Non-bank lenders versus Traditional bank loans

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

First up, small business finance is typically a great option for business owners:

• With a clear plan for growth or a well-defined short-term goals
• Who is able make the payments
• You are aware of the terms and terms associated with the loan. Your adviser or broker is there to assist you if you have any concerns.

If you’re looking to invest in inventory, brand new equipment or technology or staffing, additional training and renovations or even new premises that will take your business to the next stage You may want to consider the pros and cons of taking out a traditional bank loan versus dealing with an Non-Bank lender.

Are you a bank or an online lender?

Bank loans

The brand reputation of a long-established bank can be considered solid or 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 loan application process for bank loans can be long and complicated and requires a lot of paperwork that some small entrepreneurs may be restricted by time constraints to meet. The process could be quicker when the bank has electronic acces to your bank data - while banks aren’t usually well-known for their expertise in data-driven small business lending, they are becoming better.

Like any type of loan the chance of lower interest rates may be considered in conjunction with attributes of the loan product in order to decide on the most appropriate type of loan. Likewise, lenders - loans from traditional banks could have strict guidelines as well as lengthy and complicated application processes as well as being inflexible.

With cash flow being so vital to the survival of many small businesses, the difference between a loan today which could fund stock to sell tomorrow, and the loan that is granted next month after the season’s demand has ended can be the difference between making or breaking.

Business online or non-bank loans

If a good credit history and solid security are usually required for an bank loan, Non-Bank lenders could be more flexible in their approach. They may also offer more flexibility in structuring loans.

Non-Bank lenders are often more digitally innovative than banks. This means applications are often accepted and processed quickly, and the funds can be made available by the next dayfollowing approval.

There is a need to provide details of what the loan will be used for the business’s name, type of business and history, as well as potentially providing security for loans that are larger, but since a complete business plan and cumbersome applications aren’t required in every arrangement, things can move more quickly.

Check out these relationships: red flags, and repayments

If you have a strong relationship with a bank manager or an other lender, you may speak with them about the process of applying for loans and obtaining approval. If not, your broker could assist you with the requirements of different lenders.

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

If you’re considering Non-Bank lenders look into independent reviews. If an offer appears too tempting to be real for instance, if you get pre-approval before you’ve even made an application or if the lender appears extremely aggressive in their approach think about speaking with an adviser or broker, and looking into the matter before signing up.

When borrowing from a bank or Non-Bank lender, you may want to be aware of the terms and how you’ll be able to meet the payments. One of the most important considerations is setting the ground rules for your business - deciding whether business loans are needed to support your business’s success in managing seasonal ups and downs and fluctuations in cash flow, or to benefit from opportunities to purchase stock in large quantities, or to fund daily expenses and operations.