The short answer
In New Zealand, banks usually suit business owners with strong financials, plenty of time and a need for long-term, low-cost lending. Private and non-bank lenders suit businesses that need fast decisions, have accounts that are behind, bad credit or an unusual situation. Private loans are usually shorter and priced for risk, and are often refinanced to a bank later.
Bank or private lender: which should a business choose?
There’s no single right answer, and anyone who tells you otherwise is selling something. Banks and private lenders are built for different jobs.
- Banks are built for long-term, low-risk lending at scale. They’re at their best when you have years of clean financials, a strong credit record, plenty of security and time to wait.
- Private and non-bank lenders are built for speed and judgement. They’re at their best when the deal is urgent, your paperwork is behind, your credit has a history or your situation doesn’t fit a box.
Most New Zealand businesses will use both at some point. The skill is knowing which one fits the job in front of you. LoansOne works with a panel of non-bank and private lenders, arranging unsecured business loans and 1st or 2nd mortgages for business purposes from $20,000 to $500,000.
How do banks and private lenders compare side by side?
| Bank | Private or non-bank lender | |
|---|---|---|
| Speed | Often weeks, with set approval cycles | Next-day funding possible in many cases |
| Decision style | Credit policy and scoring models | Case by case, based on the whole story |
| Documents | Full financial statements, often forecasts | Bank statements for unsecured; property details for secured |
| Up-to-date accounts | Usually essential | No cash flow or financial records needed for property-secured loans |
| Credit history | Defaults and arrears often mean a decline | Bad credit considered; OK for property-secured |
| Security | Often a mortgage plus a general security agreement registered on the PPSR | Unsecured, or a 1st or 2nd mortgage |
| Term | Long terms common | Usually shorter terms |
| Cost | Usually the lowest available | Usually higher, priced for speed and risk |
| Flexibility | Limited outside policy | High: unusual properties, purposes and timeframes |
| Relationship | Ongoing, across all your banking | Deal by deal |
Speed: how big is the difference?
This is where the gap is widest. Bank business lending typically runs through a relationship manager, a credit team and sometimes a credit committee, each with its own queue. If anything is missing, like last year’s accounts or an updated valuation, the clock stops.
Private lenders make their own decisions, often with the decision-maker a phone call away. Through LoansOne, an expert reviews every application, then a matched lender makes contact. Next-day funding is possible, and many loans are paid out within 24 hours.
For a business with an IRD deduction notice, a broken-down truck or a settlement deadline, that difference isn’t a convenience. It’s the whole point. Our fast business loans page covers what makes urgent funding work.
Criteria: why does the bank say no when others say yes?
Banks lend within strict policy. A loan that falls outside it usually gets declined, however sensible it might look. Common reasons:
- Financial statements more than a few months out of date
- A short trading history or a recent change of structure
- A default, judgment or past insolvency on a director’s file
- GST, PAYE or income tax arrears with Inland Revenue
- A loan purpose the bank doesn’t fund, such as paying tax debt
- A property type or location outside the bank’s appetite
Private lenders can look past many of these, especially with property security. That’s why a bank decline is often the start of the conversation rather than the end. Our guide on what to do when the bank declines your business loan walks through the next steps.
Cost: is a private lender always more expensive?
Usually yes, for the same borrower on the same day. Banks fund themselves cheaply and lend to lower-risk borrowers, so their pricing is hard to beat when you qualify.
But comparing headline rates misses the real question: what does it cost you not to have the money in time? A cheaper loan that arrives after the deal has gone, or after IRD has escalated, isn’t cheaper.
Every LoansOne loan is priced on the client’s individual circumstances, and we work to get the sharpest rate available for that situation. The main drivers are security, equity, term, credit history and how clear the exit is. Whatever you’re offered, compare total cost including fees, using our compare loan offers tool.
Flexibility: what can a private lender do that a bank won’t?
Plenty, within reason.
- Lend without up-to-date financials. Property-secured 1st and 2nd mortgages through LoansOne need no cash flow or financial records.
- Lend with bad credit. Property-secured loans are OK with bad credit, and unsecured loans consider it.
- Fund tax debt. Clearing GST, PAYE or income tax arrears is a common private lending purpose.
- Take a second mortgage behind your bank, leaving the bank’s first mortgage untouched.
- Move on short notice for bridging, settlements and opportunities.
- Structure interest flexibly, for example paid at the end of a short term.
If your financials are the sticking point, our low doc business loans page explains what lenders use instead.
When does a bank win?
A bank is usually the right call when:
- Your financial statements are current and show steady profit
- Your credit file is clean
- You’re borrowing for the long term, such as buying commercial premises
- You have time, weeks rather than days
- You want the lowest possible ongoing cost
Illustrative example: A Nelson engineering firm with ten years of clean accounts wants to buy the building it leases, settling in three months. There’s no rush and the numbers are strong. A bank loan is the natural fit.
When does a private lender win?
A private or non-bank lender is usually the right call when:
- You need funds within days
- Your accounts are a year or more behind
- There are defaults, arrears or past insolvency on file
- The bank has already declined, or has taken too long
- The need is short-term with a clear exit
Illustrative example: A Waikato agricultural contractor’s bank pauses its overdraft review while waiting for accounts that the accountant won’t finish for months. Harvest is weeks away and machinery repairs can’t wait. A private second mortgage over the owner’s home funds the repairs now, and the plan is to refinance to the bank once the accounts are done.
How do private lenders manage their risk?
If private lenders say yes to deals banks turn down, it’s fair to ask how they stay comfortable. The answer explains most of the differences in price and structure.
- Security first. Property-secured loans rely on equity in the property, so lenders lend within a conservative share of its value.
- Shorter terms. A loan over months rather than decades means less can change before it’s repaid.
- A clear exit. Lenders want to see exactly how the loan will be repaid, whether from trading, a sale or a refinance.
- Pricing that reflects the deal. Faster decisions and wider criteria cost more to provide, and the price reflects that.
None of this is a catch. It’s simply a different model, and knowing how it works helps you put forward an application a private lender can approve quickly.
How do you decide? A quick checklist
Answer these five questions honestly:
- Do I need the money within the next week or two?
- Are my financial statements more than a few months out of date?
- Is there anything on my credit file, or with IRD, that a bank would flag?
- Has a bank already declined or stalled?
- Is this a short-term need with a clear payback?
If you answered yes to any of them, a private lender is likely the better starting point, often through a second mortgage or an unsecured loan. If you answered no to all five, talk to your bank first, and keep a private option in your back pocket in case it takes longer than expected.
Can you use both?
Yes, and many smart business owners do. A common pattern:
- Private lender now to solve an urgent problem, such as clearing IRD arrears or securing a property quickly.
- Tidy up the accounts, the credit file or the property position over the following months.
- Refinance to a bank for the long term once the business meets bank policy again.
A fast private first mortgage or a second mortgage behind your existing bank loan are the usual tools for step one. Planning the exit from day one keeps the private loan short and the total cost under control.
How does LoansOne fit in?
LoansOne isn’t a bank and isn’t a single lender. We match New Zealand business owners to the right lender from our panel of non-bank and private lenders, based on your situation.
- No credit file mark when you enquire
- Not shopped around to dozens of lenders
- An expert reviews every application before a lender makes contact
- Secured and unsecured options from $20,000 to $500,000
- Works when the bank says no or is too slow
For a wider look at comparing finance options, start at our compare business loans hub.
Next step
If the bank is too slow, has said no, or simply isn’t the right fit for this job, a private lender may be. Apply in about 30 seconds to see where you stand, or call 09-888 5252 to talk it through with the team.
