Non-bank lenders versus Standard bank loans

The decision to take a business loan for small businesses? First, you must decide who to apply with. Here’s a simple guide to the pros and cons of traditional lenders and Non-Bank lenders.

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

• With a clear plan for expansion or a clearly defined time-frame
• Who is able to make the repayments
• Who understand the terms and conditions associated with the loan. Your adviser or broker is there to assist you if you have any concerns.

If you are ready to make an investment in inventory, brand new technology or equipment and staffing and renovations or even new premises that can take your business to the next level If so, you may want to weigh the pros and cons of taking out the traditional bank loan or working with a non-bank lender.

Online or bank?

Bank loans

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

The loan application process for bank loans can sometimes be lengthy and complicated, and require a level of paperwork which some small business owners are limited in time to fulfill. The process might be speedier when the bank has electronic acces to your bank records - while banks aren’t usually known for being data-savvy in small-business loaning, the situation is getting better.

Like every type of lending the chance of lower interest rates may need to be considered along with attributes of the loan product in order to decide on the most appropriate type of loan and lender conventional banks might have strict requirements and cumbersome applications processes as well as being inflexible.

With cash flow so critical to the survival of many small businesses, the differences between a loan today which can fund inventory to sell tomorrow, or an offer for a loan 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 are typically a must-have for an bank loan, Non-Bank lenders might be more flexible in their approach. They may also offer more flexibility in the way they structure loans.

Non-bank lenders are typically more technologically advanced than banks. This means the applications may be processed and approved in a short time, with funds being available within the next dayfollowing approval.

You’ll still have to provide details of what the loan is being used for the business’s name, type of business and history, as well possibly providing security for loans that are larger, but since a complete business plan and lengthy applications aren’t always part of the deal, the process could be faster.

Attention: Relationships, red flags, and repayments

If you’ve established a solid relationship with a bank manager or an other lender, you may contact them regarding the lending process and their application. In other cases, your broker will assist you in understanding the different requirements of lenders.

Many newer and non-bank lenders operate exclusively online, some lenders can assign a loan specialist to guide you through the process of applying and truly get to know the needs of your business.

If you’re considering Non-Bank lenders look into independent reviews. If an offer seems too appealing to be true or getting pre-approval prior to applying or if the lender appears uncompromising in their approach you should talk to an adviser or broker and examining the details before signing on.

When borrowing from a bank or a Non-Bank lender, it is important to be clear about the terms of the loan and realistic about whether you can meet the payments. A key consideration may be setting the ground rules for your business - deciding whether business loans are needed to aid your business’s growth by coping with seasonal ups and downs and fluctuations in cash flow, to benefit from opportunities to purchase inventory in bulk, or to cover the costs of running a business and day-to-day operations.