Traditional bank loans vs non-bank lenders

What is the best way to choose a small-business loan? The first step is deciding who to apply with. Here’s an easy guide to the pros and cons of traditional lenders as well as Non-Bank lenders.

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

• With a clearly defined plan of expansion or a clearly-defined short-term objective
• Who is able make the payments
• If you are aware of the terms and terms associated with the loan – your advisor or broker is available to help if you have any concerns.

If you’re looking to invest in inventory, new technology or equipment as well as additional staff, training as well as a renovation or new building which could help take your small enterprise to the next step If so, you may want to weigh the pros and cons of taking on the traditional bank loan or using a non-bank lender.

Bank or online lender?

Credit from banks

The reputation for a brand of long-established bank can be considered solid or secure and can also give a sense of security – in 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 complex and lengthy, and require a level of paperwork which some small business owners are limited by time constraints to meet. The process can be speedier in the event that the bank has digital ability to access your personal financial records - while banks aren’t usually well-known for their expertise in data-driven small business lending, they are becoming better.

Like all types of lending, the possibility of lower interest rates may need to be considered along with characteristics of loan products in order to select the most appropriate kind of loan. As for the lender Traditional bank loans are likely to have strict criteria and cumbersome applications processes and lack flexibility.

With cash flow so critical to the survival of many small businesses, the difference between a loan granted today that could be used to fund the sale of stock in the near future, and a loan granted next month after the seasonal demand is gone, could be the difference that makes or breaks a business.

Business online or non-bank loans

A credit score that is strong and solid security is often a must-have for loans from banks, Non-Bank lenders can be more flexible with their approach. They may also offer more flexibility in structuring loans.

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

You’ll still have to explain what the loan is intended for the business’s name, type of business and past history, as well possibly providing the security required for larger loans but because a comprehensive business plan as well as a lengthy application aren’t required in every deal, things may move faster.

Heads up: relationships, repayments and red flags

If you’re in a long-standing relationship with a bank’s managing director or an other lender, you may contact them regarding the process of applying for loans and obtaining approval. Your broker may guide you through the different lending requirements.

While many newer or non-bank lending institutions operate entirely online, some lenders can assign a expert to guide you through the loan application process and really get to know your business’s needs.

If you’re thinking about Non-Bank lenders, check out independent reviews. If the offer you’re considering seems too tempting to be real or if you get pre-approval before applying, or the lender is very aggressive think about speaking with a broker or adviser and digging deeper before committing.

If you’re borrowing from a bank or Non-Bank lender, you’ll want to be clear about the terms of the loan and realistic about how you’ll be able to meet the obligations. The most important thing to consider is making a list of the rules you’ll need to follow when deciding whether business loans should be used to aid your business’s growth and to handle the seasonal changes in fluctuations in cash flow, to make the most of opportunities to purchase inventory in massive quantities, or to pay for daily expenses and operations.