonds, or through a process called securitisation, where they bundle loans into a financial product and sell it to institutional investors.
Can I get a low-doc commercial loan from a non-bank lender?
Yes. Many non-bank lenders specialise in low-doc (low documentation) commercial loans, which are ideal for self-employed borrowers who can’t provide standard proof of income like tax returns. Instead, they can use alternative documents like BAS or an accountant’s letter.
What happens if a non-bank lender goes out of business?
Your loan is an asset to the lender. If a non-bank lender were to fail, its loan book would typically be sold to another financial institution. Your loan agreement would remain in place, and you would simply continue making your repayments to the new owner of the loan. The process is designed to have minimal impact on the borrower.
Do non-bank lenders offer features like offset accounts for commercial loans?
While traditionally this was a feature exclusive to banks, some innovative non-bank lenders now offer features like 100% offset accounts on certain commercial and SMSF loan products, increasing their competitiveness.
Is it faster to get approved by a non-bank lender?
Generally, yes. Because of their specialised focus, streamlined processes, and agile nature, non-bank lenders can often provide approvals and funding significantly faster than traditional banks—sometimes in as little as 24-48 hours for straightforward applications.
Why should I use a broker like Varlo instead of going directly to a non-bank lender?
A broker provides expertise, choice, and convenience. They have access to a wide panel of lenders and understand the intricate details of each one’s products and policies. This allows them to find the most suitable and competitive option for your specific needs, saving you time and increasing your chances of a successful outcome.
Is a Non-Bank Lender Right for Your Business?
Non-bank lenders are a legitimate, regulated, and increasingly vital part of Australia’s commercial finance ecosystem. They are not a risky last resort but a strategic choice for thousands of successful businesses that value speed, flexibility, and customised solutions.
If your business has a financial profile that doesn’t fit the standard banking mould, or if you simply need a funding partner who can move at the speed of your ambition, the myths should not hold you back. By partnering with an expert broker, you can confidently explore the non-bank market and unlock a new world of financing opportunities.
If you’re facing a critical financial deadline, such as a commercial balloon refinance in Perth, or want to explore more agile funding options, the expert team at Varlo can help. Contact us today to discuss how a non-bank lending solution could be structured for your success.