Typical bank loans vs non-bank lenders

How do you choose a small business loan? The first thing to consider is which lender to go with. Here’s an easy guide to the advantages and disadvantages of traditional lenders and Non-Bank lenders.

First of all, small business financing is usually a good option for business owners:

• With a clearly defined plan of expansion or a clearly-defined short-term objective
• Who will be able to pay the loan
• Who understand the terms and conditions associated with the loan – your adviser or broker is there to assist you with any concerns.

If you are ready to make an investment in inventory, new equipment or technology as well as additional staff, training or renovation, or even a new location that will take your company to the next level If so, you may want take a look at the advantages and disadvantages of taking on the traditional loan from a bank versus dealing with an Non-Bank lender.

Are you a bank or an online lender?

Lending from banks

The reputation for a brand of long-established bank is considered solid and secure as could the feeling of security. New Zealand banks are registered with the Reserve Bank of New Zealand and are subject to the same rules.

The application for bank loans can sometimes be long and complicated and require a level of paperwork that some small business owners might be limited by time to meet. The process can be speedier when the bank has electronic access to your financial records while banks aren’t generally known for being data-savvy in small business credit, but they’re getting better.

Similar to every type of lending, the possibility of lower interest rates will require consideration alongside attributes of the loan product in order to choose the best type of loan. The lender and the loan Traditional bank loans might have strict requirements and cumbersome applications processes and lack flexibility.

With cash flow being so vital to the survival of many small enterprises, the gap between a loan that can fund inventory to sell tomorrow, or the loan that is granted next month after the seasonal demand is over can be make or break.

Online or non-bank business loans

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

Non-bank lenders are usually more digitally innovative than banks, so that applications are sometimes processed and approved in a short time, and funds are available within the next dayafter approval.

There is a need to explain what the loan is for along with your business’s nature and its history, as as potentially providing security for loans that are larger, however, because a comprehensive business plan and a long-winded application aren’t always part of the agreement, things could move more quickly.

Attention: Relationships, red flags, and repayments

If you’ve established a solid relationship with a bank’s manager or another lender, you could talk to them about their lending and application process. Otherwise, your broker can guide you through the requirements of different lenders.

Many newer and non-bank lenders work exclusively online, some lenders like offer a dedicated expert to guide you through the process of applying and truly get to know the needs of your business.

If you’re considering Non-Bank lenders, check out independent reviews. If an offer appears too appealing to be true like the pre-approval you receive before you’ve even submitted an application or the lender seems aggressive in their approach take a look at speaking with an adviser or broker and digging deeper before signing on.

When borrowing from a non-bank or bank lender, you’ll want to know the terms and realistic about whether you can meet the repayments. A key consideration may be creating a set of rules for yourself when deciding whether business loans should be used to aid your business’s growth in managing seasonal ups and downs and fluctuating cash flows, or to take advantage of opportunities to buy inventory in massive quantities, or to pay for the costs of running a business and day-to-day operations.