Specialist lending: A lifeline in choppy waters

A self-employed borrower, earning good money as a home decorator, heads into their local bank branch to secure a loan for a second property. The branch manager takes one quick look at their documentation, reaches into his drawer for the ‘declined’ stamp, and another worthy customer walks out empty-handed.

Despite comprehensive business activity statements proving they have a rock-solid business cash flow, a lack of recent tax returns and insufficient income evidence means this hard-working home decorator has to look elsewhere for the credit they clearly deserve.

It’s an increasingly common scenario, especially as heightened regulatory scrutiny and tightening risk appetites continue to reshape the Australian lending landscape.

Increasing hawkish watchdogs like APRA have forced major banks and other authorised deposit-taking institutions to reassess who they work with and to what capacity, leaving non-banks and other alternative lenders to step up to the plate for creditworthy Australian borrowers.

Amid this changing lender landscape, the typical specialist lending customer profile is undergoing a transformation.

The specialist borrower of 2026 looks less like a niche outlier and more like a cross-section of modern Australia – self-employed professionals, contractors, developers and business owners, all with legitimate needs and increasingly complex financial lives. At the same time, economic pressures and tighter bank settings are pushing previously vanilla borrowers into the specialist camp.

Changing face of specialist borrowers

Belinda Wright, general manager partnerships and distribution at Thinktank, has noticed “meaningful shifts in borrower profiles over the past year”, particularly as more self-employed clients and those borrowing through trusts or companies turn to lenders “who can take a practical, contextual view of their financial position”.

Thinktank is also seeing stronger demand in SMSF lending. Rising super balances and increased demand for control over wealth accumulation and retirement strategies are driving more trustees towards sophisticated commercial and residential SMSF solutions.

This evolution is closely tied to how brokers themselves are diversifying, notes Wright, saying, “The combination of regulatory focus, economic volatility and changing lender appetites in certain segments has created an environment where thoughtful, flexible credit solutions are more valued than ever.”

At Resimac, general manager of sales and distribution John Athanas has seen a similar broadening of the borrower base, with borrowers who would once have sailed through a mainstream scorecard now landing in the specialist segment.

“There are several reasons for this,” says Athanas. “More borrowers have experienced temporary arrears or missed payments as household budgets have tightened. Reliance on short-term credit has led to missed repayments for people who have had otherwise strong credit histories.

“Similarly, the increase in contractor roles and the growth in self-employment has changed the face of income structures. Some banks’ automated processes can’t accommodate these worthy borrowers.”

Millbrook’s general manager, George Lyall, describes the group’s borrower base as “increasingly broad”, with the lender continuing to back large-scale developer clients “who are otherwise top-tier bank customers but require short-term finance solutions”.

At the same time, Millbrook is seeing “more small business owners seeking assistance with property acquisitions or smaller development projects”. For many of these clients, private credit offers the combination of speed, structuring flexibility and direct access to decision-makers that is difficult to find at a major bank. “These borrowers are attracted by certainty of outcome, fast credit decisions and the ability to deal directly with decision-makers,” says Lyall.

Aaron Taylor, head of non-standard lending at Bluestone Home Loans, has also noticed a rising cohort of borrowers who technically qualify at a bank but prefer a lender that will fully recognise their income story. “These shifts are driving greater interest in specialist lending as customers look for a more personalised assessment,” Taylor says.

Pepper Money, meanwhile, is seeing higher volumes of newly self-employed sole operators with short financial histories; borrowers with minor credit hits tied to cost of living pressures; variable income earners and gig workers; business owners needing ATO or debt consolidation solutions; and refinancers who were once prime borrowers but who no longer pass tightened bank criteria.

Understanding specialist lending

While the customer profile is undergoing a transformation, there’s been no change in the fundamental purpose of specialist lending – to support everyday Australians whose circumstances, as Pepper Money’s general manager mortgage and commercial lending Barry Saoud puts it, “have shifted and who no longer fit the tight, automated policy settings of traditional banks”.

“These customers have often been long-term bank clients; what changes is their situation, not their character or intentions,” says Saoud. Common scenarios include job losses, temporary medical setbacks, divorce or relationship breakdown, major business disruptions, and becoming newly self-employed with a fresh ABN.

Saoud adds that debt consolidation – customers looking to roll multiple liabilities into a single manageable home loan repayment – constitutes a significant portion of the specialist lending market.

“Because banks lean heavily on rigid scorecards and fixed policy cut-offs, Pepper Money uses a balanced, common-sense assessment that considers the full story behind the application,” says Saoud.

He continues, “With cost of living pressures, elevated household expenses and higher interest rates, more borrowers are experiencing temporary cash-flow strain, missed payments, change in income. This has pushed more customers outside bank criteria, even when their long-term financial position is sound.

“Specialist lending creates a pathway forward, allowing borrowers to rebuild stability, reduce repayment pressure and ultimately transition back to mainstream lending once their situation improves.”

