Select Capital works with non-bank financial institutions which cannot accept deposits from the public and provide additional sources of funding to targeted markets not necessarily suited to regional banks.
While banks may offer a set of financial services as a package deal, non-bank lenders unbundle these services, tailoring their services to particular groups. Additionally, individual lenders may specialize in a particular sector, gaining an informational advantage. By this unbundling, targeting, and specializing, non-bank lenders promote competition within the financial services industry.
Examples of nonbank financial institutions include insurance companies, venture capitalists, hedge funds, private equity groups and microloan organizations. These non-bank financial institutions provide services that are not necessarily suited to banks, serve as competition to banks, and specialize in sectors or groups.
Benefits of working with non-bank lenders:
Easy Application: The majority of nonbank lenders have perfected a streamlined approach to lending applications. As long as you have your basic business information and financial data on hand, you can expect to finish your business loan application in less than an hour.
No-credit Financing: Because nonbank lenders have more flexible requirements, there’s a high chance they’ll grant a funding request for businesses or individuals with less-than-stellar credit.
Quick Access to Funds: Not only is a nonbank lender’s application process quick, but approved borrowers can expect access to funds within one week. Even deals over $10 million can have approval times less than one month.
No Spending Stipulations: Unlike traditional banks that require explicit spending for an allotted loan, nonbank lenders give borrowers the flexibility to put the loan to whatever helps the business grow more.
Building a Banking Relationship: Most importantly, working with a nonbank lender affords you the opportunity to cultivate a relationship with a local bank that can provide a bundle of treasury services.
What non-bank lenders look for:
Borrowers are evaluated on three basic criteria: Credit worthyness, Cashflow of the business, and Collateral of the company. If all three criteria are met, then most any traditional bank will be able to write the loan subject to the banks depository status (see below), but even then banks may refuse the borrower.
Non-bank lenders have specific channel expertise and so they have different risk profiles so only 2 of the three are needed and often times only one. For example, a business with poor cashflow and good collateral would be a candidate for a sale-lease back, equipment financing or a real estate loan. A business may be extended a revolving line of credit of they have reasonable cashflow, credit but no collateral.
Banks look at a business loan in terms of CREDIT, COLLATERAL and CASHFLOW. Depending on a company’s current situation, Select Capital would be able to provide customized financing solutions to achieve the business owner’s goals that most banks would not be able to offer.
Lastly, depository banks are regulated to only lend a percentage of their deposits held at the institution. As deposits go down, their lending requirements not only tighten, but they are obligated to actually cut back on their existing loans and are mandated to collect on loans early to reduce their exposure. When banks “call loans”, this places the business owner in a predicament as they are required by law to pay back the bank sometimes immediately. Non-bank lenders do not have these federal restrictions based on deposits, since they do not accept deposits, so the borrower has additional assurance that this unpleasant scenario will not happen.