A no doc business line of credit 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 lines of credit may be ideal for business owners whose revenue is not yet established but they are interested in getting access to cash quickly.
Learn more on no doc business lines of credit, how to qualify, and the downsides.
What Is a No Doc Business Line of Credit?
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 lines of credit 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 line of credit could help certain business owners get financing fast — even if you don’t currently qualify for other business lending options.
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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 BLOC may take the form of a business asset — like 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 BLOC may be one option. A BLOC is typically unsecured, meaning you generally won’t have to pledge collateral on a business line of credit.
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Types of No Doc Business Lines of Credit
There are a few versions of the no doc BLOC. 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, some of these financial products 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 lines of credits or short-term business financing might include:
• Merchant cash advances
• Invoice factoring
• 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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Pros and Cons of No Doc BLOCs
When it comes to unsecured business lines of credit, no doc options have benefits and drawbacks you might want to weigh:
| Pros | Cons |
|---|---|
| You can apply without compiling detailed documentation of your company’s finances | Lack of documentation means higher risk for lenders of these alternative small business loan options |
| Qualifying can be easier than qualifying for SBA loans/td> | Can include higher interest rates and fees than traditional financing |
Are No Doc Business Lines of Credit a Good Idea?
No doc business line of credit isn’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 no doc options than with traditional loans. You might even find a business credit card with a low (or no) introductory APR that could cover the purchases you need.
You could wait to get funding, focus on building your credit so that you can try to qualify for more competitive rates later and seek out more affordable financing options down the line.
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The Takeaway
No business owner wants to be caught without having the capital they need to run day-to-day operations or to take advantage of emerging opportunities for growth. But taking out a line of credit from one of these sources has some downsides to consider. Proceed only after doing your research.
If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.
FAQ
What is a no doc business line of credit?
A no doc business line of credit is an alternative loan product that businesses may get with little or no financial documentation. It can provide businesses with a revolving line of credit and generally carries higher finance charges than traditional business loans.
How can I get a no doc business line of credit without personal credit?
Many no doc business lines of credit don’t require a certain credit score. Others are open to those with poor credit. Some lenders look at other factors to determine eligibility — things like business revenue and time in business.
Is it hard to get a business line of credit?
No, it can be easy to get a business line of credit from a nonbank private lender. Nonbank private lenders may offer no doc business lines of credit to applicants with bad personal credit scores. Getting a business line of credit from banks might be harder than getting a BLOC from a nonbank lender. That’s because depository institutions may have higher underwriting standards than alternative private lenders.
How do I get a no doc line of credit for my business?
Find a lender that fits your needs. Most applications take just minutes to apply, and funds might be available as soon as the same day. Research the lender carefully before proceeding.
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