Quick answer
A bank is often the better choice for a long-established business with clean credit, full financials and time to wait, because its pricing can be sharp for borrowers who tick every box. A non-bank lender is often better when you need flexibility: a shorter trading history, credit marks, an ATO debt, unusual security or a tight deadline. Judge both on total cost, terms and fit, not on the badge.
Key points
- Banks tend to suit businesses that meet standard criteria and can wait.
- Non-bank lenders often assess unusual situations case by case.
- The RBA reports the non-bank share of SME lending has grown strongly since 2022.
- Check any lender's legitimacy on ASIC's registers before applying.
- Clean, established, patient
- Bank
- Complex or time-critical
- Non-bank
- Always
- Compare total cost and terms
For a long time, “business loan” meant “bank”. That’s changed. The Reserve Bank’s October 2025 Bulletin notes the non-bank share of SME lending has increased strongly since the start of 2022, particularly for smaller loans. So which should you approach?
How do banks and non-banks differ?
Banks take deposits and lend against standard criteria: years of trading, financial statements, tax returns, clean credit and, often, property security. When you fit, their pricing can be very competitive. When you don’t, the answer is often no, sometimes after a long wait.
Non-bank lenders don’t take deposits. They range from large specialists to private lenders, and many focus on segments banks find awkward: newer businesses, credit marks, tax debts, unusual security, or tight timelines.
How do they compare?
| Test | Bank | Non-bank |
|---|---|---|
| Criteria | Standard, less flexible | Often assessed case by case |
| Paperwork | Full financials, tax returns | Varies; some lend on bank statements |
| Time to decision | Can be longer | Often shorter |
| Credit marks or ATO debt | Often a barrier | Often considered |
| Pricing | Can be sharp for strong borrowers | Varies with risk and product |
| Security | Often property | Property, assets or statement-based |
Our verdict
Our verdict: bank if you tick every box and can wait; non-bank for everything else
- Bank is best for
- Established businesses with clean credit, up-to-date financials, solid security and no deadline pressure.
- Non-bank is best for
- Shorter trading histories, credit or tax issues, non-standard security, statement-based lending, and time-critical needs.
- Check before you sign
- Total cost in dollars, fees, early payout terms, the lender's standing on ASIC's register, and default provisions.
Banks win when you’re a textbook borrower and the timeline is relaxed. Their pricing reflects their lower cost of funds, and for a strong business that can make a real difference over a long term.
Non-banks win on fit. If the bank has said no, or would take months, or wants security you’d rather not give, a non-bank can often find a way. The cost may be higher, but the relevant comparison is against the alternative you actually have.
A common sequence: use a non-bank to solve the immediate problem, then refinance to a bank once the business has a longer track record or the credit mark has aged. Our page on the best loan when the bank said no covers that path.
The Loan Finder focuses on structures rather than lender types, but its results will tell you a lot about where you’re likely to fit. Or tell a specialist your situation and get a direct answer.
Illustrative example: same business, different stages
Illustrative only. A two-year-old electrical contractor had an ATO payment plan default during a slow patch. The bank declined a loan to buy a second van and hire an apprentice.
A non-bank lender considered the application, looked at the strong recent bank statements and the plan to clear the tax debt, and approved a smaller facility. Two years later, with the ATO cleared and four years of trading, the owner refinanced to a bank.
Verdict for this owner: non-bank first, bank later.
How do you check a lender before applying?
Business.gov.au’s guide to applying for a business loan recommends comparing loan products across lenders and verifying a lender’s legitimacy on ASIC’s register. Also:
- Read the contract, not the website. ASIC notes that commercial loans carry the lowest level of legal protection compared with consumer loans. Its page on disputes about commercial loans explains the options if things go wrong, including AFCA for eligible small businesses.
- Compare total cost, not headlines. Our guide to choosing between two loan offers shows how.
- Avoid applying everywhere. Each formal application can leave an enquiry on your credit file.
If your credit is the issue, see the best loan when you have credit issues. If your business is young, read the best loan for a new business.
What does the cost difference really look like?
Owners often assume non-bank lending is always dearer. Sometimes it is; sometimes the gap is small; sometimes the bank’s total cost is higher once fees and conditions are counted. The fair comparison is dollars: what you’ll repay in total, including every fee, for the same amount and term.
It’s also worth counting the cost of not getting the money. If a bank decline means missing a settlement, losing a contract or letting an ATO debt escalate, a non-bank offer that costs more may still be the cheaper outcome overall.
Questions to ask any lender, bank or not
- What’s the total repayable in dollars, including all fees?
- How often are repayments taken?
- What happens if I want to repay early?
- What security and guarantees do you need?
- What counts as a default, and what does it cost?
- How long until a decision, and what do you need from me to get there?
The answers tell you more than the badge on the door.
Can I use both?
Yes. Many businesses bank with a major bank for everyday accounts and borrow from a specialist lender for a particular need.
Not sure which door to knock on?
That’s the job we do. Tell us about your business and what you need, and one specialist will work out where you’re likely to fit.
There’s no credit check when you first enquire, and we don’t fire your details at a list of lenders. A frank description of your trading, credit and security means you’re matched to a suitable lender first time instead of collecting declines.
Frequently asked questions
What is a non-bank lender?
A lender that isn't an authorised deposit-taking bank. Non-bank lenders fund their lending in other ways and range from large specialist firms to smaller private lenders.
Are non-bank lenders more expensive?
Sometimes, sometimes not. It depends on the borrower, the security and the product. For borrowers banks won't approve, the real comparison is between a non-bank offer and no offer at all.
Is it safe to borrow from a non-bank lender?
Many are well established. Business.gov.au suggests checking a lender's legitimacy on ASIC's register before applying, and reading terms carefully, as commercial loans carry fewer legal protections than consumer loans.
Can I refinance from a non-bank lender to a bank later?
Often, yes. A common path is using a non-bank lender to solve a short-term problem, then refinancing to a bank once the business's position improves.