Non-bank lenders versus Traditional 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 up, small business financing is usually a good option for business owners:

• With a clear roadmap for growth or a well-defined short-term goal
• Who is able make the payments
• Know the terms and conditions associated with the loan. Your advisor or broker is available to assist you with any concerns.

If you’re looking to make an investment in the inventory, new equipment or technology as well as additional staff, training or renovation, or even a new location that will take your company to the next level, then you might want to consider the pros and cons of taking on the traditional bank loan or taking on a Non-Bank lender.

Are you a bank or an online lender?

Loans from banks

The reputation of a long-established bank can be considered solid or safe as could the feeling of security. New Zealand banks are registered with the Reserve Bank of New Zealand and fall under the same rules.

The process of applying for bank loans can sometimes be long and complicated and requires a lot of paperwork which some small entrepreneurs may be restricted in time to fulfill. The process could be quicker in the event that the bank has digital acces to your bank records - even though banks aren’t well-known for their expertise in data-driven small-business loans, their capabilities are becoming better.

As with all kinds of loans, the possibility of lower interest rates could need to be considered along with the features of the loan product to choose the most appropriate kind of loan. Likewise, lenders traditional bank loans could have strict guidelines and cumbersome applications processes and may not be flexible.

Cash flow is so crucial to the survival of a lot of small enterprises, the gap between a loan today that could be used to fund the sale of stock tomorrow, and the loan that is granted next month when the season’s peak is over, can be make or break.

Online or non-bank business loans

If a good credit history and solid security are usually essential for loans from banks, Non-Bank lenders might be more flexible with their approach. They may also have more flexibility in the way they structure loans.

Non-Bank lenders are generally more technologically advanced than banks, meaning the applications may be accepted and processed quickly, and funds are available within the next day, upon approval.

It is still necessary to explain what the loan is intended for along with your business’s nature and background, as well in the event of providing security for loans that are larger, however, since a thorough business plan and lengthy applications aren’t always part of the arrangement, things can move more quickly.

Check out these relationships: red flags, and repayments

If you’re in a long-standing relationship with a bank’s management or an other lender, you may speak with them about the process of applying for loans and obtaining approval. Otherwise, your broker can help you navigate the various requirements of lenders.

Although many of the newer non-bank lenders work exclusively online, certain lenders can provide a dedicated loan specialist to guide you through the process of applying and really get to know your business’s needs.

If you’re considering non-bank lenders take a look at independent reviews. If you think an offer is too appealing to be true like when you are pre-approved before you’ve even made an application or if the lender seems extremely aggressive in their approach you should talk to advisors or brokers and looking into the matter before signing up.

If you’re borrowing money from a non-bank or bank lender, you’ll want to know the terms of the loan and realistic about whether you’re able to make the obligations. The most important thing to consider is setting the ground rules for your business and deciding if the business loan should be utilized to aid your business’s growth and to handle the seasonal changes in fluctuations in cash flow, or to take advantage of opportunities to purchase stock in bulk, or to cover everyday expenses and operational costs.