Non-bank lenders versus Traditional bank loans

The decision to take a business loan for small businesses? The first thing to consider is which lender to go with. This is a quick guide to the pros and cons of traditional lenders and Non-Bank lenders.

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

• With a clearly defined plan of expansion or a clearly-defined short-term goal
• Who will be able to pay the loan
• You are aware of the terms and conditions that come with the loan. Your adviser or broker is there to assist you with any concerns.

If you are ready to invest in inventory, new technology or equipment as well as additional staff, training, renovation or new premises which could help take your small enterprise to the next step If so, you may want to weigh the pros and cons of taking on a traditional bank loan versus dealing with an Non-Bank lender.

Bank or online lender?

Loans from banks

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

The process of applying for bank loans may be complex and lengthy, and requires a lot of paperwork which some small entrepreneurs may be restricted in time to fulfill. The process may be faster when the bank has electronic acces to your bank records while banks aren’t usually considered to be data-savvy when it comes to small-business credit, but they’re becoming better.

Similar to every type of lending there is a possibility of lower interest rates might need to be considered alongside the features of the loan product to choose the most suitable type of loan. The lender and the loan - loans from traditional banks may have strict criteria and lengthy application procedures, and lack flexibility.

With cash flow being so vital to the survival of many small businesses, the difference between a loan today which can fund inventory to sell tomorrow, or a loan in the next month after the seasonal demand is over can be the difference between a successful or unsuccessful business.

Non-bank or online business loans

A credit score that is strong and solid security are usually required for loans from banks, Non-Bank lenders can be more flexible with their approach. They can also tend to offer more flexibility when it comes to structuring loans.

Non-bank lenders are usually more digitally innovative than banks, which means applications are often accepted and processed quickly, and funds are available within the next dayafter approval.

There is a need to disclose the purpose of the loan is for as well as your company’s type and history, as well possibly providing the security required for larger loans but because a comprehensive business plan and a long-winded application aren’t always part of the deal, the process could be more quickly.

Attention: Relationships, repayments , and red flags

If you have a good relationship with a bank’s managing director or an additional lender, you might contact them regarding their lending and application process. Otherwise, your broker can guide you through the requirements of different lenders.

Although many of the newer non-bank lenders work exclusively online, some lenders like can provide a dedicated loan advisor to help you through the process of applying and get to know your business needs.

If you’re thinking about Non-Bank lenders look into independent reviews. If an offer appears too appealing to be true for instance, the pre-approval you receive before applying, or the lender is uncompromising in their approach think about speaking with an adviser or broker and investigating further before signing on.

When borrowing from a bank or non-bank lender, it is important to be clear about the terms of the loan and realistic about whether you’re able to make the obligations. A key consideration may be making a list of the rules you’ll need to follow in deciding if business loans should be used to help your business thrive and to handle seasonal ups and downs and cash flow fluctuations, to profit from opportunities to purchase stock in huge quantities, or for day-today operations and costs.