Case Study — Identifying Hidden Risk in Private Lending

Overview 

In traditional lending environments, risk assessment is typically concentrated on the borrower, supported by well established regulatory frameworks and institutional credibility. In contrast, the private lending market, particularly where it operates with limited oversight, can shift this dynamic, exposing borrowers to heightened risk. In such contexts, the reliability of the lender becomes equally critical.  

Context 

A borrower engaged Richmount Advisory while pursuing funding for a large development project through a private lender offering expedited access to capital. The lender positioned itself as capable of rapid settlement, which appealed to the borrower’s timeline. However, as the transaction progressed, the process became increasingly uncertain. Settlement timelines began to slip, and additional upfront fees were requested without clear justification, increasing the borrower’s financial exposure. 

Challenge 

Recognising the growing risk, the borrower sought independent validation of the lender’s legitimacy, funding capacity, and overall credibility. While initial checks suggested the lender may have been viable, inconsistencies in communication and delivery raised concerns that deeper issues could exist beneath the surface. 

Approach 

Richmount Advisory undertook a structured due diligence review, examining not only the entity itself but also the individuals and networks behind it. This included analysis of corporate structures, director relationships, financial histories, and cross jurisdictional legal records. The investigation extended beyond standard checks to incorporate behavioural patterns observed throughout the transaction. 

Findings 

The findings revealed a pattern inconsistent with a genuine lending operation. The lender was linked to a network of interconnected entities with overlapping control, many of which had histories of financial distress, deregistration, or restructuring. There was limited evidence of stable capital backing or verified lending activity. At a behavioural level, ongoing delays were coupled with escalating fee requests, and disclosures regarding funding sources remained inconsistent or incomplete. 

Taken together, these factors indicated that the lender’s model was likely oriented toward extracting upfront fees rather than executing funded transactions. This significantly increased the likelihood that the deal would not reach settlement, exposing the borrower to unnecessary financial and operational risk. 

Outcome 

Richmount Advisory provided a clear, evidence based assessment that enabled the borrower to make an informed decision. With a clearer understanding of the risks, the borrower chose to disengage from the transaction before further exposure occurred. This decision prevented potential financial loss and avoided disruption to the broader development project. 

Value Delivered 

This case demonstrates how risk in private lending can extend well beyond financial metrics or surface level due diligence. Structural complexity, behavioural inconsistencies, and opaque operating models can mask underlying issues that only become visible through deeper investigative analysis. By identifying these risks early, organisations can avoid costly missteps and protect both capital and strategic objectives. 

Ultimately, the case underscores the value of independent, structured due diligence in high stakes transactions, particularly in markets where transparency and regulatory safeguards are limited. 

"In unregulated markets, due diligence must shift beyond the borrower — understanding the credibility, capability and intent of the counterparty is critical to avoiding preventable loss." 

Richmount Advisory