For Thinktank, “specialist lending is about meeting the needs of borrowers whose circumstances sit outside traditional product and credit settings without adding complexity for brokers or their clients”, says Wright.

Thinktank predominantly supports self-employed, company and trust clients, with a product suite spanning commercial, residential, SMSF and private lending options. This broad capability is increasingly in demand.

“For many brokers, specialist lending is now an essential part of their toolkit, and lenders like Thinktank are playing a critical role in keeping this segment well supported with clarity and confidence,” says Wright.

Athanas explains that Resimac’s Specialist range – comprising Specialist Clear, Plus and Assist – is designed to support creditworthy borrowers who have some form of credit impairment or a non-standard credit history.

To illustrate that this is not a ‘last resort’ segment, Athanas points to common scenarios that brokers are likely to see. Resimac can, for example, help “an IT contractor with recent mortgage arrears due to a gap in employment looking to lend up to 90% LVR, or a self-employed plumber with fluctuating income looking to refinance his existing home and consolidate accumulated debt, something a traditional lender may not consider.”

These are working Australians with real financing needs, but they may need a specialist approach to income, serviceability and recent conduct.

For Millbrook, with its focus on SMEs and property developers, specialist lending is not about disregarding risk parameters but about applying them more dynamically. Typical clients are businesses and developers who could often qualify as ‘bank grade’ in other circumstances.

Lyall explains how specialist lending is less about operating outside traditional bank risk parameters “and more about delivering tailored solutions where certainty, speed and borrower focus are critical”.

He adds, “While Millbrook’s risk principles are broadly aligned with those of major banks, what truly differentiates us is our absolute focus on the borrower and our ability to consistently deliver outcomes that exceed expectations. Our client-centric approach, combined with a nimble and streamlined credit team, enables turnaround times that are materially faster than traditional banks.”

Bluestone places particular emphasis on borrowers whose financial stories are complex or evolving, or that simply don’t fit a straight line. “We take the time to understand their circumstances, income patterns and future potential, instead of relying solely on past tax returns or a single income source,” says Taylor.

He further explains how Bluestone’s assessment approach is explicitly human first. “Every application is assessed individually so we can match customers with a loan structure that reflects their real financial position. We regularly help self-employed borrowers verify income through recent BAS statements or even an accountant’s letter, as this can help show their up-to-date financial position.”

Increasing broker awareness

As specialist lending becomes more central to broker businesses, education and confidence are proving just as important as products and pricing.

Lenders are investing heavily in training, scenario support and direct access to credit teams to help brokers navigate structures like SMSFs, trusts, companies and complex self-employed income.

Wright says Thinktank has seen awareness “grow sharply since diversification has become a central theme in the broker market”, adding that education is “woven into our business model – from practical case-based training to hands-on scenario support”.

“We also tailor our support for both seasoned commercial brokers and residential brokers transitioning into new segments, reflecting the different knowledge levels and confidence across the market,” she adds.

Broker education is critical at Resimac because, as Athanas explains, the broker is often setting realistic expectations for customers. “When clients no longer fit traditional bank criteria, it often falls to the broker to explain why,” he says. “That’s why it’s so important for Resimac to continue raising awareness of specialist lending options that may work for a broker’s client instead.”

To support brokers in those conversations, Resimac builds awareness of specialist lending through “clear product and policy resources, regular training, dedicated BDM support and broker-friendly credit policies”.

Millbrook has “absolutely seen greater awareness of specialist lending products among brokers,” Lyall says. “Broker confidence in credible, long-standing private lenders such as Millbrook continues to strengthen. We actively support broker education through direct access to our credit team and targeted training initiatives, including specialised sessions on property development and business lending fundamentals.”

Taylor concurs, saying brokers are “absolutely” seeing the benefits of specialist lending options on the market. “We’re seeing brokers increasingly recognise that specialist lending isn’t limited to traditional high-risk or non-conforming clients. Many simply need a lender who can consider different income types or complex situations,” he says.

For Bluestone, the starting point is always dialogue. Taylor says, “Our BDMs work closely with brokers to understand their clients’ needs and help identify solutions early in the process. We’re also seeing fewer brokers dismiss deals up front due to a mismatch with major bank policy. Instead, we encourage them to explore all options before saying no − and if they’re unsure, we’re always available to workshop scenarios.”

Specialist lenders get innovative

Specialist lenders are putting a lot of effort into removing friction for brokers while closing funding gaps left by banks.

Thinktank, for instance, has continued to evolve its suite “to deliver solutions that directly meet broker and client needs”.

Wright highlights Thinktank’s Private Lending offering, which provides “flexible structures and fast decisioning to support time-critical or bespoke scenarios, ensuring brokers can move quickly when opportunities arise”.

