Non-bank lenders versus Traditional bank loans

How do you choose a small business loan? First, you must decide who to make an application with. Here’s a simple guide to the advantages and disadvantages of traditional lenders and Non-Bank lenders.

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

• With a clear plan for development or a well-defined, short-term objective
• Who is able to make the repayments
• If you are aware of the terms and terms associated with the loan. Your adviser or broker is there to help you with any questions.

If you are ready to invest in inventory, brand new equipment or technology, extra staff, training or renovation, or even a new location that can take your enterprise to the next step and beyond, then you should to consider the pros and cons of taking out the traditional bank loan or taking on a Non-Bank lender.

Do you prefer a lender online or a bank?

Credit from banks

The reputation for a brand of long-standing bank can be seen as solid or safe in the sense of security – in New Zealand banks are registered with the Reserve Bank of New Zealand and are subject to the same rules.

The process of applying for bank loans can be long and complex, and will require a certain amount of paperwork which some small businesses owners may be constrained by time to meet. The process may be faster in the event that the bank has digital ability to access your personal financial records - while banks aren’t generally known for being data-savvy in small business loaning, the situation is becoming better.

As with all kinds of loans, the possibility of lower interest rates will need to be considered along with loan product features to determine the best type of loan. Likewise, lenders Traditional bank loans could have strict guidelines and cumbersome application processes, and lack flexibility.

With cash flow being so vital to the survival of lots of small-sized businesses, the distinction between a loan today which could be used to fund the sale of stock in the next day, and an offer for a loan next month after the season’s demand has ended can be the difference between a successful or unsuccessful business.

Online or non-bank business loans

Where a strong credit history and solid security are often necessary for obtaining loans from banks, Non-Bank lenders can be more flexible with their approach. They may also have more flexibility when it comes to structuring loans.

Non-bank lenders are typically more innovative in their digital technology than banks, which means applications can sometimes be completed and approved swiftly, with funds being available within the next working day, following approval.

You’ll usually still need to give details about what the loan is for along with your business’s nature and background, as well possibly providing security for bigger loans, but since a complete business plan and cumbersome applications aren’t always part of the deal, the process could be more quickly.

Heads up: relationships, red flags, and repayments

If you have a good relationship with a bank’s manager or an other lender, you may discuss their application and lending process. Your broker may assist you in understanding the different lending requirements.

Many newer and non-bank lenders are exclusively online, some lenders can provide a dedicated specialist in loan to guide you through the application process and get to know your business’s needs.

If you’re considering Non-Bank lenders review their reviews by independent sources. If the offer you’re considering seems too promising to be true like the pre-approval you receive before you’ve even made an application or if the lender seems aggressive in their approach you should talk to advisors or brokers and looking into the matter before committing.

Whether you’re borrowing from a non-bank or bank lender, you’ll want to know the terms of the loan and realistic about whether you can meet the loan repayments. A key consideration may be setting the ground rules for your business and deciding if business loans should be used to help your business thrive by coping with seasonal fluctuations and cash flow fluctuations, to benefit from opportunities to buy inventory in huge quantities, or for the costs of running a business and day-to-day operations.