What are No Doc Business Loans?
No-doc business loans, also called alternative loans, don’t require the extensive documentation and financial statements that a traditional business loan requires. They’re an excellent option for newer businesses that don’t have the years of tax returns, balance sheets, and profit and loss statements that established companies can provide.
Alternative lenders and online lending platforms primarily offer no-doc business loans. Online lenders that provide no-doc business loans typically use a financial technology (fintech) platform that connects to your business bank account or accounting software. The platform quickly analyzes your financial performance in real-time rather than relying on financial statements.
The process usually involves a quick and easy application with an approval decision within 1-2 business days. Once approved, these business loans also provide fast funding, usually in 1-3 business days. Some no-doc business loan lenders can offer same-day approval and funding.
Most fintech lenders also consider your personal credit score and income when underwriting alternative business loans. However, you can get approved with a low credit score.
In exchange for the convenience, speed, and minimal documentation of these loans, online lenders tend to charge higher rates and fees. Some small business owners are willing to pay the extra charge when they have an urgent funding need and lack documentation.
How do No Doc Business Loans work?
The “no doc” in no-documentation business loans typically refers to financial statements like profit and loss statements, balance sheets, etc. It can also refer to supporting documentation like your business plan, financial projections, and tax returns. Alternative lenders typically require less documentation than traditional banks.
Many online lenders require minimal paperwork to apply for a no-doc business loan. In most cases, you’ll still have to provide proof of identification, like a driver’s license or other government-issued ID. You might still have to provide limited documentation, like merchant statements or three months of business bank statements. Many lenders that offer no-doc loans require a personal guarantee, creating personal liability for the borrower.
Most options come in the form of an unsecured business loan, as these do not require documentation for business assets used as collateral. The specific options available often depend on how your business operates. There are several forms of no-doc business loans:
- True No Doc Loans: These are business loans where you have to fill out the application and let the lender review your credit eligibility. A true no-doc loan is less common.
- Low Doc Business Loans: The most common type of no-doc business loans. Low-doc business loans require some documentation, like business bank statements, but don’t require financial statements.
- Stated Income Loans: Lenders will ask for documents stating your income, but don’t require supporting documentation to verify it.
Several types of small business loans require little to no documentation. Here are the available no-doc business loans.
Short-Term Business Loans
- Loan amount: $10k – $5 million.
- Factor rates: Starting at 1%-4% p/mo.
- Term: 3 months – 5 years.
- Speed: 1-3 business days.
Business term loans are traditional financing structures in which a business receives a large loan disbursement, which is repaid with interest and fees. Most term loans use an APR and carry fixed monthly payments for the loan term.
A short-term business loan primarily operates the same way, with a shorter repayment period. However, that could sometimes mean a lower borrowing amount and trading monthly payments for daily, weekly, or bi-weekly payments.
Short-term lenders may ask for minimal paperwork, such as business bank statements, to apply for unsecured loans. Unsecured short-term business loans do not require physical collateral for approval.
Business Lines of Credit
- Loan amount: $10k – $1 million.
- Factor rates: Starting at 1% p/mo.
- Term: Up to 36 months.
- Speed: 1-3 business days.
Business lines of credit (LOCs) are short-term financing that offers excellent flexibility. Instead of a single loan disbursement, your funds are activated as an available credit limit.
You can draw funds from your credit limit as needed. You only pay interest on the money you draw and never have to draw the total amount.
Once you repay what you took out, the credit limit replenishes, and your funds are available for the next time you need them. This is called revolving credit and works like a credit card.
The credit limit essentially gives you funding on demand. An unsecured business line of credit is excellent for ongoing projects, seasonal businesses, and covering unexpected costs.
Merchant Cash Advance
- Loan amount: $10k – $1 million.
- Factor rates: Starting at 1%-6% p/mo.
- Term: Up to 24 months.
- Speed: 1-2 business days.
Merchant cash advances provide upfront funding in exchange for a portion of credit or debit card sales. The advance is repaid with a percentage of your future receivables. These are sometimes called business cash advances.
MCA funders base their approval amount on your previous sales history and projected future sales. That’s because your sales are the primary source of repayment.
