Typical 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 advantages and disadvantages of traditional lenders as well as Non-Bank lenders.

First , small-scale business financing is usually a good option for business owners:

• With a clearly defined plan of growth or a well-defined short-term goal
• Who can make the repayments
• Know the terms and terms associated with the loan – your adviser or broker will be there to assist you if you have any concerns.

If you’re willing to invest in inventory, brand new technology or equipment and staffing and renovations or even new premises which could help take your small enterprise to the next step, then you might want to weigh the advantages and disadvantages of taking out the traditional bank loan or using a non-bank lender.

Do you prefer a lender online or a bank?

Loans from banks

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

The loan application process for bank loans can be long and complex, and will require a certain amount of paperwork that some smaller business owners are limited by time to meet. The process could be quicker if the bank has digital accessibility to financial records even though banks aren’t considered to be data-savvy when it comes to small business credit, but they’re getting better.

As with any type of loan the chance of lower interest rates will be considered in conjunction with attributes of the loan product in order to choose the most appropriate kind of loan. As for the lender Traditional bank loans may have strict criteria and cumbersome application processes, as well as being inflexible.

Since cash flow is crucial to the survival of many small enterprises, the gap between a loan that could be used to fund the sale of stock in the next day, and the loan that is granted next month , when the season’s peak is over, can be the difference between making or breaking.

Non-bank or online business loans

When a solid credit history and solid security is often a must-have for an bank loan, Non-Bank lenders can be more flexible in their approach. They can also tend to have more flexibility in structuring loans.

Non-Bank lenders are often more innovative in their digital technology than banks. This means applications are often completed and approved swiftly, and funds are available within the next day, upon approval.

You’ll still have to disclose the purpose of the loan is intended for the business’s name, type of business and past history, as well as potentially providing the security required for larger loans however, because a comprehensive business plan and a long-winded application aren’t required in every deal, things may move quicker.

Check out these relationships: red flags, and repayments

If you’re in a long-standing relationship with a bank’s management or an additional lender, you might contact them regarding their application and lending process. Your broker may assist you with the different lending requirements.

While many newer or non-bank lenders work exclusively on the internet, some lenders have a dedicated loan advisor to help you through the loan application process and really get to know your business’s needs.

If you’re considering non-bank lenders, check out independent reviews. If the offer you’re considering seems too appealing to be true or if you get pre-approval before you’ve even submitted an application or if the lender seems very aggressive, consider speaking to an adviser or broker and investigating further before signing on.

If you’re borrowing money from a bank or a Non-Bank lender, you’ll want to know the terms and realistic about whether you’re able to make the loan repayments. The most important thing to consider is setting the ground rules for your business - deciding whether the business loan should be utilized to boost your business’s performance, to manage the seasonal changes in fluctuations in cash flow, to take advantage of opportunities to purchase inventory in large quantities, or to fund everyday expenses and operational costs.