Typical bank loans versus non-bank lenders

How do you choose a small business loan? The first decision is who to apply with. This is a quick guide to the pros and cons of traditional lenders and Non-Bank lenders.

The first thing to consider is small-business finance is typically a great option for business owners:

• With a clear roadmap for growth or a well-defined short-term goals
• Who can make the repayments
• If you are aware of the terms and conditions that come with the loan. Your broker or adviser is here to assist you with any questions.

If you’re willing to make an investment in inventory, brand new technology or equipment, extra staff, training as well as a renovation or new building which could help take your small business to the next stage If so, you may want take a look at the advantages and disadvantages of taking on the traditional bank loan or dealing with an Non-Bank lender.

Online or bank?

Loans from banks

The reputation of a long-standing bank can be seen as solid or secure, as can the sense of security – in New Zealand banks are registered with the Reserve Bank of New Zealand and fall under the same regulations.

The application process for bank loans could be long and complicated and require a level of paperwork which some small business owners might be limited in time to fulfill. The process can be speedier if the bank has digital ability to access your personal financial records - even though banks aren’t well-known for their expertise in data-driven small-business loaning, the situation is getting better.

Like every type of lending the chance of lower interest rates might need to be considered alongside the features of the loan product to choose the best type of loan and lender Traditional bank loans might have strict requirements and cumbersome applications processes and are not flexible.

With cash flow being so vital to the survival of many small businesses, the difference between a loan today which could fund stock to sell tomorrow, and a loan in the next month , when the season’s peak is over, can be the difference between a successful or unsuccessful business.

Non-bank or online business loans

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

Non-Bank lenders are generally more technologically advanced than banks, which means applications can sometimes be accepted and processed quickly, and funds are available within the next working day, following approval.

It is still necessary to give details about what the loan is intended for as well as your company’s type and past history, as well possibly providing security for larger loans, but because a comprehensive business plan and cumbersome applications aren’t always part of the deal, things may move faster.

Check out these relationships: repayments and red flags

If you have a strong relationship with a bank manager or an other lender, you may discuss the process of applying for loans and obtaining approval. Your broker may help you navigate the requirements of different lenders.

While many newer or non-bank lending institutions operate entirely on the internet, some lenders have a dedicated expert to guide you through the loan application process and to really understand your business needs.

If you’re thinking about Non-Bank lenders take a look at independent reviews. If an offer seems too promising to be true like if you get pre-approval before applying or if the lender appears aggressive in their approach you should talk to an adviser or broker, and investigating further before signing up.

If you’re borrowing money from a non-bank or bank lender, it is important to understand the terms and how you’ll be able to meet the repayments. One important aspect to think about is creating a set of rules for yourself and deciding if business loans are needed to help your business thrive in managing seasonal fluctuations and cash flow fluctuations, to benefit from opportunities to purchase stock in massive quantities, or to pay for day-today operations and costs.