Standard bank loans versus non-bank lenders

The decision to take a business loan for small businesses? The first decision is who to apply with. Here’s a simple guide to the pros and cons of traditional lenders and Non-Bank lenders.

The first thing to consider is small-business financing typically suits business owners:

• With a clear path for expansion or a clearly-defined short-term goal
• Who is able to make the repayments
• Know the terms and conditions associated with the loan – your adviser or broker is there to help you with any questions.

If you’re willing to invest in inventory, new technology or equipment as well as additional staff, training as well as a renovation or new building that could take your small company to the next level and beyond, then you should to weigh the advantages and disadvantages of taking on the traditional bank loan or working with a non-bank lender.

Online or bank?

Lending from banks

The reputation for a brand of established bank can be regarded as solid or secure in the sense of security. New Zealand banks are registered with the Reserve Bank of New Zealand and are subject to the same rules.

The loan application process for bank loans may be long and complex, and require a level of paperwork that some small entrepreneurs may be restricted by time constraints to meet. The process could be quicker when the bank has electronic accessibility to financial records - while banks aren’t generally well-known for their expertise in data-driven small business credit, but they’re getting better.

As is the case with all kinds of loans, the possibility of lower interest rates may be considered in conjunction with attributes of the loan product in order to choose the most suitable type of loan. Likewise, lenders Traditional bank loans may have strict criteria as well as lengthy and complicated application processes and lack flexibility.

Since cash flow is crucial for the survival of many small enterprises, the gap between a loan that can fund inventory to sell tomorrow, and an offer for a loan next month when the season’s demand has ended can be the difference that makes or breaks a business.

Online or non-bank business loans

If a good credit history and solid security are usually required for loans from banks, Non-Bank lenders might be more flexible with their approach. They may also offer more flexibility in structuring loans.

Non-Bank lenders are often more innovative in their digital technology than banks, so that applications are sometimes processed and approved in a short time, with funds made available within the next dayafter approval.

You’ll still have to explain what the loan will be used for as well as your company’s type and past history, as well being able to provide security for larger loans, however, because a comprehensive business plan as well as a lengthy application aren’t always part of the deal, the process could be more quickly.

Check out these relationships: repayments and red flags

If you’re in a long-standing relationship with a bank manager or an other lender, you may talk to them about their lending and application process. Otherwise, your broker can assist you in understanding the different requirements of lenders.

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

If you’re thinking of a loan from a Non-Bank lender review their reviews by independent sources. If an offer seems too appealing to be true or when you are pre-approved before you’ve even submitted an application, or the lender is very aggressive you should talk to advisors or brokers and digging deeper before signing up.

If you’re borrowing from a bank or Non-Bank lender, it is important to know the conditions and be realistic about whether you can meet the repayments. One important aspect to think about is setting the ground rules for your business and deciding if you should use business loans to help your business thrive in managing seasonal fluctuations, and fluctuating cash flows, or to benefit from opportunities to buy stock in bulk, or to cover everyday expenses and operational costs.