Standard bank loans versus non-bank lenders

What is the best way to choose a small-business loan? The first thing to consider is which lender to make an application with. Here’s a simple guide to the pros and cons of traditional lenders and Non-Bank lenders.

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

• With a clear roadmap for expansion or a clearly defined short-term goals
• Who will be able to pay the loan
• If you are aware of the terms and conditions that come with the loan. Your advisor or broker is available to help if you have any questions.

If you are ready to invest in inventory, brand new equipment or technology, extra staff, training and renovations or even new premises which could help take your small business to the next level If so, you may want to weigh the advantages and disadvantages of taking out a traditional bank loan versus using a non-bank lender.

Online or bank?

Lending from banks

The brand reputation of a long-established bank can be considered solid and secure and can also give a sense of security – in New Zealand banks are registered with the Reserve Bank of New Zealand and are subject to the same rules.

The application for bank loans can be lengthy and complicated, and requires a lot of paperwork that small entrepreneurs may be restricted by the time they have to complete. The process can be speedier if the bank has digital access to your financial records while banks aren’t usually well-known for their expertise in data-driven small-business loans, their capabilities are becoming better.

Like every type of lending, the possibility of lower interest rates may require consideration alongside the features of the loan product to determine the best type of loan and lender Traditional bank loans may have strict criteria and cumbersome application processes, as well as being inflexible.

With cash flow so critical for the survival of many small-sized businesses, the distinction between a loan that could be used to fund the sale of stock tomorrow, and an offer for a loan next month when the season’s demand has ended can be the difference between making or breaking.

Non-bank or online business loans

Where a strong credit history and solid security are often a must-have for a bank loan, Non-Bank lenders might be more flexible in their approach. They could also have more flexibility when it comes to structuring loans.

Non-Bank lenders are often more technologically advanced than banks, meaning applications can sometimes be processed and approved in a short time, and funds are available within the next day, upon approval.

You’ll usually still need to give details about what the loan is intended for as well as your company’s type and its history, as in the event of providing the security required for larger loans however, because a comprehensive business plan and a long-winded application aren’t always part of the agreement, things could move faster.

Check out these relationships: repayments and red flags

If you have a good relationship with a bank’s manager or an other lender, you may speak with them about the lending process and their application. Your broker may guide you through the different requirements of lenders.

Although many of the newer non-bank lenders operate exclusively online, some lenders like have a dedicated loan advisor to help you through the process of applying and get to know your business’s needs.

If you’re thinking of a loan from a Non-Bank lender look into independent reviews. If you think an offer is too promising to be true, such as when you are pre-approved before you’ve even submitted an application or if the lender seems extremely aggressive in their approach, consider speaking to a broker or adviser and investigating further before signing on.

Whether you’re borrowing from a non-bank or bank lender, it is important to know the terms and realistic about whether you can meet the payments. One of the most important considerations is creating a set of rules for yourself - deciding whether the business loan should be utilized to aid your business’s growth by coping with 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.