Standard bank loans versus non-bank lenders

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

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

• With a clear roadmap for development or a well-defined, short-term goals
• Who is able to make the repayments
• If you are aware of the terms and terms associated with the loan – your adviser or broker will be there to assist you with any questions.

If you’re willing to invest in inventory, new technology or equipment, extra staff, training or renovation, or even a new location which could help take your small business to the next stage 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 reputation of a long-established bank can be considered safe or solid 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 lengthy and complicated, and will require a certain amount of paperwork which some small businesses owners may be constrained by time to meet. The process might be speedier in the event that the bank has digital access to your financial records although banks aren’t widely considered to be data-savvy when it comes to small business credit, but they’re getting better.

Like all kinds of loans it is possible that lower interest rates may be considered in conjunction with loan product features to decide on the best type of loan. As for the lender conventional banks might have strict requirements and cumbersome application processes, as well as being inflexible.

Cash flow is so crucial for the survival of many small businesses, the differences between a loan that can fund inventory to sell in the near future, and an offer for a loan next month when the seasonal demand is gone, could be make or break.

Business online or non-bank loans

When a solid credit history and solid security are often required for the bank loan, non-bank lenders might be more flexible with their approach. They also may have more flexibility in the way they structure loans.

Non-bank lenders are typically more digitally innovative than banks, so that applications are sometimes processed and approved in a short time, with funds being available within the next dayafter approval.

It is still necessary to give details about what the loan is for along with your business’s nature and background, as well possibly providing the security required for larger loans but since a complete business plan and lengthy applications aren’t required in every deal, the process could be quicker.

Beware of relationships, red flags, and repayments

If you’ve established a solid relationship with a bank’s managing director or an additional lender, you might talk to them about their lending and application process. If not, your broker could assist you in understanding the various requirements of lenders.

Although many of the newer non-bank lending institutions operate entirely online, certain lenders have a dedicated expert to guide you through the loan application process and get to know your business’s needs.

If you’re thinking about Non-Bank lenders review their reviews by independent sources. If the offer you’re considering seems too tempting to be real, such as the pre-approval you receive before you’ve even applied or the lender seems aggressive in their approach, consider speaking to advisors or brokers and looking into the matter before signing on.

If you’re borrowing money from a bank or a Non-Bank lender, you’ll need to understand the terms of the loan and realistic about whether you’ll be able meet the payments. One important aspect to think about is creating a set of rules for yourself - deciding whether you should use business loans to boost your business’s performance, to manage seasonal fluctuations, and cash flow fluctuations, to profit from opportunities to purchase inventory in large quantities, or to fund day-today operations and costs.