Traditional bank loans versus non-bank lenders

Choosing a small business loan? The first decision is who to apply with. This is a quick guide to the advantages and disadvantages of traditional lenders as well as Non-Bank lenders.

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

• With a clearly defined plan of expansion or a clearly-defined short-term goals
• Who will be able to pay the loan
• If you are aware of the terms and terms associated with the loan – your adviser or broker is there to help you with any concerns.

If you’re willing to make an investment in inventory, new technology or equipment, extra staff, training, renovation or new premises which could help take your small enterprise to the next step and beyond, then you should to consider the advantages and disadvantages of taking on a traditional bank loan versus using a non-bank lender.

Online or bank?

Credit from banks

The brand reputation of a long-established bank can be considered solid or secure in the sense of security – in New Zealand banks are registered with the Reserve Bank of New Zealand and fall under the same rules.

The application for bank loans could be long and complicated and require a level of paperwork that some smaller businesses owners may be constrained by time constraints to meet. The process may be faster when the lender has digital acces to your bank records even though banks aren’t considered to be data-savvy when it comes to small-business loans, their capabilities are getting better.

Like every type of lending it is possible that lower interest rates might need to be considered along with loan product features to determine the best type of loan and lender conventional banks are likely to have strict criteria and lengthy application procedures, and may not be flexible.

With cash flow so critical to the survival of lots of small businesses, the difference between a loan that could be used to fund the sale of stock in the near future, and a loan granted next month , when the season’s peak is over, can 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 loans from banks, Non-Bank lenders may be more flexible with their approach. They can also tend to have more flexibility in structuring loans.

Non-bank lenders are usually more digitally innovative than banks, which means the applications may be accepted and processed quickly, with funds being available within the next dayfollowing approval.

It is still necessary to disclose the purpose of the loan is for along with your business’s nature and past history, as well as potentially providing security for loans that are larger, but since a complete business plan as well as a lengthy application aren’t required in every deal, things may move faster.

Attention: Relationships, red flags and payments

If you have a good relationship with a bank’s managing director or another lender, you can talk to them about the lending process and their application. If not, your broker could help you navigate the requirements of different lenders.

While many newer or non-bank lenders are exclusively online, some lenders like can assign a expert to guide you through the application process and to really understand the requirements of your company.

If you’re considering Non-Bank lenders review their reviews by independent sources. If you think an offer is too good to be true, such as when you are pre-approved before applying or if the lender seems aggressive in their approach take a look at speaking with an adviser or broker and examining the details prior to signing the contract.

If you’re borrowing money from a bank or Non-Bank lender, you may want to be clear about the conditions and be realistic about whether you’ll be able meet the loan repayments. The most important thing to consider is making a list of the rules you’ll need to follow when deciding whether business loans should be used to support your business’s success by coping with seasonal ups and downs and fluctuations in cash flow, or to benefit from opportunities to purchase inventory in huge quantities, or for the costs of running a business and day-to-day operations.