Non-bank lenders vs Traditional bank loans

The decision to take a business loan for small businesses? The first decision is who to make an application with. Here’s a brief guide to the advantages and disadvantages of traditional lenders and Non-Bank lenders.

First , small-scale business finance is typically a great option for business owners:

• With a clear path for expansion or a clearly-defined short-term goals
• Who is able to make the repayments
• If you are aware of 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 equipment or technology or staffing, additional training and renovations or even new premises that will take your business to the next level You may want to weigh the pros and cons of taking on traditional bank loans versus taking on a Non-Bank lender.

Bank or online lender?

Lending from banks

The reputation of a established bank can be regarded as solid or secure as could the feeling of security – in New Zealand banks are registered with the Reserve Bank of New Zealand and are subject to the same rules.

The application for bank loans could be long and complicated and requires a lot of paperwork that some smaller entrepreneurs may be restricted by the time they have to complete. The process can be speedier in the event that the bank has digital accessibility to financial data - although banks aren’t widely recognized for their data-savvy approach to small business loans, their capabilities are becoming better.

As is the case with every type of lending it is possible that lower interest rates will need to be considered along with attributes of the loan product in order to determine the best type of loan and lender Traditional bank loans could have strict guidelines as well as lengthy and complicated application processes and may not be flexible.

Since cash flow is crucial for the survival of many small businesses, the difference between a loan that could be used to fund the sale of stock in the near future, and the loan that is granted next month when the season’s peak is over, can be the difference between making or breaking.

Business online or non-bank loans

Where a strong credit history and solid security are often a must-have for the bank loan, non-bank lenders could be more flexible with their approach. They also may be more flexible in the way they structure loans.

Non-Bank lenders are generally more digitally innovative than banks, meaning applications can sometimes be processed and approved quickly and funds are available within the next working day, following approval.

You’ll usually still need to explain what the loan will be used for the business’s name, type of business and its history, as being able to provide security for loans that are larger, but because a comprehensive business plan as well as a lengthy application aren’t always part of the agreement, things could move quicker.

Beware of relationships, repayments and red flags

If you’ve established a solid relationship with a bank’s manager or another lender, you can contact them regarding the process of applying for loans and obtaining approval. In other cases, your broker will assist you with the different lending requirements.

Although many of the newer non-bank lenders work exclusively online, some lenders like can assign a loan advisor to help you through the application process and really get to know the requirements of your company.

If you’re considering non-bank lenders look into independent reviews. If an offer seems too appealing to be true or 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 a broker or adviser and digging deeper prior to signing the contract.

If you’re borrowing money from a non-bank or bank lender, you’ll want to be aware of the terms of the loan and realistic about whether you can meet the payments. The most important thing to consider is creating a set of rules for yourself when deciding whether the business loan should be utilized to boost your business’s performance in managing the seasonal changes in cash flow fluctuations, to profit from opportunities to buy stock in large quantities, or to fund everyday expenses and operational costs.