Standard bank loans versus non-bank lenders

How do you choose a small business loan? The first step is deciding who to approach. Here’s an easy guide to the pros and cons of traditional lenders as well as 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 will be able to pay the loan
• Know the terms and terms associated with the loan. Your adviser or broker will be there to help you with any concerns.

If you’re looking to make an investment in inventory, new equipment or technology and staffing as well as a renovation or new building that can take your business to the next level You may want to weigh the pros and cons of taking on the traditional loan from a bank versus dealing with an Non-Bank lender.

Are you a bank or an online lender?

Loans from banks

The reputation for a brand of long-established bank is considered 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 regulations.

The loan application process for bank loans may be long and complicated and requires a lot of paperwork that some small entrepreneurs may be restricted by time to meet. The process may be faster if the bank has digital ability to access your personal financial records - while banks aren’t usually recognized for their data-savvy approach to small-business credit, but they’re becoming better.

Like any type of loan, the possibility of lower interest rates could need to be considered alongside attributes of the loan product in order to decide on the most appropriate kind of loan. As for the lender conventional banks are likely to have strict criteria and cumbersome application processes, and lack flexibility.

Since cash flow is crucial for the survival of many small businesses, the differences between a loan granted today that could fund stock to sell tomorrow, and a loan in the in the next month when seasonal demand is gone, could be the difference that makes or breaks a business.

Online or non-bank business loans

If a good credit history and solid security are often required for loans from banks, Non-Bank lenders may be more flexible with their approach. They may also have more flexibility in the way they structure loans.

Non-bank lenders are usually more digitally innovative than banks, so applications can sometimes be completed and approved swiftly, and the funds can be made available by the next working day, following approval.

There is a need to provide details of what the loan is for the business’s name, type of business and past history, as well being able to provide the security required for larger loans however, since a thorough business plan and cumbersome applications aren’t always part of the deal, the process could be more quickly.

Beware of relationships, red flags, and repayments

If you have a strong relationship with a bank’s managing director or another lender, you can speak with them about their lending and application process. Your broker may guide you through the different lending requirements.

Many newer and non-bank lenders work exclusively online, some lenders like can assign a specialist in loan to guide you through the loan application process and truly get to know your business needs.

If you’re considering non-bank lenders take a look at independent reviews. If you think an offer is too appealing to be true for instance, when you are pre-approved before you’ve even made an application or if the lender appears very aggressive, consider speaking to advisors or brokers and digging deeper before signing on.

If you’re borrowing money from a bank or a Non-Bank lender, you’ll want to be clear about the terms and whether you can meet the payments. A key consideration may be setting the ground rules for your business - deciding whether business loans should be used to support your business’s success and to handle seasonal fluctuations and cash flow fluctuations, to take advantage of opportunities to buy stock in large quantities, or to fund day-today operations and costs.