The short answer
Nothing on the non-bank side beats a bank on price or on term. If your business qualifies for a bank facility and you can wait for it, that is the cheapest money in the market and it can be spread over the longest period. Anyone who tells you otherwise is selling something.
The catch is the word qualifies. A bank protects its price by lending only to files with nothing to explain, and it takes weeks to satisfy itself that yours is one of them. Non-bank lenders exist in the gap the banks leave: businesses that need more than a bank will lend, need it faster than a bank moves, or have something on the file that a bank’s process will decline before a person has read it. That gap is wide, and a great many perfectly good businesses are standing in it.
What a bank is actually offering
- The lowest rate available to you. Bank pricing on business lending sits well below the non-bank market for the same borrower, and further below it again where property is offered as security.
- The longest terms. A secured bank facility can run for decades. Most non-bank business lending runs from a few months to five years.
- Depth. For a business that meets the criteria, a bank will go larger than almost anyone, and it will add an overdraft, cards and trade facilities around the same relationship.
Those are real advantages and we do not talk clients out of them. It is why every file we handle starts at the top tier of the market and only moves down when the fit is not there.
What the bank assessment involves
The price comes with a process, and the process is where most applications end. A bank will typically want two years of accountant-prepared financials and tax returns, recent BAS, interim figures for the current year, a statement of position for each director, and in most cases property as security. Serviceability is assessed on the balance sheet and on net profit, not on what moves through the account. From a complete file, expect the decision in weeks rather than days.
It is also the least forgiving assessment in the market. Things that will stop a bank application before anyone looks at the business behind it:
- An ATO balance, even one on a payment plan that is being met.
- A default on a director’s credit file, including a small one that was paid years ago.
- Less than two years of trading, or two years of financials that are not yet finalised.
- A weak year in the accounts, whatever the reason and however well the business has recovered since.
- Dishonours or an overdrawn balance on the bank statements.
- The wrong industry, because banks keep lists of sectors they will not lend to, and hospitality, construction and transport appear on more of them than you would expect.
None of that makes the bank unreasonable. It is pricing the cheapest money in the market and it can only do that by declining anything with a story attached. The problem is that most real businesses have a story.
Where non-bank lenders win
The amount. Non-bank lenders assess the business on how it trades, on turnover and bank statement conduct, rather than on net profit and security. For a business with strong turnover and a modest profit line, which describes most growing businesses, that assessment supports a materially larger facility than the bank’s does. More is not always better, and we say so when it isn’t, but for a business with a contract to fund it is the whole point.
Speed. Approval in 24 to 48 hours and funds in days are normal on the non-bank side, against weeks at a bank. For a supplier deadline, a tax due date or a contract that starts on Monday, the cheapest facility is the one that arrives in time.
A person reads the file. With most non-bank lenders you are dealing with a credit manager who looks at the business and can be spoken to, rather than a queue that returns a decision. A file with a story gets read rather than filtered, and a good broker knows which lender wants to hear which story.
Red flags are priced, not declined. An ATO payment plan, a paid default, eighteen months of trading, a bad quarter that has since turned around: on the non-bank side each of those moves you to a different lender or a different rate. It rarely ends the conversation.
Flexibility. Facilities without property security up to around $1 million, terms from three months to five years, and repayments that can be matched to how the business collects its money rather than to the lender’s calendar.
What it costs, honestly
More than the bank. There is no way around that, and any page that suggests otherwise is not telling you the whole story. As a rough shape of the market, unsecured non-bank lending to a clean file starts somewhere around 9.5% a year and runs up to around 25% as the file gets harder, with short-term and factor-rate products above that again. Those are indicative ranges observed across our panel, not offers, and your own file moves them a long way. We break the ranges down further on our unsecured business loans page.
The useful comparison is not bank against non-bank. It is the best non-bank lender who will say yes to your file against the first one who will. The gap between the bank and the best non-bank is smaller than most people assume. The gap between the best non-bank and the worst is enormous, routinely worth tens of thousands of dollars over the life of a facility, which is the entire reason to run the whole panel rather than the lender whose advertisement you saw first.
The question to ask any broker
You may suspect the honest answer to this page’s title is commission. Lenders do pay brokers, and the footer of every page on this site says so. The check against that is simple. Ask the broker what the bank would have offered you and why you are not getting it. A clear answer, the amount, the timing, a specific decline point, is the broker doing the job. No answer is a reason to get a second opinion.
How we decide where your file goes
We start with the highest tier of lender and work our way down. The top tier is the banks and the handful of lenders priced closest to them: the cheapest money and the strictest assessment. If the file fits there and the timing works, that is where it goes, because nothing further down will beat it on price. If it does not fit, or the deadline rules it out, we move to the next tier, where the assessment is a notch more forgiving and the price a notch higher, and we keep going until we reach the lender whose criteria the business actually meets. The question at every step is the same: which lender fits this client’s needs best, on amount, timing and cost together. Wherever the file lands, we show you the total cost in dollars before you commit to anything.
The wrong way to do it, and the way a lot of the market does it, is to send every file to the lender who approves fastest and pays best. That is how a business that would have qualified for a bank overdraft ends up on a daily debit. We find the cheapest yes, not the first one, and we would rather lose a week than cost you the difference.
Which side are you on?
A quick way to read your own position before you fill in the form.
- Probably a bank: two or more years of finalised financials showing a profit, property available as security, nothing owing to the ATO, clean statements, and no deadline inside the next month.
- Probably non-bank: you need more than the bank has offered, you need it inside a fortnight, there is an ATO balance or a payment plan, a director has a default or a judgment on file, the business is under two years old, the last year was weak, or you do not own property or would rather not put it forward.
Most businesses that come to us are on the second list for at least one reason, and often it is a small one. That is not a mark against the business. It is the reason the non-bank market exists.
Fill in the form and we will tell you what you can get, from which side of the market, and what it would cost.