Traditional bank loans versus non-bank lenders

What is the best way to choose a small-business loan? First, you must decide who to apply with. This is a quick guide to the advantages and disadvantages of traditional lenders and Non-Bank lenders.

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

• With a clear plan for expansion or a clearly-defined time-frame
• Who is able to make the repayments
• Who understand the terms and conditions associated with the loan. Your adviser or broker will be there to assist you with any questions.

If you’re willing to make an investment in inventory, brand new technology or equipment and staffing, renovation or new premises that can take your business to the next stage If so, you may want take a look at the pros and cons of taking out traditional bank loans versus using a non-bank lender.

Are you a bank or an online lender?

Loans from banks

The brand 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 are subject to the same regulations.

The process of applying for bank loans may be lengthy and complicated, and may require a large amount of paperwork that some small business owners might be limited by time constraints to meet. The process could be quicker when the lender has digital access to your financial data - while banks aren’t usually known for being data-savvy in small-business loans, their capabilities are getting better.

As with all kinds of loans, the possibility of lower interest rates could be considered in conjunction with characteristics of loan products to determine the best type of loan. Likewise, lenders - loans from traditional banks may have strict criteria and cumbersome applications processes and may not be flexible.

Since cash flow is crucial to the survival of many small enterprises, the gap between a loan today that could fund stock to sell in the next day, and an offer for a loan next month after the seasonal demand is over can be make or break.

Business online or non-bank loans

A credit score that is strong and solid security are typically necessary for obtaining an bank loan, Non-Bank lenders could be more flexible with their approach. They could also offer more flexibility when it comes to structuring loans.

Non-Bank lenders are often more technologically advanced than banks, so applications are often processed and approved quickly with funds made available within the next day, upon approval.

It is still necessary to provide details of what the loan is intended for the business’s name, type of business and past history, as well in the event of providing the security required for larger loans but because a comprehensive business plan and a long-winded application aren’t required in every arrangement, things can move quicker.

Beware of relationships, repayments and red flags

If you’re in a long-standing relationship with a bank’s management or another lender, you could talk to them about their lending and application process. In other cases, your broker will help you navigate the requirements of different lenders.

Many newer and non-bank lenders operate exclusively online, some lenders like can provide a dedicated specialist in loan to guide you through the application process and to really understand your business’s needs.

If you’re thinking of a loan from a Non-Bank lender, check out independent reviews. If the offer you’re considering seems too tempting to be real for instance, getting pre-approval prior to you’ve even made an application, or the lender is uncompromising in their approach take a look at speaking with advisors or brokers and examining the details before signing on.

If you’re borrowing from a bank or a Non-Bank lender, it is important to be clear about the conditions and be realistic about how you’ll be able to meet the repayments. A key consideration may be setting the ground rules for your business when deciding whether business loans are needed to support your business’s success and to handle seasonal fluctuations, and fluctuations in cash flow, to make the most of opportunities to purchase stock in bulk, or to cover daily expenses and operations.