Typical bank loans vs non-bank lenders

What is the best way to choose a small-business loan? First, you must decide who to apply with. Here’s a brief guide to the advantages and disadvantages of traditional lenders as well as Non-Bank lenders.

The first thing to consider is small-business financing is usually a good option for business owners:

• With a clear plan for growth or a well-defined short-term goals
• Who can make the repayments
• You are aware of the terms and conditions associated with the loan. Your adviser or broker will be there to assist you if you have any concerns.

If you’re ready to make an investment in inventory, new technology or equipment as well as additional staff, training, renovation or new premises that will take your company to the next level and beyond, then you should take a look at the advantages and disadvantages of taking on the traditional bank loan or using a non-bank lender.

Are you a bank or an online lender?

Credit from banks

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

The process of applying for bank loans may be lengthy and complicated, and requires a lot of paperwork that some small business owners might be limited by time constraints to meet. The process can be speedier when the lender has digital ability to access your personal financial records - although banks aren’t widely well-known for their expertise in data-driven small-business loans, their capabilities are getting better.

As is the case with all types of lending, the possibility of lower interest rates might require consideration alongside loan product features to decide on the most suitable type of loan. As for the lender - loans from traditional banks could have strict guidelines as well as lengthy and complicated application processes and are not flexible.

Since cash flow is crucial to the survival of many small-sized businesses, the distinction between a loan today which could fund stock to sell in the next day, and a loan granted next month after the season’s peak 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 usually necessary for obtaining the bank loan, non-bank lenders can be more flexible with their approach. They may also be more flexible in the way they structure loans.

Non-bank lenders are usually more technologically advanced than banks, which means the applications may be completed and approved swiftly, and funds are available within the next working day, following 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 in the event of providing security for larger loans, however, because a comprehensive business plan and a long-winded application aren’t always part of the agreement, things could move quicker.

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 discuss the lending process and their application. Your broker may guide you through the different requirements of lenders.

Many of the more recent or non-bank lenders operate exclusively online, some lenders like can assign a loan specialist to guide you through the application process and truly get to know the requirements of your company.

If you’re thinking of a loan from a Non-Bank lender, check out independent reviews. If you think an offer is too promising to be true like the pre-approval you receive before you’ve even submitted an application or the lender seems aggressive in their approach, consider speaking to an adviser or broker and digging deeper before signing up.

If you’re borrowing money from a bank or non-bank lender, you’ll want to know the terms and whether you can meet the repayments. One of the most important considerations is setting ground rules for yourself when deciding whether business loans should be used to aid your business’s growth by coping with seasonal ups and downs and fluctuations in cash flow, or to make the most of opportunities to buy stock in massive quantities, or to pay for day-today operations and costs.