Standard bank loans vs non-bank lenders

The decision to take a business loan for small businesses? The first decision is who to go with. This is a quick guide to the advantages and disadvantages of traditional lenders and Non-Bank lenders.

First of all, small business financing is usually a good option for business owners:

• With a clear roadmap for expansion or a clearly defined short-term objective
• Who can make the repayments
• Who understand the terms and conditions associated with the loan. Your advisor or broker is available to assist you if you have any concerns.

If you’re ready to make an investment in inventory, brand new equipment or technology and staffing and renovations or even new premises that could take your small company to the next level If so, you may want to weigh up the pros and cons of taking on the traditional bank loan or dealing with an Non-Bank lender.

Bank or online lender?

Loans from banks

The reputation of a long-established bank can be considered solid or secure and can also give a sense 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 complex and lengthy, and will require a certain amount of paperwork that some small business owners are limited by the time they have to complete. The process may be faster in the event that the bank has digital ability to access your personal financial records although banks aren’t widely known for being data-savvy in small-business loans, their capabilities are becoming better.

Similar to any type of loan the chance of lower interest rates could need to be considered alongside characteristics of loan products to determine the most suitable type of loan. Likewise, lenders Traditional bank loans are likely to have strict criteria and cumbersome application processes, and may not be flexible.

With cash flow being so vital to the survival of a lot of small-sized businesses, the distinction between a loan granted today that could fund stock to sell tomorrow, and an offer for a loan in the next month when season’s demand has ended can be the difference that makes or breaks a business.

Online or non-bank business loans

When a solid credit history and solid security is often required for loans from banks, Non-Bank lenders could be more flexible in their approach. They also may be more flexible in structuring loans.

Non-bank lenders are usually more innovative in their digital technology than banks. This means applications can sometimes be accepted and processed quickly, and the funds can be made available by the next working day, following approval.

There is a need to provide details of what the loan is intended for, your business type and background, as well as potentially providing the security required for larger loans however, since a thorough business plan and a long-winded application aren’t required in every deal, the process could be faster.

Check out these relationships: red flags and payments

If you have a strong relationship with a bank’s manager or another lender, you can discuss their lending and application process. Otherwise, your broker can guide you through the different lending requirements.

Many of the more recent or non-bank lenders work exclusively on the internet, some lenders can assign a loan specialist to guide you through the application process and really get to know your business’s needs.

If you’re considering non-bank lenders look into independent reviews. If you think an offer is too appealing to be true, such as getting pre-approval prior to you’ve even applied or the lender seems very aggressive take a look at speaking with an adviser or broker, and investigating further prior to signing the contract.

When borrowing from a non-bank or bank lender, you may want to be clear about the terms and whether you’ll be able meet the loan repayments. The most important thing to consider is setting ground rules for yourself and deciding if business loans should be used to boost your business’s performance by coping with seasonal fluctuations, and fluctuating cash flows, or to benefit from opportunities to purchase stock in bulk, or to cover day-today operations and costs.