Standard bank loans vs non-bank lenders

What is the best way to choose a small-business loan? The first decision is who to make an application with. Here’s a brief guide to the pros and cons of traditional lenders and Non-Bank lenders.

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

• With a clear path for growth or a well-defined short-term objective
• Who is able to make the repayments
• Know the terms and terms associated with the loan. Your adviser or broker will be there to assist you with any questions.

If you’re looking to make an investment in inventory, brand new equipment or technology, extra staff, training as well as a renovation or new building that will take your business to the next stage You may want to weigh the pros and cons of taking out the traditional loan from a bank versus working with a non-bank lender.

Are you a bank or an online lender?

Bank loans

The reputation of a long-established bank is considered safe or solid as could the feeling of security. New Zealand banks are registered with the Reserve Bank of New Zealand and are subject to the same regulations.

The application process for bank loans may be lengthy and complicated, and require a level of paperwork that some small businesses owners may be constrained by the time they have to complete. The process can be speedier in the event that the bank has digital ability to access your personal financial records - although banks aren’t widely well-known for their expertise in data-driven small-business loans, their capabilities are getting better.

Similar to all kinds of loans the chance of lower interest rates could require consideration alongside loan product features to decide on the most appropriate kind of loan. The lender and the loan - loans from traditional banks could have strict guidelines as well as lengthy and complicated application processes and are not flexible.

Cash flow is so crucial to the survival of many small enterprises, the gap between a loan today which could fund stock to sell in the near future, and a loan in the next month , when the season’s demand has ended can be make or break.

Online or non-bank business loans

When a solid credit history and solid security is often required for a bank loan, Non-Bank lenders could be more flexible in their approach. They can also tend to offer more flexibility in the way they structure loans.

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

You’ll still have to give details about what the loan will be used for along with your business’s nature and background, as well as potentially providing security for bigger loans, but since a complete business plan and cumbersome applications aren’t always part of the agreement, things could move more quickly.

Beware of relationships, repayments and red flags

If you have a good relationship with a bank’s managing director or an additional lender, you might speak with them about the process of applying for loans and obtaining approval. If not, your broker could guide you through the various requirements of lenders.

While many newer or non-bank lenders operate exclusively online, certain lenders have a dedicated expert to guide you through the process of applying and really get to know your business’s needs.

If you’re thinking about Non-Bank lenders look into independent reviews. If an offer appears too tempting to be real, such as the pre-approval you receive before you’ve even made an application or the lender seems aggressive in their approach, consider speaking to advisors or brokers and digging deeper before signing on.

When borrowing from a bank or non-bank lender, you’ll need to know the terms and how you’ll be able to meet the loan repayments. A key consideration may be creating a set of rules for yourself and deciding if business loans should be used to aid your business’s growth, to manage seasonal ups and downs and cash flow fluctuations, to profit from opportunities to buy stock in large quantities, or to fund everyday expenses and operational costs.