No-doc business loans have become a popular way to secure funding since they are an alternative borrowing option. For entrepreneurs, these loans can make accessing capital much easier and faster than traditional funding.
This post will explain what you need to know about these financing options and identify potential advantages and disadvantages.
What Is A No-Doc Loan?
A no-doc or no-documentation business loan is a financing product that requires less documentation than a typical business loan might.
It's important that you know the term "no-doc" in might be somewhat misleading.
Their name doesn't mean a complete absence of documentation. Instead, they require minimal paperwork or have less rigorous paperwork submission and minimal requirements processes than traditional bank loans.
In exchange for the reduced requirements, lenders might charge higher interest rates and less favorable repayment terms.
They are also called "low-doc” loans.
How Do No-Doc Business Loans Work?
The application process typically involves submitting essential business information and some basic documents, but it avoids the need for extensive financial proof.
This approach allows for a quicker lending process.
Instead of reviewing information, these lenders focus on other factors, such as collateral or incoming invoices.
They might have higher interest rates or more frequent payments to offset the lender's perceived risk.
Average Interest Rates
Interest rates can range from 6% to 99%.
These rates can vary depending on:
- loan amount
- borrower's credit score and financial history
Online No-Doc Lenders vs. Banks
- No-doc loans can provide quick funding without the need for extensive paperwork or credit checks.
- Banks generally require more documentation and may have stricter eligibility requirements than online lenders.
Online no-document business loans often have higher interest rates and smaller amounts than bank loans. That said, they can be an ideal solution for businesses needing immediate funding without the hassle of traditional paperwork.
Pros And Cons Of No-Doc Business Loans
- Sometimes quickly attainable
- Potentially require less paperwork
- May have a simple application process
- It may be more achievable with poor credit
- Can have shorter repayment periods
- Can have higher interest rates
- Loan amounts may be smaller
- They may have high fees
Types Of No-Doc Business Loans
Short-Term Business Loans
has short repayment periods, usually no more than a year
. They are often used to cover immediate costs such as:
Merchant Cash Advances
is like a loan you should pay through future sales. They provide upfront funds to merchants, who pay them off through credit card sales.
Lenders may want to see past bank activity to know that you can expect the sales to cover the costs.
It's important to know that merchant cash advances tend to be really expensive.
Business Lines Of Credit
Just as an individual can, a business can use a line of credit
for funds. It's a good idea for companies that need consistent funding.
Invoice financing is sometimes a viable option for businesses with many unpaid invoices.
This is a type of financing in which you borrow funds using outstanding invoices as collateral.
Since each invoice represents potential future funds, invoices can ease lender concerns.
Typical No-Doc Business Loan Uses
A business might need to borrow money through no-doc small business loans for many reasons.
They might be up against a time constraint and need to secure funding quickly. They might have poor credit or short credit history and need to secure a loan quickly.
Some other uses might include:
- Purchasing needed operating supplies
- Paying workers
- Purchasing services required to operate
- Investing in improvements to the business
How To Get A No-Doc Business Loan: A Quick Guide
Types Of Lenders
- Traditional Lenders. Very few banks and credit unions offer no-doc loans because they are generally considered riskier products.
- Online Lenders. Many online lenders provide flexible financing solutions without the need for heavy documentation.
- Private Lenders. These individuals or entities often offer loans with more personalized terms.
- Hard Money Lenders. These lenders offer loans based on collateral rather than credit history or financial documentation. They are often used for real estate investments.
How To Choose The Best Lender
Here are some things you can look out for:
- The documentation they require. Because each lender is different, you must review their documentation requirements.
- How fast they can provide the funding. Ensure that a lender you're considering working with can deliver financing as soon as you need
- How competitive their loans are. Since no-doc loans can be costly, consider how much interest you'll be paying and over how much time.
- Additional fees. Some lenders might charge a service fee or other additional costs, making the loan even more expensive.
Most Common Requirements
Business no-doc loans aren't entirely devoid of requirements. Here are some of the most common:
- Credit Check. Lenders may still want to assess your creditworthiness, so the lender may require a personal or business credit check.
- Collateral. Since there's less information about your financial situation, the lender might ask for collateral to secure the loan. This could be real estate, equipment, or other valuable assets.
- Minimum Business Age. Some lenders may have a requirement regarding how long your business has been in operation.
- Existing Debt Information. Information about any other outstanding loans or financial obligations might be necessary to evaluate your ability to repay the loan.
Documents You Need
These are some standard documents required for business capital loans
. The lender you select might require only some or all of them.
- have a bank account and share business bank statements going back a few months or more
- proof of identity
- your social security number
- proof that you've been in business for a certain amount of time
- tax returns
- business licenses
- articles of incorporation
- accounts payable and receivable
- information on other loans and debts
- business plan
- projected financial statements
- proof of identity
5 Steps To Apply For No-Doc Business Loans
Research Potential Lenders
It's crucial that you research different lenders' policies and qualifications. Doing so ahead of time can:
- save you from rejection due to not qualifying for specific lender criteria
- help you find the best terms with the most competitive interest rates available
Write A Strong Business Plan
Many lenders require you to have a strategic business plan
This document provides the lender with a detailed overview of the company's goals, strategies, and financial projections.
