Non-bank lenders vs Standard bank loans

How do you choose a small business loan? The first decision is who to approach. Here’s a brief guide to the advantages and disadvantages of traditional lenders as well as Non-Bank lenders.

First , small-scale business financing usually suits business owners:

• With a clearly defined plan of development or a well-defined, short-term objective
• Who is able make the payments
• If you are aware of the terms and conditions with the loan. Your broker or adviser is here to assist you if you have any questions.

If you’re ready to invest in inventory, new technology or equipment and staffing as well as a renovation or new building which could help take your small business to the next level, then you might want take a look at the advantages and disadvantages of taking out traditional bank loans versus using a non-bank lender.

Bank or online lender?

Lending from banks

The brand reputation of a long-established bank is considered safe or solid in the sense of security – in New Zealand banks are registered with the Reserve Bank of New Zealand and are subject to the same rules.

The loan application process for bank loans can be long and complicated and will require a certain amount of paperwork which some small businesses owners may be constrained in time to fulfill. The process might be speedier when the bank has electronic access to your financial records while banks aren’t generally known for being data-savvy in small-business loaning, the situation is getting better.

Similar to all kinds of loans the chance of lower interest rates might be considered in conjunction with loan product features to choose the most suitable type of loan. As for the lender traditional bank loans might have strict requirements and cumbersome application processes, as well as being inflexible.

With cash flow being so vital for the survival of many small enterprises, the gap between a loan granted today that can be used to purchase stock tomorrow, or a loan in the next month after the seasonal demand is over can be the difference between a successful or unsuccessful business.

Non-bank or online business loans

If a good credit history and solid security is often necessary for obtaining the bank loan, non-bank lenders may be more flexible in their approach. They also may have more flexibility when it comes to structuring loans.

Non-bank lenders are usually more digitally innovative than banks, so applications can sometimes be accepted and processed quickly, and funds are available within the next dayafter approval.

You’ll usually still need to give details about what the loan will be used for along with your business’s nature and its history, as in the event of providing security for larger loans, however, because a comprehensive business plan and cumbersome applications aren’t always part of the arrangement, things can move quicker.

Heads up: relationships, red flags, and repayments

If you’ve established a solid relationship with a bank’s management or an additional lender, you might speak with them about their application and lending process. In other cases, your broker will assist you with the different lending requirements.

Although many of the newer non-bank lending institutions operate entirely online, some lenders like can assign a loan specialist to guide you through the application process and to really understand your business needs.

If you’re considering non-bank lenders take a look at independent reviews. If the offer you’re considering seems too good to be true for instance, the pre-approval you receive before you’ve even applied or if the lender seems uncompromising in their approach take a look at speaking with a broker or adviser and examining the details before signing on.

If you’re borrowing money from a bank or a Non-Bank lender, you may want to know the terms and whether you’ll be able meet the repayments. One important aspect to think about is setting the ground rules for your business in deciding if you should use business loans to help your business thrive in managing seasonal fluctuations, and fluctuating cash flows, or to make the most of opportunities to buy stock in huge quantities, or for the costs of running a business and day-to-day operations.