Banks are often seen as the ‘safer’ choice for securing finance, especially when compared to private or non-bank lenders. However, there are many myths about working with non-banks lenders that aren’t true. Avoiding non-bank lenders for a business loan could do your business a disservice.
Myth 1: Non-bank lenders are for people with bad credit history
Non-bank lending is sometimes thought of as the ‘last resort’ and only useful for people with bad credit history. However, non-bank lenders provide a legitimate source of funding for a wide range of businesses. Non-bank lenders usually offer greater flexibility, fast turnaround times and fewer conditions that can make securing funding more appealing for some businesses.
Non-bank lending is often a more viable option for newer businesses or SMEs looking to fund their growth quickly. Banks often require a thorough business plan, financial records and additional paperwork. The process of applying for a traditional bank loan is more complex and takes longer than a non-traditional bank. In fact, many non-bank lenders can process loan applications in as little as 24 hours.
In short, non-bank lending is for all types of businesses, including those with good and poor credit scores.
Myth 2: Lending from a non-bank is riskier than a traditional bank
Non-banks are financial institutions that do not have an authorised deposit-taking institution license (ADI) and therefore don’t offer traditional banking products like deposit or savings accounts. However, non-banks provide a host of products for personal and business use, like home loans, lines of credit and equipment lending.
There are many reasons you should be cautious before taking out a business loan regardless of whether you are applying for lending from a traditional bank or non-bank. If you are worried about risk, you can rest assured that non-banks in Australia are regulated by the Australian Securities and Investment Commission (ASIC), while home loan lending is regulated by the Consumer Credit Code.
Whichever bank you choose to lend from, make sure you compare a variety of products based on:
- Fees and rates
- Criteria for application
- Approval time
- Online reviews
- The product/features you require
Myth 3: Non-bank products are more expensive
Non-bank products can be more expensive than traditional banks. However, this doesn’t tell the full story. Non-banks have a range of features and benefits that come with their products and services that can make them the better option overall for your bottom line.
Think of it this way; a loan approved at a slightly higher rate today could be more beneficial than a low-rate loan that takes months to get approved. In that time, your business could have already spent the money on seasonal stock, invested it in new equipment or hired more staff to help your business grow.
Because non-banks don’t deal with the depositing side of banking, they can dedicate more time to focus on lending as a service. Most non-banks have invested heavily in making the application process seamless and straightforward. They also tend to have reputations for being more digitally savvy than traditional banks.
Myth 4: Non-banks have limited products ranges
In Australia, non-bank lenders provide business loans for a wide range of purposes. From equipment loans to lines of credit and invoice financing, lending is often personalized to your business needs. Traditional banks aren’t always as flexible with their products.
What’s more, non-bank lenders tend to be smaller institutions than traditional banks. This means they have the time to reviewing and approving applications based on merit. Many banks use computer algorithms to assess applications. This means your application can get rejected before a human ever lays eyes on it.
At ThinkCap, we have access to over 75 lenders including traditional banks and non-banks. No matter your circumstances or your business needs we can help you find the right loan to fund your ambitions. Talk to us today about your commercial lending needs.
