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A no-doc business loan is one that borrowers can access without substantial documentation. Rather than relying on income, lenders may approve borrowers based on credit history and collateral.
No-doc small business loans may be ideal for business owners whose revenue is not yet established but who are interested in getting access to cash quickly.
Learn more about no-doc business loans, how to qualify, and the downsides.
Key Points
• A no-doc small business loan is one that does not require extensive documentation.
• To get a no-doc loan, you may be asked to state your income or provide your yearly revenue numbers.
• Short-term, no-doc business loans include merchant cash advances, invoice factoring, and business credit cards.
• With no-doc small business loans, rates and terms will not be as favorable as other forms of financing.
What Are No-Doc Business Loans?
Some specialized lenders offer unsecured business lending that requires zero documentation — that’s where “no doc” comes from — or perhaps fewer application requirements than with conventional loans.
Usually, no-doc business loans don’t require collateral. Lack of collateral can sometimes hold some business owners back from being approved for financing from traditional lenders.
An unsecured business loan could help certain business owners get financing fast — even if you don’t currently qualify for other business lending options.
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Types of No-Doc Business Loans
There are a few versions of the no-doc business loan. Some lenders offer lines of credit you can draw from when you need cash, while others offer you a fixed sum all at once.
Unlike many other small business loans, business no-doc loans typically don’t require any documentation. You may be asked to simply state your income or demonstrate your gross sales. Depending on the lender, you may or may not need to provide bank statements or profit and loss reports.
Examples of short-term no-doc business loans or short-term business financing might include:
• Business credit cards
You may also consider low-doc loans. A low-doc business loan generally requires less paperwork (i.e., bank statements or merchant statements) during the application process.
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Who Offers No-Doc Business Loans?
Small business loans requiring no documents are primarily offered by alternative lenders, including online lending platforms, private sources, and some non-bank financial institutions. These lenders are more flexible than traditional banks and cater to businesses that may not have the extensive financial documentation typically required for traditional loans. They are willing to take on the higher risk associated with no-doc loans in exchange for charging higher interest rates and fees.
Secured vs. Unsecured Lines of Credit
Unsecured lines of credit, unlike secured lines, do not require collateral to guarantee the funds. An unsecured business line of credit for startups can help entrepreneurs get financing without pledging collateral.
Collateral for a secured loan or line of credit may take the form of a business asset, such as real estate or equipment. With secured financing, lenders can seize assets to cover what’s owed if a borrower defaults and fails to pay the lender in full.
If you’re not sure how to secure a business line of credit or loan, but you don’t own any assets a lender would consider valuable, a no-doc business line of credit (BLOC) may be one option. A BLOC is typically unsecured, meaning you generally won’t have to pledge collateral.
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Pros and Cons of a No-Doc Business Loan
When it comes to unsecured business loans, no-doc options have benefits and drawbacks you might want to weigh. Here’s a quick summary:
| Pros | Cons |
|---|---|
| You can apply without compiling detailed documentation of your company’s finances | Lack of documentation means higher risk for lenders offering these alternative small business loan options |
| Qualifying can be easier than qualifying for SBA loans | Can include higher interest rates and fees than traditional financing |
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How To Get a No-Doc Business Loan
To obtain a no-doc business loan, follow these steps:
1. Assess your personal credit score: Ensure you have a strong personal credit score, typically above 700. A high credit score is crucial; lenders heavily rely on it in the absence of detailed financial documentation.
2. Identify collateral: Be prepared to offer substantial collateral, such as real estate, equipment, or other business assets. This collateral secures the loan and mitigates the lender’s risk.
3. Select the right lender: Research lenders that specialize in no-doc or low-doc loans, including online lenders and alternative financing companies. These funding sources are more likely to offer such loans than traditional banks.
4. Prepare basic business information: While detailed financials are not required, you should provide basic information about your business, including its legal structure, industry, and length of operation. If you have a [business checking account](https://www.sofi.com/small-business-checking/), you could share past bank statements to show a lender your company’s revenues.
5. Submit a business plan: If possible, include a concise business plan that outlines your business model, market strategy, and how you intend to use the loan proceeds. This can help build lender confidence in your ability to repay the loan.
6. Apply for the loan: Complete the loan application process with your chosen lender, providing whatever information and documentation is required.
