Standard bank loans versus non-bank lenders

How do you choose a small business loan? First, you must decide who to go with. Here’s a brief guide to the advantages and disadvantages of traditional lenders and Non-Bank lenders.

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

• With a clearly defined plan of expansion or a clearly defined short-term objective
• Who is able make the payments
• You are aware of the terms and conditions associated with the loan – your adviser or broker will be there to help if you have any questions.

If you are ready to make an investment in the inventory, new technology or equipment and staffing or renovation, or even a new location that could take your small company to the next level and beyond, then you should to weigh up the pros and cons of taking on the traditional loan from a bank versus using a non-bank lender.

Are you a bank or an online lender?

Lending from banks

The reputation for a brand of long-standing bank can be seen as safe or solid in the sense of security. New Zealand banks are registered with the Reserve Bank of New Zealand and are subject to the same regulations.

The application for bank loans may be long and complicated and require a level of paperwork that some smaller business owners are limited by time constraints to meet. The process might be speedier in the event that the bank has digital ability to access your personal financial data - while banks aren’t generally well-known for their expertise in data-driven small business loaning, the situation is getting better.

As is the case with all kinds of loans the chance of lower interest rates might need to be considered along with attributes of the loan product in order to choose the most appropriate kind of loan and lender traditional bank loans could have strict guidelines and cumbersome applications processes as well as being inflexible.

With cash flow being so vital to the survival of many small-sized businesses, the distinction between a loan today which could fund stock to sell in the near future, and a loan in the next month after the seasonal demand is over can be make or break.

Business online or non-bank loans

If a good credit history and solid security are typically necessary for obtaining a bank loan, Non-Bank lenders can be more flexible with their approach. They could also have greater flexibility when it comes to structuring loans.

Non-bank lenders are usually more technologically advanced than banks, so that applications are sometimes processed and approved quickly with funds being available within the next day, upon approval.

It is still necessary to disclose the purpose of the loan is for along with your business’s nature and background, as well as potentially providing security for larger loans, however, because a comprehensive business plan and a long-winded application aren’t required in every deal, things may move faster.

Beware of relationships, red flags, and repayments

If you’re in a long-standing relationship with a bank’s management or another lender, you can discuss the lending process and their application. Otherwise, your broker can assist you with the various requirements of lenders.

Although many of the newer non-bank lending institutions operate entirely online, some lenders like can provide a dedicated specialist in loan to guide you through the application process and truly get to know your business needs.

If you’re thinking of a loan from a Non-Bank lender, check out independent reviews. If an offer appears too tempting to be real or getting pre-approval prior to you’ve even submitted an application or if the lender appears extremely aggressive in their approach think about speaking with advisors or brokers and digging deeper before signing on.

If you’re borrowing from a bank or Non-Bank lender, it is important to be aware of the conditions and be realistic about whether you can meet the payments. One of the most important considerations is setting ground rules for yourself and deciding if business loans are needed to support your business’s success in managing seasonal ups and downs and fluctuations in cash flow, or to make the most of opportunities to buy inventory in massive quantities, or to pay for daily expenses and operations.