Non-bank lenders versus Typical bank loans

How do you choose a small business loan? The first step is deciding who to approach. Here’s a simple guide to the pros and cons of traditional lenders as well as Non-Bank lenders.

First , small-scale business financing usually suits business owners:

• With a clearly defined plan of expansion or a clearly-defined short-term goal
• Who can make the repayments
• If you are aware of the terms and conditions that come with the loan – your adviser or broker is there to assist you with any concerns.

If you’re willing to invest in inventory, new equipment or technology as well as additional staff, training as well as a renovation or new building that can take your enterprise to the next step and beyond, then you should to consider the advantages and disadvantages of taking on traditional bank loans versus working with a non-bank lender.

Do you prefer a lender online or a bank?

Bank loans

The reputation for a brand of long-standing bank can be seen 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 regulations.

The process of applying for bank loans can sometimes be complex and lengthy, and will require a certain amount of paperwork that small entrepreneurs may be restricted in time to fulfill. The process may be faster when the bank has electronic access to your financial records although banks aren’t widely recognized for their data-savvy approach to small-business loans, their capabilities are getting better.

As is the case with any type of loan, the possibility of lower interest rates may require consideration alongside characteristics of loan products to choose the most appropriate type of loan and lender - loans from traditional banks might have strict requirements and cumbersome applications processes as well as being inflexible.

Cash flow is so crucial to the survival of many small enterprises, the gap between a loan today which can fund inventory to sell tomorrow, and an offer for a loan next month , when the seasonal demand is gone, could be make or break.

Online or non-bank business loans

A credit score that is strong and solid security are usually essential for loans from banks, Non-Bank lenders may be more flexible in their approach. They can also tend to have greater flexibility in the way they structure loans.

Non-Bank lenders are often more innovative in their digital technology than banks, meaning applications are often processed and approved quickly with funds made available within the next dayafter approval.

You’ll still have to disclose the purpose of the loan is for, your business type and past history, as well in the event of providing security for larger loans, however, since a thorough business plan as well as a lengthy application aren’t required in every deal, things may move quicker.

Check out these relationships: red flags, and repayments

If you’re in a long-standing relationship with a bank’s manager or an other lender, you may contact them regarding their application and lending process. If not, your broker could assist you with the various requirements of lenders.

Although many of the newer non-bank lenders work exclusively online, some lenders can provide a dedicated expert to guide you through the loan application process and truly get to know the needs of your business.

If you’re considering non-bank lenders review their reviews by independent sources. If you think an offer is too promising to be true or if you get pre-approval before you’ve even applied, or the lender is extremely aggressive in their approach, consider speaking to an adviser or broker, and digging deeper before signing on.

When borrowing from a bank or a Non-Bank lender, it is important to understand the conditions and be realistic about whether you can meet the repayments. One important aspect to think about is making a list of the rules you’ll need to follow in deciding if the business loan should be utilized to support your business’s success in managing the seasonal changes in fluctuations in cash flow, to make the most of opportunities to purchase inventory in massive quantities, or to pay for the costs of running a business and day-to-day operations.