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Tips for Improving Your Chances of Approval
Here are some pointers for further strengthening your no-doc loan application:
• Focus on lenders and loan types that fit your business credit score: For unsecured business loans and revolving lines of credit, lenders may want credit scores of 600 or more. Invoice factoring and merchant cash advances don’t rely as much on the borrower’s credit.
• Maintain high bank balances: You can showcase your company’s steadiness by keeping sizable cash reserves in your business accounts, as shown on your monthly statements.
• Present clear and consistent bank statements: In dealing with a prospective lender, emphasize cash flow. Be ready to address any unusual transactions upfront.
• Find other selling points that could build lender confidence: For example, play up your industry experience and previous business successes.
Are No Doc Business Lines of Credit a Good Idea?
Business loans with no documents aren’t necessarily a bad idea, but there are less costly financing options available to those that qualify. To be considered for the most desirable rates, you’ll need a solid credit score, a few years of business history, and consistent annual revenue.
The amount you pay in interest will generally be higher with business no-doc loans than with traditional financing. You might even find a business credit card with a low (or no) introductory APR that could cover the purchases you need. When you’re comparing options, our business loan calculator can help you compute monthly payments, total interest, and overall loan cost.
Ultimately you may decide to hold off on funding and focus on building your credit so that you can try to qualify for more affordable financing options down the line.
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Alternative Financing Options
If you are seeking alternatives to no-doc small business loans, several financing options are available that might better suit your needs, especially if you can provide some form of documentation or collateral. Here are a few options:
1. Traditional bank loans: These loans generally offer lower interest rates but require detailed financial documentation, including tax returns, financial statements, and proof of revenue. They are suitable for businesses with strong financial histories and good credit scores.
2. SBA loans: Backed by the Small Business Administration, SBA loans offer favorable terms and lower interest rates. While they require comprehensive documentation, they are accessible to businesses with less-than-perfect credit through SBA’s guarantee.
3. Business lines of credit: A line of credit provides flexible access to funds up to a certain limit. It usually requires some documentation but offers the advantage of only paying interest on the amount borrowed. It’s ideal for managing cash flow and unexpected expenses.
4. Equipment financing: This option allows businesses to borrow money specifically to purchase equipment, using the equipment itself as collateral. This reduces the lender’s risk and often makes the loan easier to obtain.
5. Invoice financing: Businesses can borrow against their outstanding invoices, providing immediate cash flow. This form of financing is especially useful for businesses with long payment cycles.
6. Crowdfunding and peer-to-peer lending: Online platforms and crowdfunding structures can connect businesses with individual investors willing to lend money. These options may require a compelling business plan and are often used for specific projects or expansions.
Each alternative comes with its own set of requirements, costs, and risks, so it’s important to carefully evaluate which option best aligns with your business’s financial situation and goals.
The Takeaway
No business owner wants to be caught without the capital they need to run day-to-day operations or to take advantage of emerging opportunities for growth. A no-doc small business loan may be useful in such cases. But these loans have some downsides to consider, as well. Proceed only after doing your research.
If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.
FAQ
What is a no-doc business loan?
A no-doc business loan is an alternative loan product that businesses may get with little or no financial documentation. It can provide businesses with a lump sum of cash and generally carries higher finance charges than traditional business loans.
How hard is it to get a no-doc business loan?
Getting a no-doc business loan is generally more difficult due to the higher risk for lenders and the stringent requirements for borrowers. Those with excellent credit, substantial assets, and the ability to provide a significant down payment or collateral have a better chance of securing such a loan. However, borrowers should carefully consider the higher costs and potential risks associated with no-doc loans.
What do you need to apply for a no-doc business loan?
To apply for a no-doc business loan, you typically need to meet several key criteria, including an excellent credit score, collateral and/or a down payment, a strong business plan, and personal and business identification.
What are the risks of a no-doc business loan?
No-doc business loans, in any format, have their risks. These may include higher interest rates than other loans, short repayment terms (daily or weekly in some cases), hidden fees, or smaller loan amounts. Be sure you understand the APR, repayment terms, and all fees that may apply. If you can, get quotes from multiple lenders; you may find a lower-cost option.
Can startups qualify for no-doc business loans?
Startups and other new businesses that aren’t yet financially established can sometimes qualify for no-doc loans. Lenders will rely on bank statements, revenue history, or collateral. However, these loans generally involve comparatively small amounts, higher interest rates, and short repayment terms. Whatever funding method you choose, be sure your startup can cover the loan payments.
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