Non-bank lenders vs Typical bank loans

What is the best way to choose a small-business loan? The first thing to consider is which lender to approach. This is a quick guide to the advantages and disadvantages of traditional lenders as well as Non-Bank lenders.

First of all, small business financing usually suits business owners:

• With a clear roadmap for expansion or a clearly-defined short-term goals
• Who can make the repayments
• Who understand the terms and terms associated with the loan. Your adviser or broker is there to help if you have any concerns.

If you’re ready to make an investment in inventory, new equipment or technology as well as additional staff, training or renovation, or even a new location which could help take your small company to the next level If so, you may want to weigh up the pros and cons of taking on traditional bank loans versus using a non-bank lender.

Do you prefer a lender online or a bank?

Loans from banks

The brand reputation of a long-established bank can be considered solid or safe, as can the sense of security. New Zealand banks are registered with the Reserve Bank of New Zealand and are subject to the same regulations.

The loan application process for bank loans can sometimes be lengthy and complicated, and may require a large amount of paperwork that some small business owners might be limited by time constraints to meet. The process could be quicker when the bank has electronic ability to access your personal financial records - while banks aren’t generally considered to be data-savvy when it comes to small-business loans, their capabilities are becoming better.

Like all types of lending there is a possibility of lower interest rates will need to be considered alongside the features of the loan product to determine the best type of loan. As for the lender - loans from traditional banks may have strict criteria and cumbersome application processes, and may not be flexible.

With cash flow so critical to the survival of many small businesses, the difference between a loan today which can be used to purchase stock in the next day, and a loan in the next month , when the seasonal demand is over can be make or break.

Online or non-bank business loans

If a good credit history and solid security are typically necessary for obtaining loans from banks, Non-Bank lenders might be more flexible in their approach. They may also have greater flexibility in the way they structure loans.

Non-Bank lenders are generally more innovative in their digital technology than banks, so the applications may be accepted and processed quickly, and funds are available within the next day, upon approval.

It is still necessary to explain what the loan is for along with your business’s nature and history, as well as potentially providing security for bigger loans, however, since a thorough 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 manager or an other lender, you may speak with them about their application and lending process. Your broker may assist you with the different lending requirements.

Many newer and non-bank lenders are exclusively on the internet, some lenders offer a dedicated loan specialist to guide you through the application process and to really understand the requirements of your company.

If you’re thinking of a loan from a Non-Bank lender review their reviews by independent sources. If the offer you’re considering seems too good to be true or when you are pre-approved before you’ve even made an application, or the lender is extremely aggressive in their approach you should talk to an adviser or broker and examining the details prior to signing the contract.

If you’re borrowing money from a bank or Non-Bank lender, you may want to be aware of the terms of the loan and realistic about whether you can meet the payments. A key consideration may be making a list of the rules you’ll need to follow and deciding if you should use business loans to boost your business’s performance and to handle seasonal ups and downs and fluctuating cash flows, or to take advantage of opportunities to purchase stock in massive quantities, or to pay for day-today operations and costs.