Standard bank loans versus non-bank lenders

The decision to take a business loan for small businesses? First, you must decide who to approach. Here’s a brief guide to the advantages and disadvantages of traditional lenders as well as Non-Bank lenders.

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

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

If you are ready to make an investment in inventory, brand new technology or equipment or staffing, additional training or renovation, or even a new location that could take your small business to the next level If so, you may want to weigh the advantages and disadvantages of taking out the traditional bank loan or using a non-bank lender.

Are you a bank or an online lender?

Lending from banks

The reputation of a long-established bank is considered solid or safe and can also give a sense of security. New Zealand banks are registered with the Reserve Bank of New Zealand and fall under the same regulations.

The application process for bank loans can sometimes be lengthy and complicated, and requires a lot of paperwork that small businesses owners may be constrained by time to meet. The process could be quicker if the bank has digital access to your financial records while banks aren’t generally well-known for their expertise in data-driven small-business loaning, the situation is getting better.

Like any type of loan there is a possibility of lower interest rates might require consideration alongside the features of the loan product to decide on the most appropriate type of loan. As for the lender - loans from traditional banks are likely to have strict criteria and lengthy application procedures, and are not flexible.

With cash flow so critical to the survival of a lot of small-sized businesses, the distinction between a loan granted today that can be used to purchase stock tomorrow, and a loan in the next month after the season’s peak is over, can be the difference between making or breaking.

Business online or non-bank loans

A credit score that is strong and solid security are often required for an bank loan, Non-Bank lenders could be more flexible in their approach. They may also be more flexible when it comes to structuring loans.

Non-bank lenders are typically more innovative in their digital technology than banks, which means applications are often processed and approved in a short time, with funds being available within the next working day, following approval.

You’ll still have to provide details of what the loan is intended for, your business type and history, as well in the event of providing security for bigger loans, but since a complete business plan and lengthy applications aren’t required in every arrangement, things can move more quickly.

Check out these relationships: red flags and payments

If you’ve established a solid relationship with a bank’s management or another lender, you can speak with them about the process of applying for loans and obtaining approval. In other cases, your broker will assist you in understanding the different lending requirements.

Many of the more recent or non-bank lenders operate exclusively online, certain lenders have a dedicated specialist in loan to guide you through the process of applying and to really understand your business needs.

If you’re considering non-bank lenders look into independent reviews. If an offer seems too appealing to be true for instance, when you are pre-approved before you’ve even submitted an application or the lender seems extremely aggressive in their approach think about speaking with an adviser or broker and digging deeper before signing up.

When borrowing from a bank or a Non-Bank lender, you’ll need to know the conditions and be realistic about whether you can meet the obligations. One of the most important considerations is setting the ground rules for your business - deciding whether business loans should be used to aid your business’s growth in managing the seasonal changes in fluctuations in cash flow, to make the most of opportunities to buy stock in massive quantities, or to pay for day-today operations and costs.