Investor withdrawals, redemption limits and regulatory scrutiny are reducing lending capacity in parts of the private credit market. This article explains what's happening, why it affects borrowers and brokers, and how lenders funded in different ways are positioned.
ASIC raises the bar again
On 10 November, ASIC released its second major review of private credit, Report 846, Private credit funds: Do investors know what they're getting?.
Between November 2025 and August 2026, ASIC reviewed 24 wholesale and retail private credit funds managing a combined $18 billion, along with a sample of financial advice given to retail investors. Commissioner Simone Constant said many investors still aren't getting the information they need to understand the risks, fees and conflicts in private credit, because complex structures, opacity and poor disclosure persist.
ASIC also continues to act on individual funds. This week it issued interim stop orders on two mortgage funds, preventing new interests from being offered while its disclosure concerns are addressed. See also ASIC's private credit crackdown: what brokers should be asking any non-bank lender.
Why lending capacity is tightening
Many private lenders fund loans from pooled investment funds, where investors can ask for their money back. When investor confidence falls, redemption requests rise, and lenders need to keep more cash available rather than lend it out.
Several fund managers have limited redemptions in recent months, in some cases to around 1% a month. Redemption limits are a normal tool for managing liquidity, and they don't mean a fund is failing. But they show the pressure some fund-based lenders are under.
Morningstar expects growth in private credit funds to slow substantially in the near to medium term, which could make it harder for developers to get finance. See After Bathla: what comes next for development funding in Australia.
What this means for borrowers
When a lender's funding tightens, borrowers can feel it in several ways:
- Slower approvals, as lenders become more selective.
- Tighter terms: lower LVRs, higher pricing or extra conditions.
- Delayed or reduced settlements, if funding isn't committed when the loan is approved.
- Fewer extensions or variations, because lenders under liquidity pressure need loans repaid on time.
- Risk to construction loans, if progress payments depend on funding that is no longer available.
How Funding Door is funded
Funding Door's lending is backed by family office capital and warehouse funding. Because we don't rely on retail investor inflows that can be redeemed at short notice, our capacity to fund approved transactions isn't exposed to the same redemption pressure facing some fund-based lenders.
In recent months, we've seen more brokers bring us scenarios that other lenders are currently unable to fund. Every application is still assessed on its own merits, against our credit criteria.
No funding model is free of risk. Warehouse facilities have their own conditions, and every lender has to manage its capital carefully. The point isn't that one model is always better. It's that borrowers and brokers should understand how each lender is funded before relying on it.
Five questions to ask any private lender now
- How is this loan funded? Pooled fund, contributory model, family office, warehouse facility or balance sheet.
- Is the full facility committed at approval? This is critical for construction and staged loans.
- Has your funding position changed in the last six months? For example, through redemption limits, reduced capacity or changes to terms.
- What is your current turnaround from approval to settlement?
- How do you handle extensions if the exit is delayed?
For brokers
- Check capacity before submitting, not after approval.
- Have a backup lender for time-critical settlements.
- Get commitments in writing, especially for construction draws and settlement dates.
The Funding Door view
Tighter conditions in private credit are a healthy correction in many ways. Stronger disclosure and governance will benefit the whole sector. But in the meantime, brokers and borrowers need certainty that a lender can fund what it approves. That certainty depends on the lender's funding source as much as its credit policy.
Have a scenario you'd like assessed?
Submit it to our credit team for direct initial feedback, or call us on +61 3 8529 1678.
Submit Your Scenario →Funding Door Pty Ltd (ACN 638 679 964) provides finance for business and investment purposes only. This lending is not regulated credit, and consumer protections under the National Credit Code do not apply. Funding Door does not provide loans for owner-occupied residential purposes. This article is general in nature, does not constitute financial, credit, investment or legal advice, and does not take into account your individual objectives, financial situation or needs. References to third parties are based on publicly available information and do not comment on their financial position. All applications are assessed on their individual merits and approval is not guaranteed. All lending is subject to credit assessment, valuation, due diligence and formal approval.