Private Investor Funding for Property & Business

Private investors in Australia: funding as a loan, not a share

When people search for private investors, most want one of two things: someone to lend them money, or someone to buy into their project or business. ADS.finance covers only the first. It is a loan marketplace, not a lender, and it connects borrowers with private lenders and brokers for loans (debt), not equity.

ADS.finance does not introduce angel investors, venture capital or business partners, and it takes no investments from the public. If you want to sell a share of your company, the sections below explain where that money comes from.

Many private lenders lend money from private investors, through private credit and mortgage funds, or lend their own capital. So for a property, commercial or business need, a private loan is private investor funding without selling a share: you repay it with interest, and the project or business stays yours.

What forms does private investor funding take?

Loans from private lenders and investor-backed funds

Private lenders are businesses that lend outside the banking system. Some lend their own capital; others run or borrow from funds that pool investors' money and lend it against security, usually property. The investors earn a return from the interest borrowers pay, but you deal only with the lender.

Equity from angel investors, venture capital and business partners

An equity investor buys part of your business. Angel investors are individuals who back early-stage companies with their own money, often adding experience and contacts. Venture capital funds invest larger sums in businesses that could grow very large, in return for shares and usually a say in how the company is run. A business partner may also buy in and work alongside you.

Joint ventures and money partners on property projects

On a renovation, a flip or a small development, a money partner supplies some or all of the cash, you supply the site, the work or the know-how, and you split the profit. A joint venture is the formal version, set out in a written agreement.

Debt or equity: what you give up with each

If you are looking for someone to invest in your business, the real question is what you are prepared to give up. A loan costs money. Equity costs ownership. Neither is free, and the right choice depends on the asset, the timeframe and how sure you are of the repayment.

What a loan costs you

• Interest and fees, payable whether or not the project makes money.
• Security: the lender can sell the property or assets you pledged if you do not repay.
• Often a personal commitment from directors, who sign as guarantors and put their own assets on the line.
• A fixed end date: the loan has to be repaid or refinanced when the term ends.

In return, you keep every share and all of the upside.

What equity costs you

• A share of the profits and of the sale price, for as long as the investor holds the shares.
• Some control: investors usually want board seats, voting rights or a veto over major decisions.
• Time and legal costs to negotiate a shareholders agreement, plus ongoing reporting to the investors.

Equity investors share the risk. If the business fails, there is usually no loan to repay, which is why equity can fund ventures a lender would not touch.

When each one suits

• A loan suits an asset-backed need with a clear repayment: buying or developing property, buying an established business, bridging between two deals, or funding stock and contracts with a known payment date.
• Equity suits a young business with no security to offer, no steady cash flow yet, or a long road before it can repay anyone.
• A mix is common: an investor funds the early stage, and a loan funds a later stage once there are assets and income to lend against.

How private investor-backed lending works for property projects

Private lending for a property project is secured by property, usually through a registered first mortgage. Two measures drive how much a lender will advance: the loan-to-value ratio (LVR), which is the loan as a share of the property's value, and loan-to-cost, which is the loan as a share of the total project cost.

Development and construction

A development or construction loan is released in stages as the build progresses, once the lender's quantity surveyor or valuer confirms each stage. Interest is often capitalised, meaning it is added to the loan rather than paid monthly, and the loan is repaid from sales or a refinance on completion.

Renovation and resale

For a flip, a private lender can fund the purchase and sometimes the renovation, lending against the current value or the expected value once the works are done. The lender will want the scope of works, a realistic budget and evidence of what similar finished properties sell for in that area.

Bridging

Bridging finance covers the gap between buying one property and selling another, or between a settlement date and a longer-term loan. It is short and comparatively expensive, and lenders focus heavily on the exit: the sale or refinance that repays it.

Private investors for small business: borrowing against security

If you are trying to find investors for your business and can offer security, a private loan may be the simpler route. As with property, the lender wants something to fall back on: often property owned by the business or its directors, but also equipment, stock or a charge over the business's assets under a general security agreement.

