Benefits of securing business finance from non-bank lenders
Business finance can be obtained from both bank and non-bank lenders. Whether your business needs a financial solution to fund day-to-day operations, fuel growth or smooth over some disruptions to cash flow, you might be considering which source of ?nancial support would be more beneficial for you and your needs.
In recent years, non-bank lending has become more prevalent across industries, with specialists providing tailored and flexible business finance for a range of small and medium sized enterprises.
What is a non-bank lender?
A non-bank lender is pretty much exactly what it sounds like: It's a financial institution that provides funding for lending solutions outside of the traditional, established banking system.
There is still a wide variety of different types of lenders including online institutions, peer-to-peer lending platforms, private equity and alternative financing providers.
We'll break down the benefits of opting for non-bank lending solutions in more detail next, but in summary, businesses often turn to non-bank lenders for greater speed, flexibility and risk appetite than traditional banks can offer.
Benefits of securing business ?nance through non-bank lending
1. Quicker approval process
For several reasons, such as the need to compete in the market and the greater willingness to take on higher risk, non-bank lenders offer more streamlined and efficient approval processes.
Unnecessarily lengthy paperwork and overly bureaucratic procedures can slow down the approval process with a traditional bank. Financial institutions that are not banks can make faster decisions with less cumbersome procedures, which means your business can access their line of credit or cash infusion soon.
2. Flexible terms and conditions
Banking institutions have strict criteria when it comes to both eligibility and terms and conditions. Non-bank lending allows for greater flexibility across all aspects of a loan or financial facility. Whether it's the loan structure itself or the conditions of repayment, the adaptability that can be offered from a non-banking institution allows for financial solutions that are more specifically targeted to suit a business's needs, more strategic in completing the financial and cash flow management needs of the borrower, and more personalised terms and conditions that work for both parties.
3. Greater accessibility for small businesses
Large enterprises and conglomerates generally do not find obtaining finance from traditional banks too difficult. With established creditworthiness and more assets available for use as collateral if needed, they can access business finance more easily. For a small business, the challenge of being able to access finance from traditional banks and lenders is more significant. Non-bank lending allows small and medium sized enterprises to have greater accessibility as they are more willing to work with and lend to businesses that may represent higher risk. If your small business is looking to grow and develop, a non-bank lender could offer financial options that otherwise would have been out of reach.
4. Innovative financial solutions
Non-bank lenders often offer innovative financing solutions that can be invaluable in non-traditional ways for small and medium sized businesses to access much needed working capital. Invoice finance, as an example, allows businesses to unlock the otherwise inaccessible funds in their customers' outstanding invoices ahead of account settlement. These customisable and flexible financial facilities can be tailored to the unique circumstances and needs of a particular business – an offering traditional bank lenders often cannot compete with.
5. Less stringent eligibility criteria
Typically, a traditional bank will have stricter eligibility criteria for a business looking to apply for a loan or business finance. Non-bank lenders, on the other hand, have more relaxed requirements and are more willing to take on increased risk. This allows a greater variety of businesses to access financial facilities. Whether your business is small or large, in its early stages or looking to grow rapidly, non-bank lending demands distinctly less eligibility criteria to be met.
6. Better customer service
Non-bank lenders often pride themselves on offering not just customised financial solutions but also personalised customer service. Working closely with their clients as partners, rather than transactions, non-bank lending institutions can better understand the unique challenges and identify the special opportunities facing clients to offer a more flexible, better catered financial solution that will suit their specific needs.
7. Diverse funding sources
Traditional banks rely heavily on deposits as their source of funding. Non-bank lenders, on the other hand, often have more diverse funding sources. This diversity and strength in funding source spread can enhance the lender's ability to provide business finance. As the client, you'll have a greater chance of securing funding knowing that your lender is not solely or exclusively dependent on a single source of capital itself.
8. Adaptability to industry trends
Banking institutions are mostly more established and immobile when it comes to adaptability. While all financial institutions must change with the times–whether that's adapting to more competitive lending markets or the embrace of new and emerging technology–non-bank lenders are both more attuned to industry trends and market shifts and more agile in being able to respond. This gives them greater ability to capitalise on new opportunities and stay ahead of the (banking) competition in a rapidly changing business environment. For you, as the client, it means better service, more tailored business finance solutions and an overall enhanced experience.
Contact us for tailored funding solutions from non-bank lenders. This article was originally published on ScotPac.com.au.