Traditional bank loans versus non-bank lenders

How do you choose a small business loan? The first decision is who to go with. This is a quick guide to the advantages and disadvantages of traditional lenders as well as Non-Bank lenders.

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

• With a clear roadmap for growth or a well-defined short-term goal
• Who is able make the payments
• Know the terms and conditions that come with the loan – your advisor or broker is available to help if you have any questions.

If you’re willing to invest in the inventory, new technology or equipment or staffing, additional training or renovation, or even a new location which could help take your small company to the next level If so, you may want to weigh up the pros and cons of taking out a traditional bank loan versus taking on a Non-Bank lender.

Bank or online lender?

Loans from banks

The brand reputation of a long-standing bank can be seen as solid or secure as could the feeling of security. New Zealand banks are registered with the Reserve Bank of New Zealand and are subject to the same rules.

The application process for bank loans could be long and complex, and require a level of paperwork which some small businesses owners may be constrained by time to meet. The process might be speedier when the bank has electronic access to your financial records - while banks aren’t generally recognized for their data-savvy approach to small business lending, they are becoming better.

As with all kinds of loans the chance of lower interest rates might be considered in conjunction with characteristics of loan products in order to select the best type of loan. As for the lender Traditional bank loans might have strict requirements as well as lengthy and complicated application processes and may not be flexible.

Since cash flow is crucial for the survival of many small businesses, the differences between a loan granted today that could fund stock to sell in the next day, and an offer for a loan in the next month when seasonal demand is over can be the difference that makes or breaks a business.

Non-bank or online business loans

When a solid credit history and solid security is often required for a bank loan, Non-Bank lenders could be more flexible with their approach. They could also be more flexible when it comes to structuring loans.

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

There is a need to disclose the purpose of the loan is intended for as well as your company’s type and history, as well in the event of providing security for bigger loans, but because a comprehensive business plan as well as a lengthy application aren’t always part of the deal, things may move more quickly.

Check out these relationships: red flags, and repayments

If you have a strong relationship with a bank manager or another lender, you can discuss their application and lending process. If not, your broker could assist you with the requirements of different lenders.

Many of the more recent or non-bank lenders operate exclusively online, some lenders offer a dedicated expert to guide you through the process of applying and get to know your business needs.

If you’re thinking of a loan from a Non-Bank lender review their reviews by independent sources. If an offer appears too good to be true like when you are pre-approved before you’ve even made an application or if the lender seems extremely aggressive in their approach, consider speaking to an adviser or broker and looking into the matter before signing up.

If you’re borrowing from a bank or Non-Bank lender, you may want to know the terms and how you’ll be able to meet the payments. One important aspect to think about is creating a set of rules for yourself in deciding if you should use business loans to support your business’s success and to handle the seasonal changes in fluctuations in cash flow, to benefit from opportunities to purchase stock in large quantities, or to fund daily expenses and operations.