“Thinktank has also scaled up to handle larger and more sophisticated transactions, including expanding its commercial and commercial SMSF loan sizes to $10 million and continuing to offer lease-doc and GST options. These enhancements are designed to give brokers greater versatility when structuring deals for diverse client situations,” says Wright.

Resimac has zeroed in on accessibility and flexibility, aiming to make specialist lending “feel more like a mainstream solution” for everyday borrowers. Recent developments include expanded alt-doc options, which allow borrowers to verify income differently, and enhanced cash-out policies for business or investment purposes, “reflecting the needs of self-employed clients”, says Athanas.

At Millbrook, off-the-shelf products are less important than bespoke structures that mirror the realities of development and business risk. One example is the lender’s ‘Cost Overrun’ facility, available to select development clients.

Lyall explains, “This progressive funding solution assists borrowers with unforeseen costs that typically arise near project completion, allowing projects to reach completion without requiring additional borrower equity where none is available.”

Bluestone, meanwhile, has recently broadened the scope of its specialist product range by extending its maximum loan size, adding more options for self-employed borrowers, and improving the range of accepted locations.

Product innovations aside, “the key to specialist lending is about the human touch”, Taylor says. “We’ve invested in our BDM network to provide a more personalised service to brokers, giving them time to understand the needs of their unique clients. We have also grown our underwriting team to allow for assessments on a case-by-case basis − again, giving them the time to understand the customer’s full story.

“Being able to work through each deal and the unique circumstances allows us to find more solutions for more borrowers.”

Saoud draws attention to Pepper Money’s heavy investments in processes and product designs that help brokers identify solutions quickly and present them confidently to clients. The Pepper Product Selector, for instance, provides brokers with “simple, fast, scenario-driven guidance”.

“One of the biggest challenges for brokers in the specialist space is quickly identifying which product is suitable, whether the credit profile is acceptable and what documentation will be required,” explains Saoud. “The Pepper Product Selector solves this by allowing brokers to enter a few key details and instantly see the most appropriate product options − aligned to the customer’s credit profile, income type and loan purpose.”

Leaning into its debt consolidation expertise, Pepper Money also conducts robust capacity assessments for customers rolling credit cards, personal loans, ATO or business debt and other debts into one. “This is especially important in today’s high-cost environment, where lowering a customer’s monthly outgoings can be the difference between ongoing financial stress and long-term stability,” says Saoud.

Pepper Money also became a market leader in launching Alt Doc Xpress, a digital process that transforms the traditionally paper-heavy alternative-documentation journey into what Saoud describes as “a fast, structured, secure online experience”.

He explains, “Alt Doc Xpress allows customers to share required income information digitally, reducing back and forth and accelerating credit assessment. For brokers, this means smoother lodgements, fewer touchpoints and faster conditional decisions − especially on more complex files.”

Regulation and tighter bank appetites

As previously mentioned, stricter regulation in the broader credit environment is providing a window of opportunity for these specialist lenders. But how are they seizing the opportunity?

Millbrook is “often stepping in where banks are constrained by policy, timing or complexity, even where the underlying borrower and asset quality remains strong”, says Lyall.

“A significant portion of our business comes from repeat clients on growth trajectories. These borrowers return to Millbrook because we take the time to understand their business models and can deliver solutions efficiently for time-poor business owners, rather than offering purely vanilla transactions.”

Wright sees regulation as an essential pillar, not a headwind. She believes it’s “an essential part of maintaining a stable, sustainable lending environment, and we’ve always taken a responsible, well-documented approach to credit”.

With several banks recently pulling back from company and trust structures, Thinktank has seen an increase in family trust and corporate trustee submissions, along with growing utilisation of SMSF and bare trust arrangements for commercial and residential investment.

“For Thinktank, this means supporting more brokers to diversify, providing structures that meet the reality of how Australian borrowers operate today, and ensuring we maintain the speed, consistency and support brokers expect from us,” says Wright.

Regulators’ increased scrutiny is also sharpening the distinction between lenders that have long-standing risk disciplines and those playing catch-up.

In Athanas’ view, “APRA’s increased regulatory scrutiny seen in late 2025 reinforces the importance of conservative risk settings, strong credit verification processes, and transparency for borrowers, but it also provides opportunity for non-banks to introduce flexibility into the equation.

“Resimac views today’s environment as an opportunity to demonstrate the maturity and robustness of the non-bank sector,” Athanas continues. “Specialist lending thrives when traditional lenders tighten their credit practices. Resimac has long operated with conservative risk settings and aims to continue to offer creditworthy borrowers access to the funding they need.”

Taylor emphasises, “Responsible lending is embedded in how we operate. [Bluestone’s] model is built on understanding a customer’s full financial picture and ensuring any loan aligns with their needs and objectives.

“While we offer flexible income verification options, each one must meet our risk settings and funder requirements. As a non‑bank, we work closely with our funders to ensure capital allocation and warehouse structures support sustainable lending, which are underpinned by strong governance and responsible practices.”