Non-bank lenders versus Typical bank loans

What is the best way to choose a small-business loan? First, you must decide who to apply with. Here’s a brief guide to the pros and cons of traditional lenders as well as Non-Bank lenders.

First up, small business financing typically suits business owners:

• With a clear path for expansion or a clearly defined short-term goals
• Who will be able to pay the loan
• You are aware of the terms and conditions associated with the loan – your broker or adviser is here to assist you with any concerns.

If you’re looking to make an investment in inventory, brand new technology or equipment or staffing, additional training, renovation or new premises that could take your small business to the next level You may want to weigh the advantages and disadvantages of taking out the traditional bank loan or working with a non-bank lender.

Bank or online lender?

Credit from banks

The brand reputation of a long-standing bank can be seen as solid and secure in 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 can sometimes be lengthy and complicated, and requires a lot of paperwork that some smaller businesses owners may be constrained in time to fulfill. The process can be speedier when the bank has electronic acces to your bank data - even though banks aren’t well-known for their expertise in data-driven small business lending, they are getting better.

As is the case with all types of lending the chance of lower interest rates could be considered in conjunction with loan product features to decide on the best type of loan. As for the lender - loans from traditional banks might have strict requirements and cumbersome applications processes as well as being inflexible.

With cash flow being so vital to the survival of lots of small enterprises, the gap between a loan today which could fund stock to sell tomorrow, or an offer for a loan next month , when the season’s demand has ended can be the difference that makes or breaks a business.

Online or non-bank business loans

A credit score that is strong and solid security are often necessary for obtaining the bank loan, non-bank lenders may be more flexible with their approach. They could also have more flexibility when it comes to structuring loans.

Non-Bank lenders are generally more technologically advanced than banks, which means applications are often accepted and processed quickly, and funds are available within the next day, upon approval.

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

Check out these relationships: red flags, and repayments

If you’re in a long-standing relationship with a bank manager or an other lender, you may speak with them about the process of applying for loans and obtaining approval. In other cases, your broker will guide you through the different requirements of lenders.

Many of the more recent or non-bank lenders work exclusively on the internet, some lenders can provide a dedicated expert to guide you through the process of applying and truly get to know your business’s needs.

If you’re considering Non-Bank lenders review their reviews by independent sources. If an offer appears too appealing to be true like when you are pre-approved before you’ve even made an application, or the lender is uncompromising in their approach think about speaking with an adviser or broker, and investigating further before committing.

If you’re borrowing money from a bank or Non-Bank lender, it is important to understand the terms and whether you’re able to make the repayments. The most important thing to consider is making a list of the rules you’ll need to follow when deciding whether you should use business loans to boost your business’s performance in managing the seasonal changes in fluctuations in cash flow, or to make the most of opportunities to purchase stock in huge quantities, or for the costs of running a business and day-to-day operations.