Private Lending in Melbourne

Private lending is commonly referred to as “the oldest form of mortgage finance”. It is a type of financial middle man where the borrower and the investors have a more direct relationship than usually applies with a bank or similar financial institutions. In the usual banking relationship, the investor deposits funds with the bank and the borrower obtains finance from the bank. The investor is paid a conservative rate of return and has no knowledge of the particular loans that the deposit is funding.

In the past, private lending has operated in a non-bank environment, where individual investors provide the capital required for the specific loans. At it’s most simple, there may be one investor providing the capital for one borrower.

Both private lending and traditional banking are regulated prudentially in Australia, but by different government regulators. Private lending is in certain cases (only when it falls within the managed investment scheme regime) regulated by the Australian Securities & Investments Commission (“ASIC”), while the banks are regulated by the Australian Prudential Regulation Authority (“APRA”). Transactions in its simplest format are not regulated by ASIC or APRA.