Standard bank loans versus non-bank lenders

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

First of all, small business finance is typically a great option for business owners:

• With a clear roadmap for expansion or a clearly-defined short-term objective
• Who is able to make the repayments
• Know the terms and conditions with the loan. Your advisor or broker is available to help you with any questions.

If you’re ready to make an investment in inventory, brand new equipment or technology, extra staff, training as well as a renovation or new building that could take your small company to the next level You may want to consider the pros and cons of taking out the traditional loan from a bank versus dealing with an Non-Bank lender.

Online or bank?

Loans from banks

The reputation of a established bank can be regarded as solid and 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 rules.

The loan application process for bank loans may be lengthy and complicated, and will require a certain amount of paperwork that some small business owners might be limited in time to fulfill. The process may be faster if the bank has digital access to your financial data - while banks aren’t usually considered to be data-savvy when it comes to small-business loans, their capabilities are getting better.

As with every type of lending, the possibility of lower interest rates might need to be considered alongside attributes of the loan product in order to determine the best type of loan. Likewise, lenders conventional banks might have strict requirements as well as lengthy and complicated application processes as well as being inflexible.

With cash flow being so vital for the survival of many small businesses, the differences between a loan that could fund stock to sell tomorrow, and a loan granted next month after the seasonal demand is over 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 typically required for the bank loan, non-bank lenders might be more flexible with their approach. They may also have more flexibility when it comes to structuring loans.

Non-Bank lenders are generally more innovative in their digital technology than banks, so the applications may be completed and approved swiftly, and the funds can be made available by the next dayfollowing approval.

You’ll usually still need to disclose the purpose of the loan will be used for the business’s name, type of business and background, as well in the event of providing the security required for larger loans but because a comprehensive business plan and a long-winded application aren’t required in every deal, the process could be more quickly.

Beware of relationships, red flags, and repayments

If you have a strong relationship with a bank manager or an other lender, you may contact them regarding the process of applying for loans and obtaining approval. If not, your broker could help you navigate the various requirements of lenders.

Although many of the newer non-bank lenders operate exclusively online, some lenders can provide a dedicated expert to guide you through the process of applying and get to know your business’s needs.

If you’re considering non-bank lenders take a look at independent reviews. If you think an offer is too appealing to be true for instance, getting pre-approval prior to you’ve even submitted an application or the lender seems aggressive in their approach take a look at speaking with an adviser or broker and digging deeper before signing on.

When borrowing from a non-bank or bank lender, you’ll need to be aware of the terms and how you’ll be able to meet the payments. The most important thing to consider is creating a set of rules for yourself in deciding if business loans should be used to help your business thrive and to handle seasonal fluctuations, and fluctuations in cash flow, to make the most of opportunities to purchase stock in bulk, or to cover everyday expenses and operational costs.