Standard bank loans versus non-bank lenders

Choosing a small business loan? The first step is deciding who to apply with. Here’s a simple guide to the pros and cons of traditional lenders and Non-Bank lenders.

First up, small business financing typically suits business owners:

• With a clear roadmap for expansion or a clearly defined short-term goals
• Who is able make the payments
• Know the terms and terms associated with the loan. Your adviser or broker is there to assist you with any concerns.

If you are ready to make an investment in inventory, brand new equipment or technology or staffing, additional training, renovation or new premises which could help take your small company to the next level If so, you may want to consider the pros and cons of taking out traditional bank loans versus using a non-bank lender.

Bank or online lender?

Lending from banks

The reputation of a established bank can be regarded as solid or 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 may be long and complex, and may require a large amount of paperwork that small entrepreneurs may be restricted by time to meet. The process may be faster when the lender has digital accessibility to financial records - while banks aren’t usually well-known for their expertise in data-driven small-business loans, their capabilities are getting better.

Similar to any type of loan the chance of lower interest rates may need to be considered alongside loan product features to decide on the most suitable type of loan and lender traditional bank loans may have strict criteria as well as lengthy and complicated application processes and are not flexible.

With cash flow being so vital to the survival of lots of small enterprises, the gap between a loan that could be used to fund the sale of stock in the near future, and a loan granted next month when the seasonal demand is gone, could be the difference between making or breaking.

Online or non-bank business loans

When a solid credit history and solid security is often required for the bank loan, non-bank lenders may be more flexible with their approach. They can also tend to have greater flexibility in structuring loans.

Non-bank lenders are typically more innovative in their digital technology than banks, meaning applications are often completed and approved swiftly, and funds are available within the next day, upon approval.

There is a need to give details about what the loan is intended for as well as your company’s type and its history, as being able to provide the security required for larger loans however, because a comprehensive business plan and lengthy applications aren’t always part of the agreement, things could move faster.

Check out these relationships: repayments , and red flags

If you’ve established a solid relationship with a bank’s management or another lender, you could talk to them about their application and lending process. Your broker may assist you in understanding the various requirements of lenders.

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

If you’re considering non-bank lenders, check out independent reviews. If an offer appears too appealing to be true like the pre-approval you receive before you’ve even applied or if the lender seems very aggressive you should talk to an adviser or broker, and looking into the matter prior to signing the contract.

If you’re borrowing from a bank or a Non-Bank lender, you may want to know the terms and realistic about whether you’ll be able meet the loan repayments. The most important thing to consider is creating a set of rules for yourself when deciding whether business loans are needed to boost your business’s performance by coping with seasonal ups and downs and cash flow fluctuations, to take advantage of opportunities to purchase stock in large quantities, or to fund everyday expenses and operational costs.