Private credit is the segment of the lending market where capital is provided by non-bank financiers and funded from wholesale sources, private credit funds, family offices, institutional mandates, warehouse facilities, rather than from retail deposits regulated under the prudential regime.
In Australia, private credit firms operate under an Australian Financial Services Licence (AFSL) regulated by ASIC. Banks (ADIs) are regulated by both APRA and ASIC; the prudential APRA regime is what allows them to take retail deposits.
The structural advantages of private credit over bank lending: faster decisioning, flexibility on credit policy (self-employed, recent credit events, non-standard security), and capacity to structure files file-by-file rather than against a centralised template. The trade-off is rate, private credit typically prices 200-400bp above the equivalent bank product to reflect higher cost of capital and bespoke underwriting.
Private credit is not "shadow banking", it's a regulated, transparent and increasingly mainstream component of the Australian capital structure. Borrowers and investors choose private credit deliberately, not because they can't get bank funding.