Typical bank loans versus non-bank lenders

The decision to take a business loan for small businesses? The first thing to consider is which lender to approach. This is a quick guide to the advantages and disadvantages of traditional lenders and Non-Bank lenders.

The first thing to consider is small-business financing is usually a good option for business owners:

• With a clear roadmap for growth or a well-defined short-term goals
• Who can make the repayments
• Know the terms and conditions associated with the loan. Your broker or adviser is here to help you with any concerns.

If you are ready to make an investment in the inventory, new technology or equipment as well as additional staff, training or renovation, or even a new location that will take your company to the next level You may want to weigh the pros and cons of taking out the traditional loan from a bank versus working with a non-bank lender.

Bank or online lender?

Loans from banks

The brand reputation of a established bank can be regarded as solid or safe and can also give a sense of security – in 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 could be long and complicated and will require a certain amount of paperwork which some small business owners are limited by the time they have to complete. The process can be speedier when the lender has digital acces to your bank records - even though banks aren’t well-known for their expertise in data-driven small business credit, but they’re becoming better.

Similar to every type of lending it is possible that lower interest rates will be considered in conjunction with the features of the loan product in order to select the most suitable type of loan. As for the lender traditional bank loans might have strict requirements and cumbersome applications processes and may not be flexible.

With cash flow so critical to the survival of a lot of small enterprises, the gap between a loan that can be used to purchase stock tomorrow, and a loan in the next month , when the seasonal demand is gone, could be the difference between a successful or unsuccessful business.

Online or non-bank business loans

If a good credit history and solid security are typically a must-have for the bank loan, non-bank lenders may be more flexible with their approach. They could also have more flexibility in the way they structure loans.

Non-Bank lenders are often more technologically advanced than banks, so the applications may be processed and approved quickly with funds made available within the next day, upon approval.

There is a need to explain what the loan will be used for along with your business’s nature and background, as well in the event of providing the security required for larger loans but because a comprehensive business plan and a long-winded application aren’t always part of the deal, the process could be more quickly.

Check out these relationships: red flags and payments

If you have a good relationship with a bank’s management or an other lender, you may talk to them about their lending and application process. Your broker may assist you with the various requirements of lenders.

Many of the more recent or non-bank lenders operate exclusively online, certain lenders can assign a specialist in loan to guide you through the process of applying and truly get to know your business’s needs.

If you’re thinking of a loan from a Non-Bank lender, check out independent reviews. If the offer you’re considering seems too appealing to be true, such as the pre-approval you receive before applying or the lender seems aggressive in their approach, consider speaking to advisors or brokers and looking into the matter prior to signing the contract.

If you’re borrowing from a bank or a Non-Bank lender, you’ll want to be aware of the terms and realistic about whether you’re able to make the payments. The most important thing to consider is setting the ground rules for your business 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 buy inventory in large quantities, or to fund day-today operations and costs.