Traditional bank loans vs non-bank lenders

Choosing a small business loan? First, you must decide who to go with. This is a quick guide to the pros and cons of traditional lenders and Non-Bank lenders.

First of all, small business financing usually suits business owners:

• With a clear plan for development or a well-defined, short-term objective
• Who is able make the payments
• You are aware of the terms and conditions that come with the loan. Your adviser or broker is there to help if you have any concerns.

If you are ready to invest in the inventory, new technology or equipment, extra staff, training, renovation or new premises that will take your business to the next stage, then you might want to weigh the pros and cons of taking on the traditional loan from a bank versus working with a non-bank lender.

Do you prefer a lender online or a bank?

Lending from banks

The reputation of a long-standing bank can be seen as solid or safe and can also give a sense of security. 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 will require a certain amount of paperwork that small businesses owners may be constrained in time to fulfill. The process may be faster in the event that the bank has digital acces to your bank data - while banks aren’t generally known for being data-savvy in small business credit, but they’re getting better.

As with every type of lending the chance of lower interest rates will be considered in conjunction with characteristics of loan products in order to select the most appropriate kind of loan. Likewise, lenders - loans from traditional banks are likely to have strict criteria and cumbersome applications processes and lack flexibility.

Since cash flow is crucial to the survival of lots of small businesses, the differences between a loan that can fund inventory to sell in the near future, and a loan granted next month after the season’s peak is over, can be the difference that makes or breaks a business.

Business online or non-bank loans

When a solid credit history and solid security are often a must-have for an bank loan, Non-Bank lenders may be more flexible with their approach. They could also offer more flexibility when it comes to structuring loans.

Non-bank lenders are usually more innovative in their digital technology than banks. This means applications can sometimes be processed and approved in a short time, and funds are available within the next working day, following approval.

There is a need to provide details of what the loan will be used for as well as your company’s type and background, as well in the event of providing security for loans that are larger, but since a complete business plan as well as a lengthy application aren’t required in every arrangement, things can move more quickly.

Check out these relationships: repayments , and red flags

If you have a good relationship with a bank’s managing director or an other lender, you may discuss their application and lending process. Otherwise, your broker can assist you with the different lending requirements.

Many of the more recent or non-bank lenders work exclusively online, certain lenders can provide a dedicated expert to guide you through the application process and get to know the needs of your business.

If you’re thinking of a loan from a Non-Bank lender take a look at independent reviews. If an offer appears too promising to be true like if you get pre-approval before applying or if the lender seems extremely aggressive in their approach you should talk to an adviser or broker and looking into the matter before signing on.

If you’re borrowing 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 creating a set of rules for yourself in deciding if business loans should be used to support your business’s success and to handle seasonal ups and downs and fluctuations in cash flow, or to make the most of opportunities to buy stock in large quantities, or to fund the costs of running a business and day-to-day operations.