Non-bank lenders vs Traditional bank loans

Choosing a small business loan? The first step is deciding who to apply with. Here’s a simple guide to the advantages and disadvantages of traditional lenders as well as Non-Bank lenders.
First of all, small business financing is usually a good option for business owners:
- With a clear plan for growth or a well-defined short-term goal
- Who is able to make the repayments
- Know the terms and conditions with the loan. Your advisor or broker is available to assist you with any questions.
If you’re looking to invest in inventory, new technology or equipment as well as additional staff, training or renovation, or even a new location which could help take your small business to the next level You may want to weigh up the pros and cons of taking out a traditional bank loan versus working with a non-bank lender.
Online or bank?
Credit from banks
The reputation of a long-established bank is considered solid or safe, as can the sense of security. New Zealand banks are registered with the Reserve Bank of New Zealand and fall under the same rules.
The loan application process for bank loans can sometimes be complex and lengthy, and will require a certain amount of paperwork that some smaller business owners are limited in time to fulfill. The process might be speedier when the bank has electronic ability to access your personal financial data - although banks aren’t widely considered to be data-savvy when it comes to small-business lending, they are getting better.
As is the case with all types of lending the chance of lower interest rates may need to be considered along with loan product features to choose the most appropriate kind of loan. The lender and the loan Traditional bank loans are likely to have strict criteria and cumbersome applications processes and lack flexibility.
Since cash flow is crucial to the survival of many small-sized businesses, the distinction between a loan today which can fund inventory to sell in the near future, and a loan in the in the next month when seasonal demand is gone, could be the difference that makes or breaks a business.
Business online or non-bank loans
A credit score that is strong and solid security are usually necessary for obtaining loans from banks, Non-Bank lenders could be more flexible in their approach. They could also have more flexibility in structuring loans.
Non-bank lenders are usually more technologically advanced than banks, meaning applications can sometimes be processed and approved quickly with funds made available within the next working day, following approval.
There is a need to explain what the loan will be used for along with your business’s nature and past history, as well in the event of providing security for loans that are larger, however, since a thorough business plan and a long-winded application aren’t always part of the arrangement, things can move faster.
Check out these relationships: red flags, and repayments
If you’re in a long-standing relationship with a bank’s managing director or an additional lender, you might contact them regarding the process of applying for loans and obtaining approval. Otherwise, your broker can guide you through the different requirements of lenders.
Many newer and non-bank lenders operate exclusively online, some lenders offer a dedicated specialist in loan to guide you through the process of applying and really get to know the needs of your business.
If you’re considering non-bank lenders look into independent reviews. If an offer appears too appealing to be true or if you get pre-approval before you’ve even made an application or the lender seems aggressive in their approach, consider speaking to an adviser or broker, and examining the details before signing up.
Whether you’re borrowing from a bank or Non-Bank lender, it is important to understand the terms and whether you can meet the repayments. The most important thing to consider is setting ground rules for yourself when deciding whether business loans should be used to support your business’s success and to handle seasonal fluctuations and cash flow fluctuations, to make the most of opportunities to buy stock in massive quantities, or to pay for daily expenses and operations.