Under cross examination on Monday, Mr Riordan told the Royal Commission into Trade Union Governance and Corruption that as security for the loan, he had relied on a promise that the ALP would receive an unknown amount of public funding after the 2011 state election.

He said the 8.5 per cent interest the ALP offered to pay for the loan was a good commercial return.

In a sworn statement, Mr Riordan said he met with the former NSW ALP secretary Sam Dastyari and assistant secretary Chris Minns on December 20, 2010 to discuss the loan proposal.

He said Mr Dastyari asked for the ETU's help after the CFMEU "pulled out" of a similar loan agreement to help fund the 2011 state election campaign.

In response, Mr Riordan said that was a "big ask" within a month of his being forced by the former Labor premier Kristina Keneally to resign as president of the NSW ALP.

But because Mr Dastyari had assured him the loan was on good commercial terms, he agreed to put it to the ETU executive.

"I was prepared to put it to the executive, but I reiterated on a number of occasions to them this was not a donation," Mr Riordan said, adding that Labor Party officials "always prefer a donation, obviously".

"The conflict of interest I had was in relation to the fact that I had a very sour taste in my mouth in relation to the ALP, that my view of the Premier and her government at that point in time was not very high and I was at pains to ensure that my personal views and anxiety, and dare I say it embarrassment, should not cloud the decision in relation to what I regarded to be a commercial loan."

In his email of August 11, 2012 to current ETU secretary Steve Butler, tendered as evidence, Mr Riordan said the loan request from the ALP was treated as an investment and "was made very urgently to overcome an issue with the new political donation laws".

Mr Riordan said he reported the ALP loan request to the state council on December 20 as a good investment.

"I believed that it would be a good commercial decision for the ETU NSW because the $500,000 was available in an ANZ bank account, with the interest earnings in that account being significantly less than what was on offer from the NSW ALP," Mr Riordan said.

"While the minutes do not contain a reference to the report I provided in respect to the proposed loan, I recall that in my report I advised the state council executive that the sum of the proposed loan was $500,000, that the interest rate would be somewhere around 8 per cent and that it would be secured against monies payable to the NSW ALP pursuant to the recently introduced public funding arrangements.

"There was no dissent to my recommendation from the members of the state council executive and my belief was that it was supported on a consensus basis."

Mr Riordan said he believed the executive meeting had consented to the loan, giving him authority to proceed.

His evidence contradicts that of other witnesses, including ETU assistant secretary Paul Sinclair, who took minutes of the December 20 meeting.

Mr Sinclair told the royal commission last week that he attended and took minutes at executive and council meetings on December 13 and 20 in 2010. Mr Sinclair gave sworn evidence that there was no discussion of an ALP loan at those meetings before $500,000 was transferred from the ETU bank account to the ALP on December 23.

He said he first heard of the loan in January the following year.

ETU president James MacFadyen told the commission that he remembered the loan was discussed at the December 20 meeting, despite it not being recorded in the minutes that were approved in January.

Russell Wilson, an elected official of the ETU, said he first learned about the $500,000 loan on February 13, 2012.