Typical bank loans versus non-bank lenders

The decision to take a business loan for small businesses? The first decision is who to make an application with. Here’s an easy guide to the advantages and disadvantages of traditional lenders as well as Non-Bank lenders.

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

• With a clear path for development or a well-defined, short-term goal
• Who is able to make the repayments
• If you are aware of the terms and conditions associated with the loan. Your adviser or broker is there to help you with any questions.

If you’re willing to make an investment in inventory, brand new equipment or technology as well as additional staff, training as well as a renovation or new building which could help take your small business to the next level You may want take a look at the advantages and disadvantages of taking on the traditional loan from a bank versus using a non-bank lender.

Do you prefer a lender online or a bank?

Lending from banks

The reputation of a long-established bank is considered safe or solid as could the feeling 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 could be lengthy and complicated, and will require a certain amount of paperwork which some small business owners are limited by time constraints to meet. The process might be speedier in the event that the bank has digital acces to your bank data - even though banks aren’t recognized for their data-savvy approach to small business loaning, the situation is becoming better.

As with all kinds of loans there is a possibility of lower interest rates may need to be considered alongside attributes of the loan product in order to decide on the most appropriate type of loan. The lender and the loan traditional bank loans could have strict guidelines and lengthy application procedures, and are not flexible.

With cash flow so critical to the survival of a lot of small-sized businesses, the distinction between a loan that can be used to purchase stock tomorrow, and an offer for a loan next month when the seasonal demand is gone, could be the difference between a successful or unsuccessful business.

Non-bank or online business loans

When a solid credit history and solid security are typically required for loans from banks, Non-Bank lenders might be more flexible in their approach. They may also have greater flexibility in structuring loans.

Non-bank lenders are usually more innovative in their digital technology than banks, which means applications can sometimes be processed and approved quickly and the funds can be made available by the next dayfollowing approval.

You’ll still have to disclose the purpose of the loan is being used for as well as your company’s type and history, as well as potentially providing security for bigger loans, however, since a thorough business plan and lengthy applications aren’t required in every agreement, things could move more quickly.

Check out these relationships: repayments , and red flags

If you have a good relationship with a bank manager or another lender, you could talk to them about the process of applying for loans and obtaining approval. In other cases, your broker will guide you through the different lending requirements.

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

If you’re thinking about Non-Bank lenders look into independent reviews. If an offer seems too tempting to be real or the pre-approval you receive before applying, or the lender is very aggressive think about speaking with a broker or adviser and examining the details prior to signing the contract.

Whether you’re borrowing from a bank or Non-Bank lender, you’ll need to know the terms and whether you’ll be able meet the obligations. One of the most important considerations is creating a set of rules for yourself when deciding whether business loans should be used to aid your business’s growth in managing seasonal fluctuations and fluctuations in cash flow, to profit from opportunities to buy inventory in huge quantities, or for the costs of running a business and day-to-day operations.