Standard bank loans versus non-bank lenders

How do you choose a small business loan? The first decision is who to make an application with. Here’s a simple guide to the advantages and disadvantages 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 clearly defined plan of expansion or a clearly defined short-term objective
• Who is able to make the repayments
• Know the terms and terms associated with the loan – your adviser or broker is there to assist you if you have any concerns.

If you’re looking to invest in inventory, new technology or equipment as well as additional staff, training or renovation, or even a new location which could help take your small business to the next stage, then you might want to weigh up the pros and cons of taking out traditional bank loans versus using a non-bank lender.

Bank or online lender?

Bank loans

The reputation of a established bank can be regarded as safe or solid as could the feeling of security. New Zealand banks are registered with the Reserve Bank of New Zealand and fall under the same rules.

The loan application process for bank loans can sometimes be long and complicated and will require a certain amount of paperwork that some smaller businesses owners may be constrained in time to fulfill. The process may be faster in the event that the bank has digital accessibility to financial records - although banks aren’t widely known for being data-savvy in small business lending, they are becoming better.

As with all kinds of loans there is a possibility of lower interest rates may require consideration alongside loan product features to determine the best type of loan. The lender and the loan Traditional bank loans are likely to have strict criteria as well as lengthy and complicated application processes and lack flexibility.

With cash flow being so vital to the survival of many small-sized businesses, the distinction between a loan today that can be used to purchase stock tomorrow, and a loan in the next month , when the seasonal demand is gone, could be make or break.

Business online or non-bank loans

A credit score that is strong and solid security is often a must-have for the bank loan, non-bank lenders might be more flexible with their approach. They also may have more flexibility in the way they structure loans.

Non-Bank lenders are often more digitally innovative than banks. This means that applications are sometimes processed and approved quickly with funds being available within the next dayfollowing approval.

You’ll still have to provide details of what the loan is for as well as your company’s type and history, as well possibly providing the security required for larger loans but because a comprehensive business plan as well as a lengthy application aren’t required in every deal, things may move more quickly.

Check out these relationships: red flags, and repayments

If you’ve established a solid relationship with a bank manager or another lender, you can contact them regarding the lending process and their application. Your broker may guide you through the requirements of different lenders.

Many newer and non-bank lenders work exclusively online, some lenders can assign a specialist in loan to guide you through the process of applying and truly get to know your business’s needs.

If you’re thinking about Non-Bank lenders, check out independent reviews. If you think an offer is too promising to be true like if you get pre-approval before you’ve even applied or if the lender appears aggressive in their approach, consider speaking to advisors or brokers and looking into the matter before signing up.

If you’re borrowing from a bank or Non-Bank lender, you’ll want to be aware of the terms of the loan and realistic about whether you can meet the repayments. The most important thing to consider is creating a set of rules for yourself - deciding whether business loans should be used to support your business’s success by coping with seasonal fluctuations, and fluctuations in cash flow, or to take advantage of opportunities to buy stock in bulk, or to cover day-today operations and costs.