Small business always turns to banks for obtaining loans to meet various business expenditures and not all the loans are approved by the banks for different reasons. However, banks are not the only option available for business owners, other lenders offer loans at competitive interest rates that are more suitable for businesses. These lenders are non-bank lenders that are not registered with the banking regulatory agency.
The non-bank lending institutions include commercial loan providers, peer-to-peer lenders, community development organizations, leasing providers and bills discounting and factoring providers. Availing loan from non-bank lending institutions is quick, easy, involves minimal procedure and less paperwork. A business owner can obtain the loan from non-bankers easily even if your business has suffered losses recently or has a poor credit score or if the business loan has been turned down by a bank. The non-bank lending institutions offer loans that are flexible and suit various types of business at competitive interest rates.
A little homework before you approach non-bank lenders for the loan can make you successful in availing a loan. Gathering information about your business finance will help you to evaluate where you stand in finances and how much you need to borrow to meet the expenditure and pay outstanding dues. An up to date realizable business plan for the coming years on hand will give the lenders an idea of your business existence and expansion plans. Error-free business and credit rating reports on hand will help in speeding up the process.
Most of the loans offered by the non-banking lending institutions will ask for some guarantee to back-up your loan amount. This security can be both tangible or intangible assets owned by the business. They also ask for a personal guarantee or business guarantee to ensure that the loan repayment is made according to the terms of the loan agreement.
Although availing loan from non-banking lending institutions is easy to a great extent, it does not make an entirely flawless option for the business owners. There are both pros and cons of availing loans from non-bank lenders who need to analyzed and evaluated carefully before approaching them for loans.
- The non-bank lending institutions are smaller operators in the credit market and hence put in a lot of effort to pool the funds and make them available for business owners at competitive interest rates.
- Non-banker loans make best options for the borrowers with low or bad credit rating, self- employed or whose loan has been rejected by the bank in the past.
- Non-bank lenders are reputed for providing more personalized and customized loan lending services when compared to banks and government financial institutions. The loans provided by the are more flexible and suit various types of businesses.
- The non-banking finance institutions have low set-up and ongoing costs.
- The non-banking lending institutions are more vulnerable to economic conditions as they are smaller parts of the finance industry.
- They may not offer full-fledged loans that cater to the loan needs of every business.
- The non-banking lenders are not regulated by banking agencies or government and hence need to be dealt carefully when availing a loan.