Non-bank lenders versus Standard bank loans

Choosing a small business loan? The first thing to consider is which lender to go with. Here’s an easy guide to the pros and cons of traditional lenders as well as Non-Bank lenders.

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

• With a clear roadmap for growth or a well-defined short-term goal
• Who is able make the payments
• You are aware of the terms and conditions that come with the loan – your broker or adviser is here to assist you with any questions.

If you’re ready to make an investment in the inventory, new equipment or technology and staffing or renovation, or even a new location that could take your small enterprise to the next step If so, you may want take a look at the advantages and disadvantages of taking on traditional bank loans versus working with a non-bank lender.

Are you a bank or an online lender?

Credit from banks

The brand reputation of a long-established bank is considered solid or safe 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 process of applying for bank loans may be long and complicated and requires a lot of paperwork that some small business owners might be limited by time to meet. The process can be speedier when the lender has digital access to your financial records while banks aren’t generally well-known for their expertise in data-driven small-business credit, but they’re getting better.

As with all kinds of loans it is possible that lower interest rates may need to be considered alongside the features of the loan product to decide on the most appropriate kind of loan. As for the lender traditional bank loans could have strict guidelines and cumbersome applications processes as well as being inflexible.

Since cash flow is crucial for the survival of many small enterprises, the gap between a loan that can be used to purchase stock in the near future, and the loan that is granted next month , when the season’s demand has ended 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 necessary for obtaining the bank loan, non-bank lenders might be more flexible in their approach. They also may have more flexibility in structuring loans.

Non-bank lenders are usually more innovative in their digital technology than banks, which means that applications are sometimes completed and approved swiftly, with funds made available within the next day, upon approval.

It is still necessary to provide details of what the loan is for along with your business’s nature and past history, as well being able to provide security for bigger loans, but since a complete business plan as well as a lengthy application aren’t always part of the agreement, things could move quicker.

Beware of relationships, repayments , and red flags

If you have a good relationship with a bank’s management or another lender, you can speak with them about the lending process and their application. If not, your broker could assist you in understanding the various requirements of lenders.

While many newer or non-bank lenders work exclusively online, some lenders like can assign a loan advisor to help you through the loan application process and really get to know your business needs.

If you’re considering non-bank lenders review their reviews by independent sources. If the offer you’re considering seems too tempting to be real for instance, getting pre-approval prior to you’ve even applied, or the lender is extremely aggressive in their approach take a look at speaking with an adviser or broker and digging deeper before signing on.

If you’re borrowing from a non-bank or bank lender, you’ll need to be clear about the terms of the loan and realistic about whether you can meet the loan repayments. A key consideration may be setting ground rules for yourself and deciding if the business loan should be utilized to boost your business’s performance by coping with seasonal fluctuations, and fluctuating cash flows, or to make the most of opportunities to buy inventory in huge quantities, or for the costs of running a business and day-to-day operations.