Non-bank lenders versus Standard bank loans

Choosing a small business loan? The first step is deciding who to apply with. This is a quick guide to the advantages and disadvantages of traditional lenders as well as Non-Bank lenders.

First of all, small business financing is usually a good option for business owners:

• With a clear path for growth or a well-defined short-term goals
• Who is able make the payments
• If you are aware of the terms and conditions that come with the loan. Your adviser or broker will be there to help you with any concerns.

If you’re ready to make an investment in the inventory, new equipment or technology and staffing as well as a renovation or new building that can take your company to the next level If so, you may want take a look at the advantages and disadvantages of taking out the traditional loan from a bank versus dealing with an Non-Bank lender.

Are you a bank or an online lender?

Lending from banks

The reputation for a brand of long-standing bank can be seen as solid or secure and can also give a sense of security. 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 require a level of paperwork that small entrepreneurs may be restricted by time constraints to meet. The process may be faster in the event that the bank has digital accessibility to financial data - although banks aren’t widely considered to be data-savvy when it comes to small-business credit, but they’re becoming better.

Like any type of loan the chance of lower interest rates will need to be considered along with the features of the loan product to determine the most suitable type of loan. As for the lender traditional bank loans could have strict guidelines and cumbersome application processes, and may not be flexible.

Cash flow is so crucial for the survival of many small-sized businesses, the distinction between a loan today which can fund inventory to sell in the near future, and the loan that is granted next month after the seasonal demand is gone, could be the difference between a successful or unsuccessful business.

Business online or non-bank loans

Where a strong credit history and solid security are often essential for loans from banks, Non-Bank lenders could be more flexible in their approach. They can also tend to have more flexibility in the way they structure loans.

Non-Bank lenders are often more technologically advanced than banks, meaning that applications are sometimes accepted and processed quickly, with funds made available within the next working day, following approval.

You’ll usually still need to disclose the purpose of the loan is intended for as well as your company’s type and history, as well in the event of providing security for loans that are larger, but because a comprehensive business plan and lengthy applications aren’t always part of the arrangement, things can move more quickly.

Check out these relationships: repayments , and red flags

If you have a strong relationship with a bank manager or an additional lender, you might talk to them about their lending and application process. Your broker may help you navigate the different lending requirements.

While many newer or non-bank lenders work exclusively online, certain lenders have a dedicated loan advisor to help you through the loan application process and to really understand the requirements of your company.

If you’re considering non-bank lenders, check out independent reviews. If an offer appears too good to be true like if you get pre-approval before you’ve even applied or the lender seems uncompromising in their approach, consider speaking to advisors or brokers and examining the details before signing on.

Whether you’re borrowing from a bank or Non-Bank lender, you’ll need to be clear about the terms and whether you’ll be able meet the obligations. One of the most important considerations is setting ground rules for yourself - deciding whether you should use business loans to support your business’s success by coping with seasonal ups and downs and fluctuations in cash flow, or to take advantage of opportunities to buy inventory in massive quantities, or to pay for the costs of running a business and day-to-day operations.