Brokers on non-banks: Where they shine and where they fall short

Solving the problem, not always the process

They provide real solutions for clients that are otherwise prevented from accessing credit.

We are a brokerage that has many different lead sources, so working with these lenders has meant we can offer a full service to our referral partners for any client that walks through their doors.

Processing could be better. The vast majority of non-bank lending we do is painful, with long SLAs, multiple touchpoints, poor-quality settlement agents, and BDMs that appear to have portfolios too large to keep up. It makes the process very clunky for us and the client, however, for the most part, clients are happy to achieve their goals even if the experience has been poor.

When the banks say no

I have worked with a number of non-bank lenders for both self-employed clients and those whose credit scores don’t fit the usual mould.  

Some of these clients may have found themselves in this situation due to having particularly tax-effective returns and financials or perhaps a forgotten credit card or facility or one that was collateral damage in a relationship breakdown – but they are still very viable clients for a mortgage. They might generate income from an overseas business or investment that they own or have an unusual business structure or working background – and non-bank lenders offer really good solutions for these clients, often at reasonable rates.
  
Just because their circumstances don’t fit the requirements of the usual banks, it doesn’t mean that they are not financially liquid or capable of managing a home loan. It is great to have a suite of options available for these clients.

Unlocking more borrowing power

Non-bank lenders are a good solution for clients, no matter if it’s for owner-occupier or investment purposes as they are able to work on scenarios that require thinking outside of mainstream lenders.

When we use non-bank lenders, it’s generally because of income, borrowing power purposes, or self-employed clients who require an alternative for income verification when full financials are not ready to be used.

But we generally use non-bank lenders when clients need more borrowing power. At times, non-bank lenders can provide up to 50 per cent more borrowing power depending on the situation, scenario, and debt level of the client.

We generally do full-doc loans, but we use non-bank lenders for borrowing power purposes, especially when clients want to build a property portfolio and require more lending to achieve their property goals.

Making complex lending work

While our core business usually fits the major banks in most cases, we use non-bank lenders for low-doc loans, SMSF lending, trust lending, as well as purchases and refinances where their policies are a better fit. Clients can sometimes be hesitant initially, particularly when they see the interest rates. However, when they understand that the lender provides a solution that traditional banks can’t, they’re generally happy to proceed.

Not every client fits into the same lending criteria, and no two financial situations are exactly alike. Having lenders that cater to niche markets gives brokers more options to find the right solution for clients who may not meet the policies of mainstream lenders.

Improving processing times would make a significant difference. More competitive interest rates, lower rate loadings, and reduced fees would also help make non-bank lending an even more attractive option for clients.

No longer the plan B

We often work with non-bank lenders for self-employed clients, investors, refinancers, and borrowers who require alternative documentation (alt doc) to verify their income. These are often clients who have strong businesses or financial positions but don’t fit the traditional lending model used by major banks.

The perception of non-bank lenders has shifted significantly. They’re no longer seen as a fallback option – many clients now see them as a smart alternative that provides flexibility, expertise, and a more tailored approach.

The lending market has changed, and clients’ financial circumstances are more diverse than ever. Specialist lenders play an important role in supporting borrowers who may not fit a traditional framework, but are still responsible and capable of managing finance.

Having more choice in the market means better outcomes for clients and encourages lenders to continue innovating. Non-bank lenders have made significant progress and continue to challenge the traditional lending model.

Competing on service and flexibility

Unlike banks, non-bank lenders don’t have branch networks or proprietary distribution channels – they rely almost exclusively on mortgage brokers. As a result, they need to compete by delivering excellent service, faster turnaround times, and more competitive lending policies.

Brokers can be confident that non-bank lenders are aligned with the broker channel, whereas we’ve recently seen examples of some banks prioritising their own distribution channels and, in some cases, stretching or inconsistently applying policy simply to win deals. 

Many non-bank lenders have developed expertise in areas such as self-employed borrowers, expatriates, construction lending, or other more complex scenarios. These lenders fill important gaps in the market, ensuring borrowers have access to suitable finance solutions. 

One area where many non-bank lenders could improve is their digital banking experience. While their lending products and service levels are often excellent, some still lag behind the major banks when it comes to mobile apps, online banking functionality, and everyday customer experience after settlement.

From niche option to first call

Non-bank lenders aren’t a backup plan. For a lot of my clients, they’re the best option on the table. At Blank Financial, we use them constantly for self-employed people whose income doesn’t line up neatly on paper, complex or investor income, SMSF property purchases, refinancing under pressure, and anyone who needs policy flexibility rather than a rigid yes or no.

Most clients arrive wary, thinking “alternative” means risky or expensive, and there’s this idea that “bank” equals safe and “non-bank” equals risky, and I get why. But in my experience, it’s often the opposite. A lender that actually looks at the story behind your application – not just a box on a form – is usually the safer choice, not the riskier one. That’s exactly why niche lenders matter. 

Australian borrowers aren’t a uniform product. They’re business owners, contractors, investors, developers, professionals with irregular income, families with changing circumstances, and the market needs lenders who understand those differences instead of pretending everyone fits the same mould. 

That said, I won’t pretend non-banks get everything right. Turnaround times on standard home loans still need work, pricing and policies aren’t always easy to follow, and most people have never even heard of these lenders, which means brokers end up doing all the heavy lifting to build that trust. Fix that, and non-banks stop being the industry’s quiet secret. They become the first call.

More choice, better outcomes

Clients today are far more educated than they were 10 years ago. Once we explain the reasons behind a recommendation, they’re usually very comfortable. Most clients aren’t focused on whether a lender is a bank or a non-bank – they simply want the right solution that helps them achieve their goals.

Every client is different, and lending shouldn’t be treated as a one-size-fits-all exercise. Having lenders that specialise in different areas gives brokers the ability to find solutions for people who may otherwise miss out. It creates competition, drives innovation, and ultimately provides better outcomes for consumers. Without those niche lenders, there would be many good borrowers who simply wouldn’t fit within the policies of the major banks, despite being perfectly capable of meeting their commitments.

Like every lender, there’s always room to improve. For me, consistency is the biggest one. Clear policies, predictable credit decisions, and open communication make a huge difference to both brokers and clients.

As the industry continues to evolve, I think the non-bank sector has a real opportunity to keep investing in technology, streamline document requirements where possible, and continue reducing assessment time frames. Brokers value certainty, and when expectations match the outcome, it creates a great experience for everyone involved.

Filling the gaps banks leave behind

We have many non-bank lenders on our aggregator panel, and they can be vital in providing an option for clients who have unique borrowing requirements or income sources. Non-bank lenders will often pick up the slack on lending that other lenders can’t help with.

At our brokerage, we mostly do residential loans, so when we use a non-bank lender, it’s usually due to our client’s specific position. For example, if they are self-employed with irregular income, have a non-standard credit history, or have a non-standard loan security – these may be the reasons we would look to a non-bank lender.

In the last few years, we’ve found that the majority of the loans we put with non-bank lenders are for self-managed super fund (SMSF) lending. Non-bank lenders have excelled in this space where bank lenders seem to have pulled back from SMSF lending. It will be very interesting to see how the recent legislation changes around LRBAs will affect non-bank lenders!

Typically, a lot of non-bank lenders will offer higher rates than bank lenders, so of course, these could always be sharpened! But we understand that a lot of the time, it’s a ‘rate for risk’ type scenario where non-bank lenders will charge a higher rate for taking on ‘riskier’ clients.