Where does private lending money actually come from?

The sources of capital

Four groups provide most Australian private credit funding. High-net-worth and sophisticated individuals who hold a valid certificate under the Corporations Act, seeking income secured by real property. Family offices deploying multi-generational capital with a mandate for defensive, income-producing exposure. Self-managed super funds and private trusts that meet the wholesale client tests. And funds and institutional allocators — domestic credit funds, mandates and offshore capital — that invest at scale.

None of it is retail deposit money, and none of it is government guaranteed.

How the money gets to the borrower

There are two common routes. In a pooled structure, investors subscribe to a fund and the manager lends out of the pool; investors get diversification across many loans and the manager controls allocation. In a contributory structure, investors are offered a specific loan — that property, that borrower, that LVR, that term — and choose whether to fund it, so their return and risk are tied to that single transaction.

Either way, the loan settles with a registered mortgage held for the benefit of the investors, and interest received from the borrower flows back to them after fees.

Why investors lend into private credit

The attraction is contracted income at a return above cash and term deposits, secured by a registered mortgage over real property with a measurable equity buffer beneath it. Terms are short, which means capital recycles and the manager can reprice as conditions change.

The trade-offs are real: capital is not liquid during the term, returns are not guaranteed, borrowers can default, property values can fall, and recovery through enforcement takes time and cost. Past performance is not a reliable indicator of future returns.

What the arranger does in the middle

An arranger like Envision Private sources the transaction, verifies the story, instructs an independent valuation, underwrites the sponsor and the exit, documents and settles the loan, then administers it — collecting interest, monitoring the security and managing the exit or, if needed, the recovery. Investors are relying heavily on that discipline, which is why underwriting quality matters more than headline yield.