Non-bank lenders versus Typical bank loans

What is the best way to choose a small-business loan? The first step is deciding who to make an application with. Here’s a brief guide to the pros and cons of traditional lenders and Non-Bank lenders.

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

• With a clear plan for expansion or a clearly defined short-term goal
• Who is able make the payments
• Know the terms and conditions with the loan. Your adviser or broker will be there to help you with any concerns.

If you are ready to invest in inventory, new technology or equipment and staffing, renovation or new premises that could take your small company to the next level and beyond, then you should to weigh up the advantages and disadvantages of taking on a traditional bank loan versus using a non-bank lender.

Are you a bank or an online lender?

Loans from banks

The reputation for a brand of long-established bank can be considered solid or secure, as can the sense of security. New Zealand banks are registered with the Reserve Bank of New Zealand and are subject to the same regulations.

The application process for bank loans may be long and complicated and will require a certain amount of paperwork which some small businesses owners may be constrained by the time they have to complete. The process can be speedier in the event that the bank has digital ability to access your personal financial records while banks aren’t usually considered to be data-savvy when it comes to small business loaning, the situation is becoming better.

As is the case with all types of lending, the possibility of lower interest rates might require consideration alongside characteristics of loan products to decide on the best type of loan. As for the lender conventional banks could have strict guidelines and lengthy application procedures, and may not be flexible.

With cash flow being so vital to the survival of many small businesses, the differences between a loan that can be used to purchase stock tomorrow, or a loan in the next month after the seasonal demand is gone, could be the difference that makes or breaks a business.

Online or non-bank business loans

When a solid credit history and solid security are typically required for the bank loan, non-bank lenders may be more flexible in their approach. They can also tend to be more flexible when it comes to structuring loans.

Non-Bank lenders are generally more innovative in their digital technology than banks, which means applications are often processed and approved in a short time, and funds are available within the next dayafter approval.

You’ll still have to explain what the loan is for along with your business’s nature and history, as well possibly providing security for bigger loans, however, because a comprehensive business plan as well as a lengthy application aren’t always part of the deal, things may move quicker.

Beware of relationships, red flags, and repayments

If you have a good relationship with a bank’s management or another lender, you could discuss their lending and application process. Your broker may help you navigate the various requirements of lenders.

Many of the more recent or non-bank lending institutions operate entirely online, some lenders like have a dedicated loan advisor to help you through the process of applying and to really understand your business’s needs.

If you’re thinking about Non-Bank lenders look into independent reviews. If you think an offer is too good to be true, such as if you get pre-approval before you’ve even applied, or the lender is extremely aggressive in their approach take a look at speaking with a broker or adviser and digging deeper before signing on.

If you’re borrowing from a bank or Non-Bank lender, you’ll need to be aware of the conditions and be realistic about whether you can meet the payments. The most important thing to consider is setting ground rules for yourself in deciding if business loans are needed to support your business’s success by coping with seasonal fluctuations, and fluctuating cash flows, or to make the most of opportunities to purchase inventory in massive quantities, or to pay for daily expenses and operations.