Non-bank lenders vs Typical bank loans

What is the best way to choose a small-business loan? The first decision is who to make an application with. Here’s an easy guide to the advantages and disadvantages of traditional lenders as well as Non-Bank lenders.

The first thing to consider is small-business financing usually suits business owners:

• With a clear roadmap for growth or a well-defined short-term goal
• Who is able to make the repayments
• Who understand the terms and terms associated with the loan. Your broker or adviser is here to help if you have any questions.

If you’re willing to make an investment in the inventory, new technology or equipment as well as additional staff, training and renovations or even new premises that could take your small company to the next level You may want to weigh the advantages and disadvantages of taking on the traditional loan from a bank versus dealing with an Non-Bank lender.

Do you prefer a lender online or a bank?

Credit from banks

The reputation for a brand of long-established bank can be considered safe or solid as could the feeling of security – in New Zealand banks are registered with the Reserve Bank of New Zealand and are subject to the same rules.

The application process for bank loans could be lengthy and complicated, and will require a certain amount of paperwork which some small businesses owners may be constrained by the time they have to complete. The process could be quicker when the bank has electronic acces to your bank records while banks aren’t usually well-known for their expertise in data-driven small-business credit, but they’re getting better.

Similar to any type of loan, the possibility of lower interest rates will be considered in conjunction with loan product features in order to select the best type of loan and lender - loans from traditional banks might have strict requirements and lengthy application procedures, and lack flexibility.

With cash flow being so vital to the survival of a lot of small-sized businesses, the distinction between a loan that could be used to fund the sale of stock in the near future, and an offer for a loan next month after the season’s demand has ended can be the difference between a successful or unsuccessful business.

Business online or non-bank loans

When a solid credit history and solid security is often essential for the bank loan, non-bank lenders could be more flexible with their approach. They could also have more flexibility when it comes to structuring loans.

Non-bank lenders are usually more digitally innovative than banks, so the applications may be processed and approved in a short time, with funds being available within the next working day, following approval.

It is still necessary to give details about what the loan is being used for along with your business’s nature and history, as well possibly providing security for loans that are larger, however, because a comprehensive business plan as well as a lengthy application aren’t required in every arrangement, things can move faster.

Attention: Relationships, repayments and red flags

If you have a good relationship with a bank’s managing director or another lender, you could talk to them about their application and lending process. If not, your broker could assist you with the different requirements of lenders.

Many newer and non-bank lenders are exclusively online, some lenders like offer a dedicated loan advisor to help you through the loan application process and get to know your business needs.

If you’re considering Non-Bank lenders take a look at independent reviews. If an offer seems too appealing to be true like the pre-approval you receive before you’ve even made an application, or the lender is uncompromising in their approach think about speaking with an adviser or broker, and digging deeper before committing.

Whether you’re borrowing from a bank or Non-Bank lender, it is important to know the terms and realistic about whether you’ll be able meet the obligations. One of the most important considerations is setting ground rules for yourself - deciding whether business loans should be used to boost your business’s performance by coping with the seasonal changes in fluctuations in cash flow, or to benefit from opportunities to buy stock in bulk, or to cover everyday expenses and operational costs.