Typical bank loans versus non-bank lenders

The decision to take a business loan for small businesses? The first thing to consider is which lender to go with. Here’s a brief guide to the pros and cons of traditional lenders and Non-Bank lenders.

First of all, small business financing usually suits business owners:

• With a clear path for growth or a well-defined short-term goal
• Who can make the repayments
• Know the terms and conditions that come with the loan. Your broker or adviser is here to help you with any questions.

If you’re looking to invest in inventory, new technology or equipment or staffing, additional training or renovation, or even a new location that could take your small enterprise to the next step, then you might want to weigh up the pros and cons of taking on a traditional bank loan versus dealing with an Non-Bank lender.

Are you a bank or an online lender?

Lending from banks

The reputation of a long-standing bank can be seen as solid or secure, as can the sense of security – in New Zealand banks are registered with the Reserve Bank of New Zealand and fall under the same rules.

The process of applying for bank loans can be lengthy and complicated, and require a level of paperwork that small business owners might be limited by time to meet. The process may be faster when the lender has digital access to your financial records - while banks aren’t usually recognized for their data-savvy approach to small business credit, but they’re becoming better.

Similar to every type of lending it is possible that lower interest rates may need to be considered alongside loan product features to decide on the most suitable type of loan. As for the lender - loans from traditional banks may have strict criteria and cumbersome application processes, and are not flexible.

Cash flow is so crucial to the survival of many small businesses, the differences between a loan granted today that could fund stock to sell tomorrow, and a loan in the next month , when the season’s peak is over, can be the difference between a successful or unsuccessful business.

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 could be more flexible in their approach. They could also offer more flexibility in structuring loans.

Non-bank lenders are typically more digitally innovative than banks, meaning the applications may be processed and approved in a short time, and the funds can be made available by the next dayafter approval.

You’ll usually still need to explain what the loan is intended for along with your business’s nature and history, as well possibly providing security for larger loans, but since a complete business plan as well as a lengthy application aren’t always part of the deal, things may move quicker.

Beware of relationships, red flags, and repayments

If you have a strong relationship with a bank’s management or an other lender, you may contact them regarding their lending and application process. If not, your broker could assist you in understanding the various requirements of lenders.

Many newer and non-bank lenders are exclusively online, some lenders like can assign a specialist in loan to guide you through the loan application process and really get to know the requirements of your company.

If you’re thinking about Non-Bank lenders review their reviews by independent sources. If an offer seems too tempting to be real like if you get pre-approval before you’ve even applied, or the lender is uncompromising in their approach take a look at speaking with an adviser or broker, and digging deeper before signing on.

When borrowing from a bank or non-bank lender, you’ll want to be aware of the terms and realistic about whether you can meet the obligations. One important aspect to think about is setting the ground rules for your business when deciding whether the business loan should be utilized to aid your business’s growth, to manage seasonal ups and downs and fluctuating cash flows, or to take advantage of opportunities to purchase inventory in large quantities, or to fund everyday expenses and operational costs.