Non-bank lending and its role as an alternative to traditional lenders for SME property developers

Australia has seen the rapid growth of non-bank lending options as a viable alternative to credit sourced from traditional financial institutions like banks.

This explainer provides a brief rundown of what you need to know about non-bank lending — including why it differs from traditional lending, and how small-to-medium enterprise (SME) property developers can use it to overcome their financing pain points.

What is non-bank lending?

Non-bank lending refers to the provision of finance and loans by alternative lenders that are not permitted to accept deposits and not regulated under banking laws.

Non-bank lending plays an essential role in the financial system, bridging gaps that traditional banks have failed to adequately service and providing borrowers with a wider range of financing options.

Researchers from the Reserve Bank of Australia (RBA) believe non-bank lending “supports economic growth by providing an alternative form of funding and increased competition for lending.”

Why non-bank lending is increasingly relevant for property developers

Non-bank lending in the Australian property sector has seen increased uptake in recent years, particularly amongst small-to-medium (SME) property developers who can struggle to access conventional financing.

CrowdProperty’s landmark survey of Australia’s small-to-medium property developer community found that debt financing is the single biggest barrier to building more homes.

56 percent said raising debt finance was a factor that prevented them from developing projects, while for 37 percent equity financing was an issue.

CrowdProperty’s survey also found that developers are highly dissatisfied with the quality of service provided by traditional banks — a key factor prompting them to shift to non-bank lenders.

SME developers gave traditional lenders a negative Net Promoter Score (NPS) — a metric used to rate the quality of customer experience.

The survey also revealed concerns with a lack of transparency on the part of traditional lenders who, in addition to reported poor service, also often apply hidden fees to loans that drive up financing costs for developers.

This has contributed to the increased acceptance of alternative lenders which often offer more flexible and tailored finance solutions. ScotPac’s SME Growth Index Report from 2024 found that 90 percent of Australian SMEs are willing to partner with a non-bank lender, compared to just 44 percent in 2018.

Advantages for SME developers and investors

Non-bank lending offers benefits to both developers and investors in the Australian property space.

For investors, it gives them access to a diverse range of alternative debt assets, providing them with stable returns above inflation, and diversification of risk.

For developers, it means access to funds that they may otherwise be unable to obtain from traditional lenders, giving them the funds they need to build more homes.

Why CrowdProperty is a leading non-bank alternative

As a specialised marketplace lender, CrowdProperty is a leading non-bank alternative for small-to-medium property developers, thanks to a combination of advanced technological expertise and nearly 100 years of collective industry experience.

For borrowers, this means access to deep knowledge from property experts whose expertise can contribute to the success of the borrowers projects.

CrowdProperty also employs a 57-step due diligence process for the assessment of project loan applications. This safeguard against credit risk means only the best projects are made available via our online platform, which can better attract a diverse mix of capital for borrower-developers to access.

CrowdProperty provides fast, simple and transparent property project finance for property professionals, learn more.

New call-to-action