Buying a business

Acquisition finance funds the purchase of an established business. Lenders look at its trading history and profits, how much of the price you are contributing, your experience in the industry and the security on offer. Goodwill on its own is hard to lend against, so property security often makes the difference.

Growth and working capital

Growth funding pays for equipment, a new site, stock or a large contract. Working capital covers the gap between paying your costs and being paid by your customers. A lender will want to see how the money produces the cash to repay it, and a line of credit can suit needs that rise and fall through the year.

What private lenders and investors look for

Whether the money comes as a loan or as equity, the questions are much the same. A lender cares most about getting its money back, an equity investor about how large the return could be.

• Security: what the lender can sell if the loan is not repaid, and what it is worth today.
• The exit: how the money is repaid - a sale, a refinance or business cash flow - and what happens if that takes longer than planned.
• Your contribution: the cash or equity you are putting in yourself. Lenders want you to have something to lose.
• Experience: a track record with similar projects or in the same industry, or a team that has one.
• A credible plan: a budget, a timeline and assumptions an outsider can check, not only the hoped-for result.
• Your history: how you have handled past debts, tax obligations and dealings with other lenders.

Equity investors add questions of their own: how big the market is, whether the business can grow without its founder, and how they will one day sell their shares.

How to make your funding request investor-ready

Private lenders see many requests. The ones that get a response explain the deal in a few lines and back it with documents. Before you approach anyone, prepare the following.

1. Clear numbers: the amount you need, the total cost, what you are contributing and how soon you need the money.
2. The purpose: what the money buys or builds, in one or two plain sentences.
3. The security: the property or assets on offer, their location, their current value and any existing loans against them.
4. The exit: how and when the loan is repaid, with a back-up if the first plan slips.
5. Documents: recent financial statements or tax returns, a budget or feasibility study for a project, any contract of sale, plans and development consent, and identification.
6. A short background: your experience, the people involved, and anything a lender will find in its own checks, explained up front.

Be honest about weak points. A late tax return, a past default or a tight margin will come out in the lender's checks, and explaining it first builds more trust than having it discovered.

What does private investor funding cost?

Private funding generally costs more than a bank loan, because the lender takes on risk a bank will not. Rates and fees vary between lenders, so compare written offers line by line, not on the interest rate alone.

• Interest, charged on the amount drawn, and sometimes prepaid or capitalised for the term.
• An establishment fee, charged when the loan is set up and usually calculated on the loan amount.
• A broker fee, if a broker arranges the loan, which should be disclosed before you sign.
• Valuation, legal and quantity surveyor costs, which the borrower usually pays even though the reports are for the lender.
• Line or exit fees on some loans, and default interest if you miss payments or the term runs out.

With equity there are no repayments, but the cost is a permanent share of what you build. If the project succeeds, that share usually costs more than interest would have.

Money partners for flipping houses and property joint ventures

A money partner can be a friend, a relative or an investor you meet through your network. The arrangement can work well, but handshake deals are a common source of disputes. Put everything in writing, in an agreement prepared by a solicitor, before money changes hands.

A sound joint venture or money partner agreement covers at least these points:

• Who contributes what: cash, the property, labour, skills, or standing as guarantor to a lender.
• Whose name the property is held in, and how each party's interest is protected, for example by a registered mortgage or a caveat.
• Who makes day-to-day decisions, and which decisions need both parties to agree.
• How profit is split, and how a loss or a cost overrun is shared.
• What happens if one party wants out, falls ill, dies or cannot fund their share.
• How disputes are resolved before anyone goes to court.

Ask your accountant how the profit will be taxed for each party before you sign. If the project also needs a loan, the lender will want to see the joint venture structure and know who is acting as guarantor.

Red flags when someone offers to fund you

Searches for investors attract scammers, because people looking for money are often under pressure. Treat any offer with care until you have checked who is behind it.

