Home loan provider Pepper Group has received a $650 million bid from private equity firm KKR, it told the market this morning.

Amid rumours of a deal in recent months, Pepper this morning confirmed an indicative non-binding proposal of $3.60 a share, with permission for directors to also declare a dividend of 3c a share.

Rumours of the deal appear to have already influenced trading this week. Pepper's shares were up as much as 9 per cent on Tuesday and closed that day at $3.75, higher than KKR's offer.

Pepper said it had given KKR permission to conduct due diligence and potentially come up with a binding offer.

Pepper is non-bank lender that specialises in "non-conforming" home loans, such as to self-employed customers who can find it harder to get credit from a bank.

It floated in 2015 with an initial offer price of $2.60 a share.

The deal, if it goes ahead, could be a significant payday for chairman and founder Seamus Dawes and co-chief executives Patrick Tuttle and Michael Culhane.

More to come.