Regulatory Trends and Compliance in Private Credit for SMEs
Regulators in Australia and abroad are paying close attention to how private credit is structured, disclosed and accessed, especially when retail investors and small businesses are involved.
For small and medium enterprises (SMEs), understanding these regulatory shifts is essential, including the conditions, risks and protections attached to finance.
At Empirical Legal, we specialise in helping startups, scaleups and SMEs navigate the intersection of law, finance and technology. We combine commercial expertise with deep regulatory insight, so you don’t just stay compliant, you also stay competitive.
Summary
Private credit is expanding rapidly, now accounting for about $40 billion in Australia or 2.5% of all business debt (RBA Bulletin Growth in Global Private Credit). Regulators see risks, including transparency, leverage and retail investor exposure. ASIC, APRA and Treasury are considering measures to increase transparency, align with international standards and ensure investor and borrower protection.
For SMEs, five regulatory trends matter most:
Growth of Private Credit: Non-bank lending is rising, providing flexible finance options.
Stronger Oversight: ASIC and APRA are boosting supervision to protect market integrity.
Retail Investor Protections: Rules may tighten as more non-sophisticated investors enter private credit markets.
Superannuation Influence: Super funds’ growing role brings new governance standards.
Data and Transparency: Regulators want more disclosure and international consistency.
Each of these factors affect how SMEs can access credit and the compliance obligations surrounding the provision of that credit.
Growth of Private Credit
Private credit has grown from a niche to a major financing channel. Globally, assets under management have quadrupled in a decade to US$2.1 trillion in 2023 (RBA Bulletin Growth in Global Private Credit). In Australia, the market is smaller but expanding quickly, with around $40 billion outstanding (RBA Bulletin Growth in Global Private Credit).
Why is this happening? Bank lending to SMEs remains tight, often requiring residential property as collateral but private credit funds can offer loans tailored to firms with irregular cashflows, unique assets or intangible-heavy balance sheets. For SMEs, this means access to financing that would otherwise be unavailable.
However, growth comes with risk. Regulators warn that private credit has yet to face a major downturn, making its resilience uncertain (RBA Bulletin Growth in Global Private Credit). SMEs relying on it must be mindful of potential refinancing challenges and the lack of secondary markets for these loans.
Stronger Oversight
ASIC has confirmed that private credit is good for the economy if done well—but warned of risks in its rapid, opaque growth (ASIC Discussion Paper: Australia’s evolving capital markets). The regulator has already launched surveillance of private credit funds, focusing on disclosure, conflicts of interest, valuations and conduct practices.
APRA is also tightening rules for superannuation funds’ investments in private markets, including private credit, with new standards on unlisted asset valuations (RBA Bulletin Growth in Global Private Credit). Treasury is reviewing the broader regulatory framework for managed investment schemes that often house private credit funds (National Consumer Credit Protection Act 2009 - Exposure Draft).
For SMEs, this means that lenders may soon operate under more stringent compliance obligations. Better oversight could bring greater confidence and standardisation but it may also increase the documentation and disclosure SMEs must provide when borrowing.
Retail Investor Protections
Traditionally, private credit was limited to institutional investors. That’s changing. More retail and less sophisticated investors are being offered access to private credit products. ASIC has flagged this as a priority risk, especially where transparency is low and liquidity is limited (ASIC Discussion Paper: Australia’s evolving capital markets).
Some stakeholders have suggested raising the wholesale investor threshold to reduce retail exposure (ASIC Discussion Paper: Australia’s evolving capital markets). Others argue for better disclosure of fees, risks and conflicts.
For SMEs, this matters because investor protections shape the availability of capital. If rules tighten, some smaller funds may exit retail offerings, narrowing funding options. But stronger protections also mean a healthier, more sustainable private credit market, reducing the risk of sudden withdrawals or collapses that could impact business borrowers.
Superannuation Influence
Australia’s superannuation funds now manage more than $3.5 trillion and are a structural force in capital markets (ASIC Discussion Paper: Australia’s evolving capital markets). Increasingly, they are allocating funds to private credit, both directly and through private credit funds.
This brings higher governance expectations. Super trustees are required by APRA to manage liquidity, valuations and disclosure carefully. That pressure cascades down to private credit funds and, in turn, to SMEs borrowing from them.
For SMEs, the involvement of super funds can be positive. Large pools of capital are seeking returns in private credit but it also means borrowers must meet stricter reporting and governance requirements, especially if a super fund is indirectly providing finance.
Data and Transparency
Both ASIC and the RBA stress that private credit markets remain opaque. Estimates of the market’s size range from $1.8 billion to $188 billion, depending on methodology (RBA Bulletin Growth in Global Private Credit).
ASIC is working to align Australia’s practices with international standards, looking at jurisdictions like the US, UK and Singapore (ASIC Discussion Paper: Australia’s evolving capital markets). Expect more standardised disclosure and transparency rules in coming years.
For SMEs, greater transparency could simplify the process of comparing credit options. Over time, clearer standards should reduce hidden fees and improve fairness across lending products.
Key Takeaways
Private credit is reshaping SME finance. It offers flexibility and fills gaps left by banks but its rapid growth is attracting regulatory attention. SMEs should expect:
More oversight of lenders by ASIC and APRA;
Stronger protections for retail investors, which may affect funding availability;
Higher governance standards as super funds play a bigger role; and
Increased transparency requirements across the sector.
Staying informed is the best way to stay ahead. At Empirical Legal, we track these developments closely and help SMEs navigate compliance without losing sight of growth opportunities.
Empirical Legal is a corporate advisory and technology law firm for startups, scaleups and SMEs.
We combine legal, technology, and business experience and expertise to deliver practical, actionable advice and solutions.
Contact us today to discuss how regulatory changes might affect your financing options.
Reach out to Empirical Legal today.