• Fees before a written offer: requests for an upfront, "due diligence" or "insurance" fee before you have the full terms in writing.
• Pressure: deadlines that leave no time to read the documents or get independent advice.
• Certainty with no checks: promises that the money is yours before anyone has looked at your numbers or your security.
• A lender you cannot verify: no ABN, no business address, or payment requested to a personal or overseas account.
• Terms that change late: a different rate, fee or security demand just before settlement.

Read every loan, mortgage, guarantor or investment document with your own solicitor, not one the lender or investor nominates. If something does not make sense, do not sign until it does.

Where to find private investors in Australia

Where you look depends on whether you want a lender or a shareholder.

For a loan

• Mortgage brokers and commercial finance brokers, who know which private lenders fund which kinds of deals.
• Private lenders and private credit funds directly, if you know which ones lend for your purpose.
• Your accountant or solicitor, who often hear which lenders their clients have used.
• A loan marketplace such as ADS.finance, where one loan request reaches many lenders and brokers.

For an equity investor or partner

• Your own network: customers, suppliers, former colleagues and people in your industry.
• Angel investor groups and start-up networks, for early-stage businesses with growth potential.
• Venture capital funds, for businesses that could scale nationally or internationally.
• Business brokers, when you want a partner to buy part of an established business.

ADS.finance cannot help with the second list. If you are giving up a share, get your own accountant and solicitor to advise on the structure and the documents.

Do you need a private investor near you?

For a loan, where the security is matters more than where the lender is. Many private lenders and brokers work with borrowers by phone, email and video, and send a local valuer to inspect the property. What counts is whether the lender funds that kind of property in that area.

Local knowledge still helps on a property project. A lender or broker that understands the suburb, local sale prices and the council can judge the deal with more confidence. For an equity partner, being nearby matters more, because you may be working together for years.

When private investor funding is the wrong choice

Private money solves particular problems. It is the wrong tool in these situations:

• A bank will lend on terms you can meet. Bank finance usually costs less, so private funding makes most sense when a bank declines, cannot meet your settlement date or will not lend on the asset.
• There is no clear exit. A short-term private loan with no realistic way to repay it can end in a forced sale.
• There is no security and no trading history. A pre-revenue start-up is usually an equity proposition, not a lending one.
• The margin is thin. If interest and fees would consume most of the expected profit, the project may not be worth doing on borrowed money.
• You need a personal loan. ADS.finance does not do personal loans; requests are for property, commercial and business finance.

Credit for personal, domestic or household purposes, or to buy, renovate or improve residential property as an investment, is consumer credit regulated under the National Credit Code. Credit wholly or mainly for business purposes generally falls outside it.

How to find private lender funding through ADS.finance

You post one loan request, and ADS checks every loan request before it goes live to a network of 200+ verified Australian Finance Providers: private lenders, non-bank lenders, mortgage brokers and commercial finance brokers.

Lenders and brokers can ask you about the request, and one can take it on and contact you. You are never obliged to go ahead. There is no credit check to post. Each lender sets its own rates, fees and lending criteria.

What to put in your loan request

• The loan type: development, construction, commercial property, bridging, buying a business or working capital.
• The amount, and how soon you need the money, including any settlement date.
• Where the property or business is.
• What the money is for, and the security you can offer.
• Your exit: how the loan will be repaid.

ADS.finance does not give financial or credit advice and does not recommend any lender or loan.

Investors looking for projects to fund in Australia

If you found this page because you have money to invest, note that ADS.finance takes no investments from the public. It does not pool investors' money, offer returns or match individual investors with borrowers.

Lending businesses, private credit and mortgage funds, and brokers can join the network as Finance Providers. ADS checks each provider's ABN and business details before an admin approves them. Providers can then ask borrowers about checked loan requests and take on the ones that fit their criteria.

Each Finance Provider is responsible for its own licences and disclosures. If you want to invest in property lending as an individual, speak to your own financial adviser about funds that accept investors.