Non-bank lenders versus Typical bank loans

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

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

• With a clear plan for expansion or a clearly defined time-frame
• Who is able to make the repayments
• If you are aware of the terms and conditions that come with the loan. Your advisor or broker is available to assist you with any concerns.

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

Are you a bank or an online lender?

Bank loans

The reputation for a brand of long-established bank can be considered solid or safe 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 regulations.

The loan application process for bank loans may be long and complicated and may require a large amount of paperwork which some small business owners are limited by time to meet. The process might be speedier if the bank has digital ability to access your personal financial records - even though banks aren’t well-known for their expertise in data-driven small-business loans, their capabilities are becoming better.

Like all kinds of loans there is a possibility of lower interest rates might be considered in conjunction with attributes of the loan product in order to choose the best type of loan. The lender and the loan Traditional bank loans are likely to have strict criteria and lengthy application procedures, and may not be flexible.

Since cash flow is crucial for the survival of many small-sized businesses, the distinction between a loan granted today that could be used to fund the sale of stock in the near future, and the loan that is granted next month when the season’s peak is over, can be the difference between making or breaking.

Online or non-bank business loans

If a good credit history and solid security are typically necessary for obtaining a bank loan, Non-Bank lenders can be more flexible with their approach. They may also offer more flexibility in structuring loans.

Non-bank lenders are usually more innovative in their digital technology than banks, so the applications may be processed and approved quickly with funds being available within the next day, upon approval.

You’ll still have to disclose the purpose of the loan will be used for the business’s name, type of business and history, as well as potentially providing the security required for larger loans however, since a thorough business plan as well as a lengthy application aren’t required in every agreement, things could move faster.

Heads up: relationships, red flags, and repayments

If you have a good relationship with a bank’s managing director or an additional lender, you might contact them regarding their application and lending process. Otherwise, your broker can assist you with the different requirements of lenders.

Many newer and non-bank lending institutions operate entirely on the internet, some lenders have a dedicated loan specialist to guide you through the loan application process and really get to know the requirements of your company.

If you’re considering Non-Bank lenders take a look at independent reviews. If an offer seems too appealing to be true for instance, the pre-approval you receive before you’ve even made an application or if the lender appears aggressive in their approach, consider speaking to an adviser or broker and digging deeper before committing.

If you’re borrowing from a bank or Non-Bank lender, it is important to be aware of the terms and whether you can meet the repayments. A key consideration may be setting the ground rules for your business - deciding whether you should use business loans to aid your business’s growth and to handle seasonal fluctuations, and fluctuating cash flows, or to make the most of opportunities to purchase stock in massive quantities, or to pay for daily expenses and operations.