Non-bank lenders versus Traditional bank loans

What is the best way to choose a small-business loan? The first step is deciding who to approach. Here’s an easy guide to the advantages and disadvantages of traditional lenders and Non-Bank lenders.

First of all, small business finance is typically a great option for business owners:

• With a clear plan for expansion or a clearly defined short-term goals
• Who will be able to pay the loan
• If you are aware of the terms and conditions that come with the loan – your adviser or broker is there to assist you if you have any questions.

If you’re ready to invest in inventory, brand new technology or equipment, extra staff, training as well as a renovation or new building that will take your business to the next stage You may want to consider the advantages and disadvantages of taking on a traditional bank loan versus working with a non-bank lender.

Bank or online lender?

Bank loans

The reputation of a long-established bank can be considered solid and secure and can also give a sense of security. New Zealand banks are registered with the Reserve Bank of New Zealand and fall under the same regulations.

The application process for bank loans could be long and complicated and requires a lot of paperwork that some small entrepreneurs may be restricted in time to fulfill. The process can be speedier when the bank has electronic acces to your bank records - although banks aren’t widely considered to be data-savvy when it comes to small business credit, but they’re getting better.

Like all kinds of loans the chance of lower interest rates may need to be considered along with loan product features to determine the most suitable type of loan. The lender and the loan - loans from traditional banks may have strict criteria and cumbersome applications processes and lack flexibility.

Since cash flow is crucial to the survival of a lot of small businesses, the difference between a loan that could fund stock to sell in the next day, and a loan in the in the next month when seasonal demand is over can be the difference between making or breaking.

Business online or non-bank loans

A credit score that is strong and solid security are typically required for the bank loan, non-bank lenders may be more flexible in their approach. They could also offer more flexibility in the way they structure loans.

Non-bank lenders are usually more technologically advanced than banks, so the applications may be accepted and processed quickly, with funds being available within the next dayafter approval.

It is still necessary to give details about what the loan will be used for along with your business’s nature and history, as well as potentially providing security for larger loans, however, because a comprehensive business plan and lengthy applications aren’t always part of the deal, things may move quicker.

Beware of relationships, red flags and payments

If you’ve established a solid relationship with a bank manager or an other lender, you may contact them regarding their application and lending process. If not, your broker could help you navigate the requirements of different lenders.

While many newer or non-bank lenders work exclusively online, certain lenders can assign a loan specialist to guide you through the application process and to really understand your business’s needs.

If you’re considering non-bank lenders, check out independent reviews. If you think an offer is too tempting to be real, such as the pre-approval you receive before you’ve even applied or if the lender appears uncompromising in their approach, consider speaking to an adviser or broker, and examining the details prior to signing the contract.

When borrowing from a bank or Non-Bank lender, you’ll need to know the terms and realistic about whether you’ll be able meet the repayments. A key consideration may be setting ground rules for yourself when deciding whether business loans are needed to boost your business’s performance by coping with seasonal fluctuations and fluctuations in cash flow, or to profit from opportunities to buy stock in bulk, or to cover daily expenses and operations.