Due diligence
12 questions to ask any private credit manager (and our answers)
A good manager will answer every one of these plainly. Here is why each question matters, what ASIC has found when managers could not answer them, and how HomeSec answers them for its own loans.
The most useful questions to ask a private credit manager are about structure, not headline returns: what you will own, whose name is on the security, how much is lent to construction, how you get your money out, and whether the manager’s own money is at risk. A good manager answers each one plainly, with specifics rather than averages.
These twelve questions draw on what ASIC found when it reviewed the sector. In its REP 820 surveillance of 28 funds, only four disclosed what borrowers were charged, fewer than half had detailed written credit and default policies, and only two wholesale funds stress-tested liquidity. In September 2026 ASIC told the sector to prepare for enforcement action.
We think it is fair to answer our own questions. HomeSec Business Finance, an Australian private lender founded in 2004, invites wholesale investors to co-fund specific loans alongside its own money, as set out in how it works. Here is how we answer each one.
1. What exactly will I own?
Why it matters. Units in a fund are a claim on the fund, not on any particular loan. If the fund freezes or fails, you depend on the manager, receiver or liquidator. A direct interest in a specific loan is a very different position.
Our answer. You own a share of one specific loan that you chose. It is not a pooled fund. The loan agreement is prepared in your name and your contribution is recorded against that loan alone.
2. Whose name is on the security?
Why it matters. In most pooled funds the mortgages are held by the fund or its custodian. Being named on the security yourself lets you verify it exists and gives you a direct interest in the property that backs your loan.
Our answer. Yours. You are named on the registered mortgage (or caveat, where that is the security) for your exact contribution, alongside HomeSec. The borrower signs the loan documents with their own solicitor present before the mortgage is lodged.
3. Can I see every loan before my money goes in?
Why it matters. Portfolio averages can hide individual problem loans. ASIC’s REP 814 flagged inadequate portfolio transparency about impairments and loan characteristics as a sector-wide concern.
Our answer. Yes. HomeSec assesses every loan against a 50-point due diligence checklist, then emails you a due diligence pack covering the loan, the property and the borrower. You decide whether to fund it and how much. There is no obligation to take any loan. Our guide on how to read a loan due diligence pack explains what to look for.
4. How much of your own money is in the loans?
Why it matters. A manager paid upfront fees with none of its own capital in the loans is rewarded for volume, not outcomes. Alignment is strongest when the manager stands to lose alongside you.
Our answer. HomeSec co-invests its own money in every loan it offers to investors, often 50/50. It funds the majority of its loans entirely off its own balance sheet, and earns mostly when loans are repaid.
5. How much is lent to construction, land or development?
Why it matters. More than half of Australian private credit is real-estate debt, mostly lending to developers. Construction, land and unsold-stock loans carry cost, completion and sales risk, and they were at the centre of the August 2026 redemption gates.
Our answer. None. HomeSec does not make development or construction loans. It lends short term business loans for legitimate business or investment purposes, secured by first and second mortgages over existing Australian real estate, and avoids unusual properties or anything that would take a long time to sell.
6. What is the maximum LVR, and how do you define it?
Why it matters. The loan-to-value ratio sets the equity buffer between the loan and the property’s value. ASIC noted that terms such as LVR and “senior debt” are not used consistently across funds, so ask for the definition, not just the number.
Our answer. A maximum 80% LVR on residential property, lower on commercial property: the loan amount against the value of the property securing it. That leaves at least a 20% buffer if a property ever has to be sold. See LVR explained for mortgage investors.
7. How long do the loans run?
Why it matters. Longer loans tie up capital, expose it to more market change and make it harder for a fund to meet withdrawals. A mismatch between loan terms and redemption terms is the classic cause of gating.
Our answer. Loans run 1 to 12 months. When a loan is repaid, your principal and interest come straight back to your account.
8. What does the borrower pay, and how are you paid?
Why it matters. ASIC found some managers keeping borrower fees investors never saw. If you do not know what the borrower pays, you cannot judge what the manager keeps.
Our answer. Your rate is set loan by loan and shown in each loan’s pack before you commit. Returns are 12% to 18% p.a. on the loans you choose. HomeSec’s own money sits in the same loan, and it earns mostly when loans are repaid. If you want more detail on how the economics of a particular loan work, ask our Funding Manager.
9. How and when can I get my money out?
Why it matters. Many funds promise monthly or quarterly redemptions but reserve the right to limit or suspend them. ASIC also found side letters giving some investors better redemption terms than others.
