How Do No Doc / Low Doc Business Loans Work?
Small business owners can complete an easy and quick online application. Unlike traditional lenders who typically require applicants to provide tax returns, profit and loss statements, balance sheets, A/P or A/R, and other financial documents, alternative lenders offer similar marketplace loans with less documentation requirements.
Typically, borrowers will be asked to provide merchant processing and/or bank statements. Since there’s less paperwork demands, the process moves much faster.
Most lenders allow the applicant to complete all forms online, for a hasslefree and convenient experience. Businesses can receive capital immediately.
What Are the Different Types of Reduced Paperwork Business Loans?
Most lenders will break down reduced doc loans into three different categories. Below we’ll offer some clarity and overview the three main loan types.
Low-Doc Business Loans
This is the most popular loan type for small business owners and entrepreneurs seeking reduced paperwork financing. There’s a significant reduction in documentation compared to traditional loan requirements.
Conventional lenders usually ask for multiple documents to verify financial history and performance. The increased paperwork ultimately ends up extending out funding timelines.
At Clarify, we keep things simple. We only require bank statements from the last 3 months. Reducing paperwork demands allows us to move quickly to get you financing.
Business owners frequently choose to work with an online lender over a traditional lender when they value speed in funding and want to increase their approval odds.
Stated-Income Business Loans
This funding type may still require some documents, but similar to Low-Doc Business loans, Stated-Income loans require less paperwork than standard business loans.
Stated-income loans are usually pursued by borrowers with limited financing options. Self-employed individuals and freelancers, for example, might have huge fluctuations in income, multiple streams of income, or receive a larger portion of their revenue in cash. When this happens, business forms and tax documents may not accurately reflect an applicant’s true financial situation. These borrowers may use a stated-income loan because they are able to qualify for a larger loan amount that way.
Their self-reported statement is used to determine funding eligibility and there is no need of formal proof. Lenders do not require the applicant to provide verification materials.
While this option might seem easy, it’s not without a catch. Basing funding off of word-of-mouth, rather than financial statements, means more lending risk.
Because lenders take on more risk for stated-income loans, financing terms tend to be less competitive.To reflect the increased lending risk, interest rates are usually higher than that of Low-Doc loans.
No-Doc Business Loans
No-doc business loans are pretty much what they sound like - no doc! You do not need to provide any financial statements or documentation to receive financing. Funding is provided based on credit standing and whatever information you provide in your application.
Lenders take on a large amount of risk when offering no-doc business loans because there are fewer safeguards in place. Of the three loan types, no-doc loans tend to have the least competitive terms, and therefore, are often used as a last resort for businesses pressed for time.
Similar to stated-income loans, the increased risk of lending impacts the loan terms and interest rates. We always recommend prospective borrowers try for a low-doc business loan over no-doc, to qualify for the most competitive financing options available.
Common No-Doc Loan Uses:
Clarify offers low doc financing to cover all of your business needs. Here are some of the top ways business owners use funding:
Short-term Needs:
Less paperwork can mean getting funds quicker. If you have an immediate financial need, you may not have time to wait. Get the working capital you need to take care of urgent expenses.
Equipment & Machinery:
Finance technical equipment, heavy machinery, automobiles and more. Most industries have some type of equipment or machinery needed to get the job done. Whatever your needs, we’ve got you covered.
Payroll & Taxes:
Payroll and taxes are some of the highest expenses as business incurs. Loans can be used to help you meet any outstanding financing obligations. Small business owners use funds to cover staffing costs and tax burdens.
COVID Assistance:
Off-set a decline in sales or increase in operational expenses caused by the novel coronavirus with an infusion of working capital. We understand how difficult these unprecedented times have been for small businesses across the nation. Use financing to pay for Personal Protective Equipment (PPE), employee and customer safety products, and any extra sanitation measures you’re implementing.
Inventory:
Get the inventory you need for your company in a timeframe that works best for you. Funds can be allocated towards buying orders, ensuring you can meet customer demand at all times.
Smoothing Cash Flow:
Oftentimes, business owners are in a situation where they’re short on cash, but expecting to receive additional funds soon. Smooth over cash shortfalls with financing. Our expedited loan process ensures you get fast access to capital.
Frequently Asked Questions About No Doc Loans
Most lenders are unable to provide no income business loans. Providing business loans without proof of income increases the risk of lenders and brokers significantly. While we are unable to offer unsecured no doc business loans, we do offer similar financial products.
A low doc business loan is a viable and popular solution for companies who want to significantly reduce the amount of documentation they’ll be asked to complete. Many lenders are able to provide business loans primarily based on bank statements, requiring little additional information. By asking for some form of verification and proof, the integrity of the lending industry stays protected.
