ASIC's private credit crackdown: what brokers should be asking any non-bank lender

For brokers who place clients with non-bank lenders, this matters. The quality of the lender behind a loan affects more than pricing. It affects how the facility is managed and how disputes and defaults are handled. It also affects whether the lender will still be there, with funding available, when a client needs a variation or an extension.

This article explains what ASIC has said, what its principles cover, and how brokers can turn them into practical due diligence questions.

What ASIC said, and why the timing matters

Speaking at the Commercial & Asset Finance Brokers of Australia (CAFBA) Commercial Property & Development Finance Summit in Sydney on 22 September, ASIC commissioner Simone Constant said the watchdog had exposed weaknesses in private credit, but too many participants had been slow to respond. She indicated the industry has three months to make changes before ASIC begins taking action, and challenged the sector to write down distressed loans, provide clearer financial information, improve liquidity and better manage portfolio risks.

Enforcement is already under way. Constant said several investigations are running and that ASIC is actively monitoring both wholesale and retail funds, with clear evidence that practices have fallen short.

The backdrop is the collapse of Sydney developer Bathla Group, which Constant referred to directly. She noted that developers with exposure to private credit are particularly vulnerable when economic conditions become more challenging. The broader environment adds pressure: the RBA's cash rate target now sits at 4.60%, and borrowers across the market are feeling higher holding costs.

What ASIC found when it looked under the bonnet

ASIC's concern is based on evidence. Its surveillance of 28 private credit funds identified several red flags: only four published information about the interest rates or ranges charged to borrowers, fewer than half had detailed credit, impairment and default management policies, and most funds lacked adequate separation between the people approving loans and the people independently assessing their ongoing performance and value.

Source: ASIC surveillance of 28 private credit funds, cited September 2026.

The last point is worth dwelling on. When the same people who approve a loan also judge whether it is performing, problems are easier to overlook. For a broker, that is not an abstract governance issue. It can mean a lender slow to recognise trouble, then abrupt in dealing with it once it can no longer be ignored.

The 10 principles of "private credit done well"

ASIC summarised its expectations in 10 principles. They cover stewardship, organisational capability, transparency, design and distribution, fees and costs, conflicts, governance, valuations, liquidity and credit risk.

The principles are aimed mainly at fund managers and the investors who back them, not at borrowers. But several translate directly into things a broker should care about when placing a client:

• Governance. ASIC expects well-defined, documented roles, decision-making and escalation processes, with clear accountability. For a broker, this is the difference between a clear credit answer and a moving target.
• Credit risk. ASIC expects standardised credit assessment and monitoring frameworks, documented credit decisions and risk ratings, and regular reviews of borrower performance. A lender that assesses loans consistently is more predictable to work with.
• Valuations. Security values need to be current and independently grounded. Inflated or stale valuations flatter a loan book in good times and create sharp corrections when conditions turn.
• Liquidity. A lender funded by investors who can redeem at short notice may struggle to honour commitments such as construction progress draws when redemptions rise. Globally, this has already happened. Morgan Stanley recently announced it was again curbing redemptions at its nearly US$7 billion private credit fund.

Industry self-regulation is also taking shape

The sector is responding as well. A Private Credit Association of Australia is being formed, aiming to introduce accreditation, common reporting standards and a manager database. Managers seeking accreditation would be assessed against ASIC's 10 principles and undergo annual reviews. Separately, the Financial Services Council has announced new private credit standards in response to ASIC's call for enhanced industry standards.

For brokers, this should eventually make lender comparison easier. Until it matures, due diligence remains the broker's job.

Seven questions to ask any non-bank lender

None of these questions is adversarial. A well-run lender should be comfortable answering all of them.

1. Who makes the credit decision, and who reviews the loan after settlement? Look for separation between approval and ongoing monitoring.
2. How is your lending funded? Balance sheet, a pooled fund, a warehouse facility or deal-by-deal investors all behave differently under stress. The key question is whether funding is committed when the loan is approved.
3. For construction loans, how are progress draws funded and assessed? Committed funding for the full facility is very different from funding sourced draw by draw.
4. How are valuations commissioned? Ask whether valuers are independent and panel-appointed, and how the lender treats "as if complete" values compared with "as is" values.
5. What happens if the exit is delayed? Ask about the lender's approach to extensions, default interest and communication before enforcement.
6. Are all fees disclosed upfront and in writing? That includes establishment, line, discharge and any fees retained by related parties.
7. Who will my client and I deal with during the loan? Direct access to decision-makers matters most when something goes wrong.

What this means for borrowers

For commercial borrowers, stronger standards in private credit are good news. More disciplined underwriting may mean more questions at application, particularly about exit strategy and valuation. But it also means a more stable funding market, with fewer lenders that disappear or change terms mid-project.

Private credit remains an important part of Australian commercial finance, particularly for transactions that fall outside bank policy or need speed and flexibility. ASIC has itself acknowledged the role private credit plays when it is done well. The aim of the current scrutiny is to make that "done well" standard the norm.

The Funding Door view

Every scenario should be assessed on its own facts, with a clear view of the security, the borrower's position and how the loan will be repaid. Brokers should expect clear answers from any lender they introduce clients to, and we encourage them to ask.