Non-bank lenders vs Standard bank loans

Posted on: 5 Aug 2024 at 11:37 am

The decision to take a business loan for small businesses? The first step is deciding who to apply with. Here’s an easy guide to the advantages and disadvantages of traditional lenders and Non-Bank lenders.

First up, small business finance is typically a great option for business owners:

  • With a clear path for growth or a well-defined short-term goal
  • Who can make the repayments
  • You are aware of the terms and conditions that come with the loan – your adviser or broker will be there to assist you if you have any questions.

If you’re looking to make an investment in inventory, brand new technology or equipment, extra staff, training, renovation or new premises that could take your small enterprise to the next step If so, you may want to consider the advantages and disadvantages of taking out a traditional bank loan versus dealing with an Non-Bank lender.

Online or bank?


Credit from banks

The reputation for a brand of long-established bank can be considered 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 regulations.

The loan application process for bank loans could be complex and lengthy, and may require a large amount of paperwork which some small business owners might be limited in time to fulfill. The process may be faster in the event that the bank has digital ability to access your personal financial data - while banks aren’t generally recognized for their data-savvy approach to small business credit, but they’re becoming better.

Similar to all kinds of loans the chance of lower interest rates could require consideration alongside characteristics of loan products to choose the most appropriate kind of loan. As for the lender traditional bank loans are likely to have strict criteria and lengthy application procedures, and lack flexibility.

Cash flow is so crucial to the survival of lots of small businesses, the differences between a loan today that could be used to fund the sale of stock in the near future, and a loan granted next month , when the season’s peak is over, can be make or break.

Business online or non-bank loans

A credit score that is strong and solid security are usually required for an bank loan, Non-Bank lenders may be more flexible with their approach. They may also have greater flexibility in structuring loans.

Non-bank lenders are usually more innovative in their digital technology than banks. This means applications are often completed and approved swiftly, and funds are available within the next dayfollowing approval.

You’ll usually still need to give details about what the loan is intended for as well as your company’s type and background, as well as potentially providing security for larger loans, but since a complete business plan and a long-winded application aren’t always part of the deal, the process could be more quickly.

Attention: Relationships, red flags and payments

If you have a strong relationship with a bank’s manager or another lender, you can discuss the process of applying for loans and obtaining approval. If not, your broker could guide you through the different requirements of lenders.

Many newer and non-bank lenders operate exclusively online, some lenders have a dedicated expert to guide you through the process of applying and to really understand your business needs.

If you’re considering Non-Bank lenders take a look at independent reviews. If an offer seems too promising to be true like getting pre-approval prior to you’ve even made an application or the lender seems extremely aggressive in their approach think about speaking with an adviser or broker, and investigating further before signing up.

If you’re borrowing from a bank or Non-Bank lender, you may want to be aware of the conditions and be realistic about whether you’ll be able meet the loan repayments. The most important thing to consider is setting the ground rules for your business in deciding if business loans should be used to aid your business’s growth by coping with the seasonal changes in cash flow fluctuations, to make the most of opportunities to buy stock in huge quantities, or for everyday expenses and operational costs.

Tags: lenders, loans, non-bank Categories: Business Loans

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