Why Non-Bank Lending is On the Rise

Emerging trends show that borrowers are steadily opting for alternative lending and away from banks. Traditional banks and lenders are slowly losing their grip as more borrowers look for more customised loan solutions that suit their specific needs.

With tough economic times and ever-tightening lending conditions, traditional banks are no longer the go-to option for borrowers seeking the loans they need to grow their businesses or purchase property.

Considering banks still hold an enormous amount of cash deposits, why is non-bank lending rising in popularity?

Banks Have Outdated Requirements and Procedures

Among the factors that have influenced businesses and individuals to consider alternative lending methods is the long list of requirements and procedures that banks have. These typically drag the loan application process for months and prevent most deserving businesses from securing the funds they need.

Unfortunately, some of these requirements and procedures are outdated, and their list keeps on growing. In the fast-changing business environment, individuals and businesses want fast financial solutions that can keep up with the ever-changing environment. Having to collect tonnes of documents and make countless trips to the bank branch delays the process and puts undue pressure on the business.

Customers Want Faster and Smoother Experiences

Modern borrowers don’t want to spend their valuable time travelling to bank branches, spending hours on hold or sitting waiting for the branch manager.

Most banks have yet to automate their loan application processes. With outdated systems, it takes longer to apply for a loan and requires a lot more effort on the part of the borrower.

On the other hand, many non-bank lenders use the latest technology to allow borrowers to submit their applications securely online, complete with digital signing technology. This not only makes their financing products more accessible but also moves faster because borrowers can easily submit an application online, which gets approved within a short time.

Online Application Submission

Most banks still rely on outdated application methods that require printing and scanning of documents. This not only slows down the borrower but may also infringe on their goals to maintain a paperless office in line with their environment-friendly goals.

With many non-bank lenders, the borrower can complete an online application and submit it in minutes, getting the loan approved faster than you can finish printing the requirements for your bank loan. This level of convenience and swiftness appeals to most borrowers, which has led to an increase in demand for loans from non-bank lenders.

Banks Have Rigid Requirements

Banks seem out of touch with the modern finance industry. They are only interested in borrowers with perfect paperwork and everything in line.

For instance, you cannot secure a loan from a bank without standard documentation such as pay slips and the latest tax returns. These rigid requirements effectively lock out individuals who are not in conventional jobs and have yet to lodge their latest tax returns.

Non-bank lenders are more indulgent in looking at clients with messy paperwork and looking beyond the standard paperwork. This also means that non-bank lenders are more flexible in who they lend to. They can offer more tailored options that suit the borrower's needs and provide bespoke solutions that are more appealing to unconventional borrowers.

More Financing Options

Most banks still view lending the same way they did decades ago. They need to respond to businesses' evolving financial needs.

Non-banking lenders are aware that lending and financing needs have changed, and they have quickly adapted and evolved to offer a wide range of financial solutions that most banks don't offer.

One such solution is cash flow financing and invoice finance. This unique financing model allows businesses to get the financing they need using their accounts receivables without taking on additional debt. This unique financing diversity allows businesses to find financing solutions matched to their needs that banks are unable to keep up with.

Fast Disbursement of Funds

Most businesses apply for a loan when they are in dire straits. Usually, that means they need the money within the shortest time possible. This is commonly the case unless the funds the business is trying to acquire are for a planned expansion, in which case they have more than enough time to apply for the loan in advance.

If a business is seeking funding to cover some of its teething challenges, it usually needs the funds quickly after applying for a loan. With banks, not only is the application process winding and tedious, but the waiting times also don't favour organisations, especially when they need the money within a short time to cover urgent costs such as payroll.

Non-bank lenders are more suitable options in such cases because they run efficient systems that can get the funds in your account within a few days and, in some cases, a few hours. The time it takes to get the funding depends on the nature of the financing you need. However, most non-bank lenders offer a faster turnaround time than banks. Because of this convenience, most businesses seeking assistance to cover cash flow shortages and other financing problems have turned to such non-bank lending solutions.

Conclusion

Banks still have a firm grasp on the Australian finance market. But over the years, they have lost some ground. They continue to lose ground against non-bank lenders. This is because non-bank lenders have adapted to the changing financing needs of emerging businesses and offer more tailored solutions.