A low doc business loan can be an ideal choice when you don’t have sufficient documentation. While you’d prefer to apply for a traditional bank loan, it might not always be possible. For instance, if you don’t have the extensive paperwork (that standard business loans need), it can leave you in a tricky position. Fortunately, low documentation business loans provide a viable alternative. So, what is a low doc business loan and how does it differ from a traditional business loan?
An Alternative Business Loan
A low doc business loan is similar to a standard business loan – with a difference or two. So, a low documentation loan focuses on small business owners that don’t have the typical paperwork to support their application. For instance, instead of the usual documents presented to a lender, alternative ones can be used. It allows businesses to get access to funding when they need it most.
The Differences Between Standard and Low Doc Business Loans
When you apply for a standard business loan, most lenders would require balance sheets, cash flow statements, income statements, tax returns for two or more years, income proof and more. Unfortunately, not every business has these documents at hand (for one reason or another). Fortunately, a low doc business loan does not require such extensive paperwork. For instance, you may be required to show business activity statements and other paperwork.
Typically, low doc business loans come with higher interest rates than standard business loans. The reason is the fact you’re not eligible for a traditional loan. It means lenders deem you a ‘high-risk’ and that would usually incur a higher rate of interest. However, it will vary from each lender and it may be possible to reduce your rate.
What Might You Need for a Low Document Business Loan?
There are several reasons why a business or business owner doesn’t qualify for a traditional loan. For example, you have a small business or it has just recently formed which means you wouldn’t have sufficient documents yet. It could also be down to your business. Sometimes, you just don’t have the extensive paperwork to show. Credit also plays a part in your eligibility. That’s why a low doc business loan is often necessary.
The Types of Business Loans Available
Typically, there are three main types of low doc business loans available. You have a no doc loan, low doc loan and leasing loan. So, a no-doc is an ideal choice for those who have limited paperwork or can’t show income proof. With a lease loan, you can show your income from the lease to obtain the loan.
Is There a Borrowing Limit with a Low Document Business Loan?
Borrowing limits are dependent on you, the lender and the type of business loan you have. For instance, a secured loan might allow you to borrow a higher amount – if you have sufficient collateral. Unsecured business loans, however, could limit how much you can borrow. Again, it depends on several factors. A low doc business loan may come with borrowing limits but can be beneficial to your business.
A Low Document Business Loan Can Help You
When you don’t qualify for a standard business loan, a low documentation business loan could be the ideal alternative. Of course, these loans come with higher interest rates but they do still have their advantages, including giving you a funding option. While low doc loans differ slightly from traditional loans, they offer a viable solution to consider. Low doc business loans can be the ideal choice for many.