Our answer. When the loan matures and is repaid, principal and interest are paid directly to your own bank account. If you want out early, HomeSec will buy out your share and repay your principal. You can stop co-funding at any time: once your current loans are repaid, you simply don’t take the next one. There is no pool, so there are no redemption queues and no gating.
10. Who approves loans, and who values them?
Why it matters. ASIC found most funds lacked effective separation between the people approving loans and those monitoring them, and warned in June 2026 about valuations lagging economic reality.
Our answer. Every credit decision is signed off by General Manager Catriona Anderson, with HomeSec since 2005, and both Joint CEOs, Paul Stone and Jason Brockmuller, are involved in every loan decision. The property and its value are set out in the pack for your own review. Ask our Funding Manager how the value on any particular loan was established, and we will explain it.
11. What happens if a borrower doesn’t repay?
Why it matters. Every lender has late payers. What matters is the enforcement path, who pays for it and how much equity sits behind the loan.
Our answer. The loan is enforceable through the courts in every state. HomeSec has specialist mortgage and property lawyers across Australia. As mortgagee, the lenders can take possession and sell the property. HomeSec meets the legal costs of recovery on defaulted loans, and the maximum 80% LVR leaves a buffer before capital is at risk. More in what happens if a borrower defaults.
12. What is your track record, including losses and arrears?
Why it matters. Past performance does not predict the future, but how a manager behaved through a downturn tells you a great deal. Be wary of anyone who cannot or will not discuss losses.
Our answer. HomeSec was founded in 2004 by Paul Stone and has lent its own money the entire time. It is a founding member of the Australian Short Term Lenders Association. During the GFC, when most ordinary super funds posted negative returns, HomeSec’s co-funders kept earning their loan returns. We don’t publish loss or arrears statistics on this site: ask us and we’ll walk you through our track record on a call.
How should you use these questions?
Put them in writing, to every manager you are considering, and compare the answers side by side. Watch for three things: answers given as averages rather than specifics, answers that change between the website and the legal documents, and questions that are deflected entirely.
| Answer type | What it usually signals |
|---|---|
| Specific, in writing, consistent with the documents | A manager comfortable with scrutiny |
| Averages or ranges only | Limited visibility into individual loans |
| “That’s commercially sensitive” on fees or borrower rates | Possible undisclosed margins |
| Vague on withdrawals or side letters | Liquidity terms may not be what they seem |
No set of answers takes the risk out of an investment. But clear answers let you decide which risks you are willing to carry. For a scored version, see our 10-point private credit test.
If you’d like to put these questions to us directly, register your interest and our Funding Manager will be in touch.
Frequently asked questions
What should I ask a private credit manager before investing?
Ask what you will own, whose name is on the security, whether you can see each loan, how much of the manager's own money is invested, how much is lent to construction or development, what LVRs apply, how long the loans run, what borrowers pay, how and when you can withdraw, who values the security, what happens on default and what the track record is.
How do I choose a mortgage fund?
Compare structure before yield. Check whether the fund invests in construction and land loans, whether its withdrawal terms match its loan terms, how often and how independently loans are valued, whether borrower fees are disclosed and whether the manager invests alongside you. A direct or contributory structure, where you choose and hold specific loans, gives more visibility than a pool.
What red flags did ASIC find in private credit funds?
ASIC's 2025 reviews found undisclosed borrower fees kept by managers, weak conflicts policies, the same committees approving loans and then valuing them, infrequent valuations, inconsistent use of terms such as LVR and default, and side letters giving some investors better redemption terms. Only four of 28 funds disclosed the rates charged to borrowers.
Why does it matter if a manager invests its own money?
Because it aligns the manager's interests with yours. A manager that earns fees upfront but has none of its own money in the loans is paid whether or not the loans are repaid. A manager with its own capital in the same loan shares the outcome. HomeSec co-invests its own money in every loan it offers to investors.
Does HomeSec publish its loss or default history?
HomeSec does not publish loss or default statistics on this site. It has lent its own money since 2004, including through the GFC. If track record is important to your decision, ask our Funding Manager, who will walk you through it on a call and answer your questions directly.
Sources
- ASIC — REP 820 private credit surveillance
- ASIC — REP 814 Private credit in Australia
- ASIC — Signals opportunity for industry to lift private credit standards (REP 814)
- ABC News — ASIC lays down the law to Australian private credit sector
- ASIC — ASIC puts private credit on notice ahead of 30 June valuations and reporting
- Livewire — Private credit: separating noise from reality
Figures are as at 26 September 2026 unless stated. This page is reviewed by Catriona Anderson, General Manager of HomeSec Business Finance, and updated as markets change.