By assessing this information, the lender can gauge the viability of the business and your ability to repay the loan.
Even if the lender doesn't require a business plan, preparing one will help you make the right investments.
Complete The Application
Fill out the lender's application form, providing the requested information. Be honest about all the information you provide.
Remember that even if it's called "no-doc," some documentation might still be needed. At this point, the lender will ask for several documents.
Since these loans typically require less evaluation, the approval process may be quicker.
Review The Loan Agreement
Carefully read and understand the loan terms
, including interest rates, repayment schedule, and potential collateral requirements.
Accept The Offer
If you agree to the terms, sign the loan agreement to finalize the process.
Upon approval and acceptance, the lender will quickly disburse the funds to the provided business account.
Don't forget to make regular payments as per the agreed schedule.
Should I Take Out A No-Doc Loan?
It depends on your unique circumstances.
This product benefits startups that haven't established themselves or businesses that simply don't have the documentation to secure a traditional loan.
No-doc business funding
can be helpful for businesses that need funding to establish themselves.
On the other hand, they're not a good idea for businesses with long and positive credit histories, as they could quickly obtain capital elsewhere with lower rates.
These loans may be a good option if you find yourself nodding to the following points:
- Limited Documentation. Do you lack the typical financial documents required for a standard loan?
- Need for Speed. Are you urgently needing funds where traditional loans might take too long?
- Unique Business Situation. Does your business have non-traditional income streams that aren't easily documented?
Alternatives To No-Doc Business Loans
- Apply with a traditional lender. Obtaining a conventional loan might require you to wait longer or improve your credit score, but they may offer superior rates and terms if you can afford to do so.
- Liquidating assets. You may have assets available to sell that are nonessential to operating.
- U.S. Small Business Administration (SBA) Loans. Government-backed loans with potentially lower interest rates and extended repayment terms.
- Business Credit Card. A flexible option for managing expenses and short-term cash flow needs.
- Equipment Financing or Leasing. Specific loans or leases for purchasing or using business equipment.
- Small Business Investment Companies (SBICs). These are privately owned investment companies that the SBA licenses to provide investment capital.
- Inventory Financing. A loan specifically created to purchase inventory.
- Commercial Mortgages. Used for purchasing commercial real estate.
- Business Acquisition Loans. Loans a business can use to buy an existing business.
- Crowdfunding. These platforms, like Kickstarter or Crowdfunder, allow businesses to raise money from individual investors through an online campaign.
- Going without additional funding. You can also carefully reconsider whether you need the additional funding at all. You may be able to operate without it by cutting costs or budgeting.
No SSN Business Loans
No-doc business loans aren't for everyone and aren't ideal in every situation. But, businesses can use them to secure funding quickly.
At Camino Financial, we offer small business loans
that don't require a document most lenders ask for: an SSN.
If you don't have a Social Security Number, don't worry, you can apply with your ITIN.
Plus, compared to conventional business loan providers, our business loan requirements are less strict, making it easier for many businesses to qualify.
If that sounds like the perfect financing product for you, complete an application today:
Apply For A Business Loan!
Can I get a business loan with just my EIN number?
Some lenders do accept this number in lieu of an SSN. That said, you cannot apply with just an EIN.
Lenders typically require additional documentation and information, such as your business plan, financial statements, and credit history, to determine your eligibility for a loan.
Can I get a business loan with a 500 credit score?
Getting a business loan with a 500 credit score is possible, but it may be difficult. Many lenders prefer to work with borrowers with higher credit scores, which indicates a lower risk of defaulting on the loan.
However, some lenders specialize in working with borrowers with lower credit scores.
Can you get a business loan without filing taxes?
It can be challenging since most lenders require proof of income and tax returns to assess your creditworthiness and ability to repay the loan.
If you are a new business, some lenders may accept bank statements or other financial statements as an alternative to tax returns.
However, if you have been in business for a while, not filing taxes can significantly impact your chances of securing a business loan.
What are the best no-doc business lenders?
Remember that no-doc-loans are not devoid of requirements, but they usually have minimal paperwork or requirements.
- Camino Financial. We have easy-to-meet requirements, a 100% process, and if you don't have an SSN, you can apply with an ITIN.
- Fundbox. They offer fast funding and don't charge excessive fees.
- Kabbage/American Express Business Line of Credit. American Express offers a quick-to-acquire line of credit that businesses might particularly appreciate if they're looking for a lot of funding quickly.
- OnDeck Capital. They offer quick funding and work with low credit scores.
What banks offer no-doc business loans?
Banks usually require extensive documentation, but there are a few of them that do have minimal requirements. Some examples are:
- Franklin Mint Federal Credit Union,
- and Key Bank.