Non-bank lenders vs Traditional bank loans

The decision to take a business loan for small businesses? The first thing to consider is which lender to make an application with. This is a quick guide to the pros and cons of traditional lenders as well as Non-Bank lenders.

First , small-scale business financing typically suits business owners:

• With a clear roadmap for development or a well-defined, short-term objective
• Who is able make the payments
• You are aware of the terms and terms associated with the loan. Your adviser or broker will be there to assist you with any concerns.

If you’re looking to invest in the inventory, new technology or equipment and staffing, renovation or new premises that could take your small business to the next level, then you might want take a look at the advantages and disadvantages of taking out the traditional loan from a bank versus taking on a Non-Bank lender.

Do you prefer a lender online or a bank?

Bank loans

The brand reputation of a long-established bank can be considered solid or safe in the sense of security. New Zealand banks are registered with the Reserve Bank of New Zealand and fall under the same rules.

The application process for bank loans can be lengthy and complicated, and may require a large amount of paperwork which some small business owners might be limited by time to meet. The process can be speedier when the bank has electronic acces to your bank data - while banks aren’t generally well-known for their expertise in data-driven small-business loaning, the situation is becoming better.

As with every type of lending, the possibility of lower interest rates might be considered in conjunction with loan product features to decide on the best type of loan. Likewise, lenders conventional banks are likely to have strict criteria and cumbersome application processes, as well as being inflexible.

Since cash flow is crucial to the survival of a lot of small enterprises, the gap between a loan today that can be used to purchase stock tomorrow, or the loan that is granted in the next month when seasonal demand is gone, could be the difference between making or breaking.

Business online or non-bank loans

When a solid credit history and solid security are usually necessary for obtaining the bank loan, non-bank lenders could be more flexible with their approach. They can also tend to offer more flexibility in the way they structure loans.

Non-bank lenders are typically more digitally innovative than banks, meaning applications are often processed and approved in a short time, and the funds can be made available by the next working day, following approval.

It is still necessary to provide details of what the loan will be used for as well as your company’s type and background, as well possibly providing security for loans that are larger, but because a comprehensive business plan and cumbersome applications aren’t always part of the agreement, things could move faster.

Heads up: relationships, repayments , and red flags

If you have a good relationship with a bank manager or an additional lender, you might contact them regarding their lending and application process. In other cases, your broker will guide you through the different lending requirements.

Many newer and non-bank lenders are exclusively on the internet, some lenders offer a dedicated loan advisor to help you through the application process and really get to know the requirements of your company.

If you’re considering non-bank lenders review their reviews by independent sources. If an offer seems too promising to be true, such as when you are pre-approved before you’ve even made an application or if the lender seems uncompromising in their approach you should talk to an adviser or broker, and looking into the matter before signing up.

If you’re borrowing money from a bank or a Non-Bank lender, you’ll want to understand the terms and whether you can meet the obligations. The most important thing to consider is setting the ground rules for your business in deciding if you should use business loans to support your business’s success by coping with seasonal fluctuations and fluctuations in cash flow, or to benefit from opportunities to buy inventory in large quantities, or to fund the costs of running a business and day-to-day operations.