Why banks won't help when you're behind on repayments
If you've fallen behind on your commercial mortgage, most banks won't entertain a refinance conversation. Being in arrears — even by one or two months — is a red flag in their system. The application gets declined automatically, regardless of how much equity is in the property or how solid your business is overall.
Banks see arrears as proof of cash flow stress or financial difficulty. They don't distinguish between a business that's struggling long-term and a business owner who simply had a rough quarter and got behind. To them, being late on a current obligation means you're a higher risk of being late on a new one. So they say no.
How private lenders look at arrears differently
Private lenders don't have the same rigid rulebook. Instead of starting with your payment history, they start with your asset — the property itself. They ask three critical questions:
- How much is the property worth? — The property is the security. If there's enough equity after paying out the arrears, the lender is protected.
- How much do you need to borrow? — This includes the existing loan, the arrears amount, and any other costs. The lender needs to understand the total picture and the loan-to-value ratio.
- What happened, and how will you avoid this next time? — Lenders understand that cash flow dips happen. What matters is your plan to stabilize and repay the new loan.
If the numbers stack up and there's a realistic exit strategy, the arrears become part of the deal — not a reason to decline. Many specialist lenders also accept low documentation applications for this scenario, which removes another barrier for self-employed borrowers and business owners.
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Check Your OptionsWhat a typical deal looks like
Illustrative example — not a real casePicture a café owner with a commercial property valued at $1.5 million. They have an existing bank loan of $900,000 and are now three months behind on their monthly repayments — about $45,000 in arrears. The bank has sent a default notice and is threatening enforcement. The business is still trading, but cash flow has been tight due to lower foot traffic over winter.
A private lender might offer a refinance loan of $950,000 — enough to pay out the existing bank loan and clear the arrears in full. The property is worth $1.5 million, so the new LVR is 65%. The loan term might be set for 18 months, giving the business owner time to rebuild cash reserves and refinance back to a traditional bank once trading improves.
What lenders want to see
Even though private lenders are flexible, they still need to understand the deal properly. Here's what makes a strong application:
- Clear property value. A recent valuation or market evidence. The more equity after clearing the arrears, the stronger the case.
- Explanation of the arrears. What caused the shortfall? A seasonal dip in income? A temporary business disruption? Lenders understand that these things happen — they just want to know you understand it too.
- Business recovery plan. How will you get cash flow back to normal? Are you adjusting pricing, cutting costs, expanding the service? Lenders want confidence that this won't happen again.
- Exit strategy. How will you repay the private loan? The most common path is refinancing back to a bank once trading stabilizes, or selling an asset.
When this might not work
Private lending is flexible, but it's not a solution for every situation. A deal like this might not work if:
- The total amount needed (existing loan + arrears + costs) pushes the LVR too high — there's not enough equity left for the lender to feel comfortable.
- The underlying business problem hasn't been fixed. If the same cash flow issues are still present, lenders will worry the arrears will just happen again with the new loan.
- The bank has already filed for enforcement or appointed a receiver. At that point, the timeline becomes critical and some lenders won't touch it due to legal complexity.
- The property has multiple charges against it (tax liens, other mortgages) that eat into the equity. This doesn't always kill the deal, but it complicates it.
Our panel includes specialist private lenders who actively fund commercial refinances for borrowers in arrears. Across these lenders:
- Credit-impaired borrowers are accepted by lenders on our panel
- Fast settlement — as quick as 1-5 business days for straightforward deals
- Lo doc options — some lenders don't require full financials or serviceability proof
- Coverage across all Australian states and territories
The exact lender and terms depend on your specific situation. Describe your deal and our AI will match you with the most suitable lenders.
How to refinance when you're in arrears
The process is straightforward:
- Step 1: Describe your situation. Tell us about the property, what it's worth, how much you owe, how far behind you are, and what happened. You don't need every detail — just the basics to get started.
- Step 2: Get matched with lenders. Our AI checks your scenario against specialist lenders on our panel and shows you who's most likely to consider the deal, with plain-English explanations of the terms.
- Step 3: Move forward quickly. Review the options, pick the one that suits, and connect directly with the lender. Most can give you an indication within days and settle within weeks.