Non-bank lender business loans

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If you're thinking about looking for business financing, don't limit your options to regular banks. It's better for your business to consider all of the options available, especially if these options can provide you with more competitive rates, fees, loan conditions and customer service.

What types of non-bank business loans are available?

• Line of credit. This is a revolving loan, such as a credit card or overdraft, that allows you to withdraw funds up to a maximum limit. As you pay back the loan, you regain access to your funds.
• Short-term loan. This is an up-front lump-sum loan with a fixed repayment schedule ranging from 3-12 months.
• Unsecured loan. This type of loan doesn’t require you to attach assets as security for your lender. It could be a term loan with a fixed repayment schedule or a line of credit.
• Secured loan. This type of loan requires you to attach assets, such as home or business equity, as security for your lender. It could be a term loan or a line of credit.
• Bad credit business loan. Individuals with bad credit history can qualify for this loan, although interest rates will likely be higher. Bad credit loans may also require asset security.

How to find the best non-bank business loan

There is no one “best” business loan on the market, as it will depend on your particular situation. However, keep the following in mind when weighing up your options:

• Can my business afford it? As the most important factor in your decision making, be well aware of all loan costs as well as your repayment ability over the next few months.
• What’s the interest rate? Make sure you know the difference between fixed and variable interest rates and how they can impact your business. Also be cautious of variable interest rates that may exceed your repayment ability.
• What’s the comparison rate? This combines the loan’s interest rate, fees and other charges into one single percentage to help you better compare your options.
• What are the fees? Be aware of one-off fees such as application fees, exit fees and termination fees. Other charges include ongoing fees such as service and advance fees.
• How will I repay the loan? Lines of credit don’t have fixed repayment terms, but lump-sum term loans do and will usually cost you the loan amount plus interest over the loan's term. Also, keep in mind that lenders are usually more flexible with repayments for business loans than standard personal loans, so check your lender’s repayment terms before applying.
• Secured or unsecured? The difference between a secured and unsecured business loan is huge, with one requiring you to put up assets as collateral for the lender while the other has no such requirement (usually meaning higher rates). The right choice depends on your particular situation.

Have you weighed up the pros and cons of borrowing from non-bank lenders?

What pitfalls do you need to avoid?

You should always be cautious of debt. Avoid borrowing too much money and learn exactly how much debt your business can handle. Also, try not to apply for amounts that exceed your business needs.

Understand all the fees involved, including one-off and ongoing fees, and be aware of interest rates that exceed the market rates as well as your ability to repay.

You should also be cautious of applying too many times for credit products. Applying and getting rejected for loans will negatively affect your credit history and your ability to be accepted for future loans. Take your time weighing up your options and apply only when you meet all eligibility requirements set out by your lenders.

Compare non-bank business credit card options

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Product AUFBL	Bonus points	Complimentary travel insurance	Annual fee	Interest-free period
American Express Platinum Business Card	250,000	Yes	$1,750	Up to 55 days on purchases	Special offer: Get 250,000 Amex Membership Rewards Points when you get a new American Express Platinum Business Card and spend $12,000 on eligible purchases in the first 3 months. Plus 50% off card annual fee in the first year. Must apply by March 2025. New customers only. Available to ABN holders w/ $75,000 revenue. Features no pre-set spending limit with up to 55 days to pay for your purchases and a Flexible Payment Option. Plus, rewards, insurance covers and up to 99 additional cards for no annual fee.	More Info Compare	loading Fetching your data...
American Express Velocity Business Card	120,000	Yes	$249	Up to 51 days on purchases	Available to ABN holders w/ $75,000 revenue. Features no pre-set spending limit with up to 51 days to pay for your purchases and a Flexible Payment Option. Plus, Velocity Points, travel insurance covers and Virgin Australia lounge passes.	More Info Compare	loading Fetching your data...

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FAQs

• What's the main difference between regular banks and non-bank lenders?

  Non-bank lenders are privately-owned institutions that don't hold a banking licence. They get funding from various sources, at wholesale, and then sell at retail value. This allows them more flexibility with rates and fees than normal banks.

• What happens if my non-bank lender goes bankrupt?

  If this happens, you won't be forced to suddenly repay your entire balance, but you'll still be obligated to continue making payments normally. Also, your original loan terms won't change, even with changed ownership.

• Are non-bank lenders regulated?

  Although non-bank lenders don't hold a banking licence, they're bound by the same laws and regulations as regular banks.

Picture: Shutterstock

Written by

Elizabeth Barry

Lead Editor

Elizabeth Barry was the lead editor for Finder. She has over 10 years' experience writing about a range of topics with a focus on personal finance. You’ll find her writing and commentary in a range of publications and media including Seven News, the ABC, MSN, the Irish Times and Singapore Business Review. See full bio

Elizabeth's expertise

Elizabeth has written 211 Finder guides across topics including:

• Banking
• Personal finance
• Investing

Co-written by

Bria Horne

Writer

Bria Horne is a writer for Finder, with a specialist knowledge of personal loans, car loans and business loans. Originally from the UK, Bria has been a professional personal finance writer in Australia for over 2 years. She has an M.A and B.A in Philosophy and Literature from the University of Sussex, and previously worked on the UK’s leading hospitality publication. See full bio