Non-Bank Lenders

When you're looking for funds, the bank is the first place you go to. However, taking a loan from a bank comes with many requirements and demands that most people and businesses hardly keep up with. Banks have been extremely hard-nosed in changing their traditional approach to loans and funding, which leaves many people and businesses in need and out in the cold.

As a result, businesses have had to look for alternative lending methods, which has led to an increase in the number of non-bank lenders. These are more flexible and cater to the needs of customers who don't qualify for bank loans or require customised loans that are more tailored to their needs.

Because the rules of operation with non-bank lenders are different from traditional banks, businesses are cautious about approaching them for loans. But with more understanding, it's possible to pick the right lenders to secure funding for your business. Factoring company can help!

What are Non-Bank Lenders?

Non-banker lenders are financing institutions other than banks, credit unions, or building societies. They are also not traditional, so the loan application process is likely to be much easier and faster.

The home loan industry is the most common for non-bank lenders. They provide mortgages by sourcing wholesale funds and lending them to their customers. This is one of the differences between banks and non-bank lenders. Banks source their funds from customer deposits and wholesale funding.

The concept of non-bank lending has been around for some time but took longer because borrowers are hesitant to secure funding. However, more people and businesses have acquired loans from lenders, which has increased their services. They have become a viable option for anyone looking to take out a loan who doesn't want to work with banks or doesn't qualify for a bank loan.

What Types of Loans Do Non-Bank Lenders Offer?

Non-bank lenders specialise in a wide range of lending options. Most of them are in the home loan market, but they can also offer loans for cars and businesses.

Typically, the lenders focus on industries underserved by the banking sector, including residential and commercial construction.

Regulation of Non-Bank Lending

One reason businesses are hesitant to work with non-bank lenders is that they believe they are not regulated. Most people are comfortable borrowing from banks because banks are considered safer because they are subject to a high amount of government scrutiny and regulations.

Non-lenders are also subject to various regulations and industry codes. These include ASIC laws, Australian Consumer Laws, National Consumer Credit Protection Laws and the ePayments Code.

The only difference in regulation between the two entities is that banks are subject to an additional layer of regulation administered by the Australian Prudential Regulatory Authority (APRA).

To some extent, non-bank lenders also regulate themselves by rewarding lenders who uphold the highest quality and services. The Australian Home Loan Awards are one of the distinguished awards set aside for this purpose.

Benefits of Non-Bank Lenders

Lower fees

Non-bank lenders understand they are under stiff competition from banks, and one way they attract consumers is by offering lower fees for their lending options. This is made possible by the fact that non-bank lenders don't have the large overheads the banks have, such as the huge number of staff and branches that add to the cost of running banks.

Lower interest rates

Like the fees, non-bank lenders may also have lower interest rates for the same reason: lower overheads. Non-bank lenders look to shake up the market with more competitive interest rates. However, some non-bank lenders may have higher fees, so you should vet your options and compare the rates and fees to ensure you get the best deal.

Another benefit of non-bank lending is that the lenders may be slower to pass on rate rises from the Reserve Bank of Australia, but this is not always the case.

Personalised Service

Non-bank lenders are huge on personalised service, especially because much of their business depends on referrals. This isn't the case with banks, especially when you go with the big four, which are notorious for providing a universal customer experience. Because non-bank lenders have smaller customer pools, they are more dedicated to customer attention and providing customised service.

Faster processing

Banks are notorious for having long processing and waiting times when you apply for funding. The lending process in a bank can take weeks or months, depending on the amount in question. With non-bank lenders, loan applications are done online and in record time. You can get your loan processed and deposited in a few days, making them ideal for companies looking for quick funding.


Non-bank lenders are more flexible with their lending options. They will check your credit history before approving the loan. They are open to discussing payment options and customising to your needs and abilities. Borrowers with lower credit scores can also benefit from this type of lending, and there is less documentation for the application.

Disadvantages of Non-Bank Lenders

Lack of Offset Accounts

There are some drawbacks to working with non-bank lenders. One of them is the lack of offset accounts, a key feature of banks because they are deposit-taking institutions. Non-bank lenders cannot do the same thing to the same extent.

Lack of branches

Customers trust banks because they have physical outlets where they can walk into when they have a problem. That physical, personal connection has a huge benefit on trust. Most non-bank lenders don't have a banking hall or physical offices, which can be a deterrent to most customers. Smaller non-bank lenders have no location, which can be a concern to some borrowers.

Less Trust

Non-bank lenders haven't done very well as far as trust is concerned. The lack of physical locations and long-established reputations of the major banks in Australia hasn't helped. There's still some scepticism around them, largely because they're not understood. But there really shouldn't be any concerns. When a non-bank lender fails, it is bought out by another, so there's always a chain of continuation.

Is a Non-Bank Lender Right for Me?

Like bank loans, non-bank lenders are not ideal for every situation. But there are some situations where they make perfect sense. If you're unsure whether a non-bank lender is right, you should consider professional advice. While at it, don't assume banks are a better option with lower rates. Some non-bank lenders might offer you better terms and should be considered.

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