Non-bank lenders versus Standard bank loans

How do you choose a small business loan? The first decision is who to apply with. Here’s an easy guide to the pros and cons of traditional lenders as well as Non-Bank lenders.

First , small-scale business financing is usually a good option for business owners:

• With a clear path for development or a well-defined, short-term goals
• Who is able to make the repayments
• If you are aware of the terms and terms associated with the loan – your advisor or broker is available to help if you have any questions.

If you are ready to make an investment in the inventory, new equipment or technology or staffing, additional training and renovations or even new premises that will take your company to the next level and beyond, then you should to weigh up the pros and cons of taking on traditional bank loans versus working with a non-bank lender.

Do you prefer a lender online or a bank?

Bank loans

The brand reputation of a long-established bank can be considered solid and secure in the sense of security. New Zealand banks are registered with the Reserve Bank of New Zealand and are subject to the same regulations.

The application for bank loans can sometimes be complex and lengthy, and will require a certain amount of paperwork that small entrepreneurs may be restricted by time constraints to meet. The process might be speedier in the event that the bank has digital acces to your bank records - although banks aren’t widely considered to be data-savvy when it comes to small business credit, but they’re getting better.

As with every type of lending, the possibility of lower interest rates will need to be considered alongside attributes of the loan product in order to determine the most suitable type of loan. Likewise, lenders Traditional bank loans may have strict criteria and lengthy application procedures, and are not flexible.

Since cash flow is crucial to the survival of many small businesses, the difference between a loan today that can fund inventory to sell tomorrow, and an offer for a loan next month when the season’s demand has ended can be the difference between making or breaking.

Business online or non-bank loans

When a solid credit history and solid security are usually required for loans from banks, Non-Bank lenders could be more flexible with their approach. They also may have greater flexibility in the way they structure loans.

Non-Bank lenders are generally more technologically advanced than banks. This means applications can sometimes be accepted and processed quickly, with funds being available within the next day, upon approval.

There is a need to explain what the loan is intended for along with your business’s nature and past history, as well as potentially providing security for loans that are larger, but because a comprehensive business plan and lengthy applications aren’t required in every deal, things may move quicker.

Attention: Relationships, red flags, and repayments

If you have a good relationship with a bank’s manager or an other lender, you may discuss their lending and application process. If not, your broker could assist you with the different lending requirements.

Many newer and non-bank lending institutions operate entirely on the internet, some lenders offer a dedicated loan advisor to help you through the application process and get to know the needs of your business.

If you’re thinking about Non-Bank lenders, check out independent reviews. If an offer seems too appealing to be true or when you are pre-approved before applying, or the lender is extremely aggressive in their approach you should talk to an adviser or broker, and investigating further before signing up.

Whether you’re borrowing from a bank or Non-Bank lender, you’ll want to know the terms of the loan and realistic about whether you’re able to make the repayments. One important aspect to think about is creating a set of rules for yourself when deciding whether business loans should be used to boost your business’s performance in managing the seasonal changes in fluctuating cash flows, or to make the most of opportunities to purchase inventory in massive quantities, or to pay for day-today operations and costs.