Non-Bank Finance is Better For Business

Mar 13, 2024
3 min read

Banks are usually the first port of call for businesses looking for finance, but more and more small to medium businesses are turning to alternative finance providers. So what exactly is drawing businesses away from traditional bank loans and towards alternative business finance solutions?

Five conditions that make non-banks attractive to SME's: 

1: The Application Process Is Much Simpler

Bank loan applications can take months. You have to jump through hoops and fill out endless paperwork. But non-bank business finance providers usually have simple application processes, so it’s no wonder people are turning away from bank loans.

Most alternative finance applications involve a few simple questions, which can be filled out online, such as our NoBnk Enquiry Form with the extra bonus of having no hits on your credit file, until after your application has been approved. Most communication can be done over the phone and through email, which also makes it more personal.

2: Credit Requirements Are More Relaxed

Bank loans often focus on your credit score and will rarely lend to new businesses without several years of accounts. But the eligibility criteria is much less strict with alternative providers. They take into account more than just your credit score, and applications are often reviewed on a case by case scenarios.

Many providers specialise in providing finance to those with subpar credit scores or new businesses without an extensive financial history.

Because non-bank business finance is generally easier to qualify for, alternative finance providers give more people the chance to succeed on their own terms.

3: Get Fast Access to Funds

Previously, it’s always been the norm for business finance to take weeks, sometimes even months, to come through. But alternative providers are usually much quicker. Your application will be reviewed pretty much straight away, and if you’re approved for finance, you’ll have access to it in a matter of days.

So if you need business finance and want it as soon as possible, non-bank financing is the way to go.

4: You Decide How To Spend Your Funds

Banks often outline strict rules for how loans should be spent, especially for small businesses. But by going with an alternative provider, you’ll usually be free to use the finance how you see fit. The funds are for you to grow your business - how you go about that is up to you.

It’s worth bearing in mind that some types of finance may require you to use the funds in a certain way. For example, if you apply for invoice financing, you must use the money to fund invoices. So it’s worth considering what type of funding you’re after - a standard business loan or a specific purpose facility based on your company’s needs.

5: Non-Bank Business Finance Is Often More Flexible

While banks are quite rigid with the types of finance they offer and how loans are repaid, alternative providers offer more flexible solutions.

Non-bank business finance often has the option of extended repayment periods, so the monthly repayment is more manageable. This makes business finance easy to manage and improves cash flow, which will help make your business more financially stable.

Non-bank lenders can also be more flexible regarding what type of finance product they offer you. Some lenders will even allow you to combine different types of business finance to create a “hybrid” finance solution.

If you’re still wondering what exactly non-banks are – continue reading.

Non-Bank Explained

A non-bank lender, is a financial institution or organisation that offers financial services and products outside the traditional banking parameters. These providers offer various forms of financing and lending to individuals and businesses, often utilising innovative technologies and approaches.

Non-Bank Selling Points

Here are a few more unique aspects that makes non-bank lenders attractive to clients:

Different Regulatory Framework

Non-bank lenders operate outside the regulatory framework that traditional banks follow. Banks are subject to specific regulations and oversight by central banks and financial regulatory authorities. Non-bank lenders, on the other hand, may be subject to different or lighter regulatory requirements depending on the jurisdiction they operate in.

Diverse Funding Sources

Non-bank lenders often raise capital from alternative sources, such as private investors, hedge funds, pension funds, family offices or through securitisation. Unlike banks, they are not typically deposit-taking institutions and do not rely on customer deposits as their primary funding source.

Specialised Services

Non-bank lenders tend to focus on specific niche markets or underserved population segments. They may provide loans for small businesses, consumer loans, peer-to-peer lending platforms, invoice financing, equipment finance, short-term finance, crowdfunding, or other alternative forms of finance that cater to borrowers who may have difficulty accessing traditional bank loans.

Flexibility and Innovation

Non-bank lenders often leverage technology and innovative approaches to provide faster, more streamlined services. They may use online platforms, data analytics, and automated processes to assess creditworthiness, underwrite loans, and facilitate transactions. This flexibility allows them to respond more quickly to changing market demands and offer tailored financial solutions.

Summing Up

Overall, non-bank finance offers borrowers greater flexibility, faster approval processes, and more innovative loan products compared to traditional bank financing. For businesses looking for funding options that better meet their needs, non-bank finance can be a more attractive and beneficial choice. While banks may be a good option to store money and finance personal loans, we believe non-bank finance to be a better and more flexible option for managing business. It’s important to note that while non-bank lenders provide alternative financing options, they still operate within the legal framework of the countries they are based in. However, their operations may differ from traditional banks in terms of regulation, funding sources, and service offerings.

Businesses need to know their cash flow and financial position to take steps to grow. Always seek professional advice before taking on a loan to avoid getting it wrong and your business failing.

NoBnk is your answer. We are here to help your business succeed.

Ready to get started?

Find out how much you can borrow now.