Bank vs private lender: what you gain and give up when you go non-bank

The short verdict

Go to the bank when you have time, clean credit, up-to-date financial statements and a need that suits longer-term lending. You’ll usually pay the least.

Go to a private or non-bank lender when speed matters, when your credit or tax history is complicated, when your accounts are behind, or when a bank has already said no. You’ll pay more — so plan how and when you’ll move to cheaper money.

How do they compare?

	Bank	Private / non-bank lender
Speed	Often weeks	Fast — $20k to $250k possible same day (property-secured)
Relative cost	Usually lowest	Higher
Paperwork	Full financials, forecasts, sometimes a business plan	Bank statements and/or property details
Credit history	Strict scoring and policy	Case by case
IRD debt	Often a deal-breaker	Often fundable, especially secured
Term	Longer	Usually shorter
Decision-maker	Credit committee, policy rules	Often a small team with discretion
Relationship	Broad banking relationship	Usually just the loan
Exit	Long-term facility	Refinance, sale or repayment

Why are banks cheaper — and slower?

Banks fund themselves cheaply and lend within tight policies designed to keep losses low. That combination produces low prices and slow, thorough processes. They usually want to see recent financial statements, sometimes management accounts and forecasts, and they often require property security plus a general security agreement. A credit committee may need to sign off. For a well-documented business with time to spare, this is exactly the right place to borrow.

Why are private lenders faster — and dearer?

Private and non-bank lenders work differently. Many focus on security and the exit rather than on years of financial statements, and decisions are made by smaller teams with more discretion. That’s why they can move quickly and look past issues a bank’s policy won’t. They also take on more risk and fund themselves at higher cost, so they charge more and usually prefer shorter terms.

When is “both” the right answer?

Often. A common pattern for New Zealand businesses:

1. Private lender now — to meet a deadline, clear Inland Revenue debt, settle on a property or fund a contract.
2. Fix what the bank didn’t like — file overdue returns, finish financial statements, let defaults age, build a track record of on-time payments.
3. Refinance to the bank — once the business fits bank policy, move to cheaper long-term lending.

Illustrative example. A Tauranga horticultural services company needs $600,000 to buy out a retiring partner by a fixed date. Its bank is supportive in principle but needs updated accounts that won’t be ready for two months. A private first mortgage over the company’s depot, possible within days, completes the buy-out on time. Once the accounts are done, the bank refinances the private loan at a lower cost.

The key is to plan step 3 before you sign step 1. A private loan without a credible path to cheaper money can become expensive quickly.

What should you check with a private lender?

• Total cost in dollars for the expected term, including establishment, legal and any line fees.
• What happens at the end of the term — extension terms, fees and what’s required.
• Early repayment — can you refinance to a bank early without a penalty?
• Default terms — what triggers a default, and what it costs.
• Upfront fees — be cautious of large fees demanded before approval.
• Security — exactly what’s being registered, and over which property.

Our guide on comparing fast loan quotes turns those answers into one comparable number.

What if the bank has already said no?

Find out why. Banks decline for policy reasons that may not matter to a private lender: the business is too new, the industry is out of favour, the accounts show a loss, there’s a default on file or tax is owing. Understanding the reason tells you which private options are worth trying and what to fix for a future bank application. Our page on what to do when the bank has declined you covers this step by step.

Before applying anywhere, get your credit report — the Privacy Commissioner confirms you can get it free from each credit reporter — so you know what a lender will see.

How do you read a private lender’s offer?

Private loan offers vary in format, so translate them into the same few numbers before comparing:

1. Amount you actually receive after any fees deducted at settlement.
2. Total you’ll repay if everything goes to plan.
3. Total you’ll repay if you exit three months late.
4. Cost of repaying early, if you refinance to a bank sooner than expected.

Those four numbers tell you more than any headline.

Is non-bank lending only for businesses in trouble?

No. Plenty of healthy businesses use private and non-bank lenders simply because they’re faster and less bureaucratic, and the cost of a few weeks’ delay outweighs the price difference. A business seizing a time-limited opportunity, or one whose accounts lag behind a recent growth spurt, is a perfectly normal non-bank borrower. For the trade-off between documentation levels, read low doc vs full doc; for putting a dollar value on time, read speed vs cost.

Wondering which side of the line you fall on? Ask without a credit check.

Find out which lender suits your timing

We compare both worlds every day, and we’ll tell you honestly if your business would be better off waiting for a bank. Enquiring costs nothing and doesn’t involve a credit check, and your details stay with one specialist rather than being shopped around. Tell us accurately how soon you need the money, where your accounts are up to, and any credit or tax issues — that’s what lets us point you to the right lender first time. Start now.