Australia’s Private Credit Market: What’s Driving Its Rapid Growth?

Guest Author: Therese Oneill is a business coach and mentor. Therese is a member of our Regulatory Compliance Advisory Group and a contributor to our Credit CPD Programs.

Over the last decade, Australia’s private credit market has grown significantly, attracting a wider mix of players—from fund managers and super funds to insurers, big institutions, and even everyday investors. As an asset class, private credit has become an attractive proposition for investors, and local businesses of all sizes are profiting from more flexible finance options. But what’s behind the rise of private credit in Australia and what are the benefits to market participants?

What is private lending?

Private lending refers to loans that are provided by non-bank lenders, as opposed to traditional financial institutions, such as banks or building societies. Private loans are typically provided by asset managers, who act as intermediaries between investors and end-borrowers. The loans are most often sought for business purposes, however there are private lenders who offer finance to individuals (eg: mortgages, personal loans).

There are three key parties that operate within the private lending sector:

1. Investors: the source of the funds, investors can include superannuation funds, insurance firms, large corporates, family businesses, and high net worth individuals.
2. Intermediaries: the organisations that act as a go-between for investors and end borrowers. They pool investor money which is then used to fund loans to borrowers.
3. Borrowers: these are typically businesses, seeking an alternative to traditional lenders, particularly those with unique financing needs or irregular cash flow. Borrowers can also include property developers and investors (eg: SMSFs).

The private credit market

Globally, the private credit market has experienced strong growth over the past two decades. As regulators around the world responded to the GFC with tighter lending laws, opportunities emerged for non-traditional lenders, particularly in the area of commercial and real estate finance.

Estimates on the size of the Australian private credit market vary widely. According to the RBA, private credit accounts for approximately 2.5% of total business debt, putting the total market size at $40 billion. Over the last few years, private credit growth has outpaced broader business lending by around two percentage points. However, RBA figures only include private credit facilitated by asset management firms.

Taking a broader view of private creditors, EY calculates there is over $188 billion allocated to corporate and real estate private credit, accounting for around 13% of the total corporate debt market. As Australian borrowers now consider private credit as a standard rather than an alternative option for finance, the firm argues there is no sign that the recent growth will end anytime soon.

Demand for commercial loans overall has risen in recent years. According to the MFAA, the number of mortgage brokers writing commercial loans rose from 28.45% to 30.66% between October 2023 and March 2024. Fuelled by demand from SMEs seeking flexible funding solutions, these commercial specialist brokers are opting for private lenders to close funding gaps, especially for clients who present as riskier propositions for banks.

Regulating the private credit market?

The other surefire indicator of growth in the private lending market is the increased interest from regulators.

In October 2024, the RBA released a report into the private credit market, to identify potential risks to Australia’s financial stability. Ultimately, the RBA concluded that the risks to financial security from the private credit market in Australia were contained, for now.

In early 2025, ASIC launched a discussion paper on the shifting dynamics of capital markets. In June, the regulator issued commentary on the paper, noting there were significant gaps in data collection and transparency in private markets. ASIC says it wants to “strengthen efficiency and integrity across markets, with a focus on cleanliness, access and participation in our public listing markets and changing risk in private markets,” and that it will consider whether changes to how regulation operates are needed.

What’s behind the growth of private credit markets?

The private credit market is beneficial for investors, intermediaries and borrowers alike.

Benefits for investors

• Typically generate higher returns than other similar assets, such as leveraged loans
• Low volatility relative to publicly traded assets like corporate bonds
• Investment terms are short, between 6 months – 3 years
• Portfolio diversification
• Minimal risk due to historically low loan arrears rates
• Governance comfort in dealing with managed loans as managers must hold AFSL
• Efficiencies through big data and AI to help drive profit and innovation

Benefits for borrowers

• Speed – same day approvals and funds available within hours
• Cutting-edge online platforms (offered by fintech specialists)
• Minimal paperwork
• Access to finance which may not be available through traditional lenders
• Greater flexibility through personalised offers and terms
• Greater certainty of deal execution and no cost to decline the offer

Benefits for intermediaries

• Possible to offer products without ACL – less red tape
• Big data enables faster turnarounds, better customer experience
• Ability to pool investor funds to offer better terms/larger amounts
• Historically low default rates
• Flexible lending agreements allowing loss mitigation

Private credit has become a go-to option for Australian businesses, with more money flowing into the space and more companies—big and small—turning to it as a viable, secure source of finance. As the market has expanded, intermediaries have adapted, offering a wider range of loans and working with a broader mix of borrowers. This shift is good news for Australian businesses, which now have more ways to access funding, and for local investors, who have new opportunities to strengthen and diversify their portfolios.