Most merchant cash advances require daily payments, but some require weekly payments. In a traditional MCA, the repayment amount comes directly from your debit or credit card reader. However, many MCA companies are moving to a more reliable repayment process where the funds are automatically debited from your business bank account via ACH transfer.
Accounts Receivable Factoring
- Loan amount: $10k – $10 million.
- Factor rates: Starting at 1% p/mo.
- Term: Up to 24 months.
- Speed: 1-2 business weeks.
Accounts receivable factoring, sometimes called invoice factoring, is an alternative to traditional business loans. Invoice financing allows businesses to use unpaid customer invoices as collateral against a business loan. Like an MCA, the process is technically a business-to-business transaction, not a loan.
Companies that sell on credit deliver their products or services to a client and issue an invoice at a later date. The process is convenient and helps some companies attract more business.
However, delays between delivering the goods and receiving payment may cause critical cash flow interruptions. This process lets you sell or “factor” those unpaid invoices to a third-party financial services business called a factoring company to smooth out cash flow gaps.
The factoring company issues funds based on the invoice’s value, which is called an advance rate. Most advance rates are between 75% and 95%. The factoring company then owns the invoice and collects payment from your client.
What are the advantages of No Doc Business Loans?
The primary advantage is that you don’t have to track down and compile documents before getting your loan. The process saves significant time, and you don’t have to hand over as much sensitive information to the lender.
Most no-doc business loans provide fast funding. This form of business funding is good when you have an urgent need.
The application process is quick and easy. Many alternative loans don’t require collateral, and some offer early payoff discounts.
Eligibility requirements for alternative business loans are much more lenient than traditional loans. You can typically get a business loan with a low credit score and less than a year in business.
What are the disadvantages of No Doc Business Loans?
The tradeoff for the speed and convenience of no-doc business loans is the cost. No-doc business loans typically have higher interest rates than traditional loans. The actual interest rate you receive is generally based on your credit history.
In addition, you might have to pay fees, like an origination fee. Some lenders have extra charges, like draw fees, for lines of credit. You might also have early payoff penalties depending on the loan type and lender.
These business loans also have frequent repayment schedules. Small businesses typically have to repay short-term loans on a daily or weekly schedule. No-doc business loans often come with shorter repayment terms, ranging from 12 weeks to 24 months.
While most no-doc business loans don’t require collateral, some do. You’ll typically have to sign a personal guarantee even when collateral is not required. No-doc loans can create a cycle of debt due to high interest rates, short terms, and frequent payments that may lead borrowers to seek additional financing.
Pros & Cons
Pros:
- Quick & easy online application process.
- Lower eligibility requirements.
- You can usually receive approval within 24 hours or sooner.
- Fast funding time once approved.
- Doesn’t require extensive documentation.
- Most loans don’t require collateral.
- Some lenders offer early payment discounts.
Cons:
- Potentially expensive loan costs with high interest or factor rates.
- Might have to pay additional fees.
- Some lenders charge early payoff penalties.
- Most loans require a personal guarantee.
- Frequent repayments, typically daily or weekly.
What are the qualifications for a No Doc Business Loan?
The qualifications for no-doc business loans largely depend on the type of loan you receive. Lenders consider your personal credit score, business credit, time in business, and annual revenue.
Here are the minimum qualifications by loan type.
Term Loans
- Minimum credit score: 550+.
- Time in business: 6 months+.
- Annual revenue: $75k+.
Business Line of Credit
- Minimum credit score: 575+.
- Time in business: 1 year+.
- Annual revenue: $75k+.
Merchant Cash Advance
- Minimum credit score: 550+.
- Time in business: 4 months+.
- Annual revenue: $120k+.
Invoice Factoring
- Credit score: 550+.
- Time in business: 1 year+.
- Annual revenue: $250k+.
How to apply for a No Doc Business Loan:
The application takes just a few minutes if you have the required information. Upon approval, funds can appear in your bank account in 1-3 business days. Here’s how to get started:
Step 1: Consider Your Financing Needs
Before you begin the process, take some time to ensure this is the right financing option for your needs. Will you be able to access your desired working capital amount? Will you be able to fulfill the repayment structure? Answering these questions ahead of time will ensure that you don’t run into liquidity issues when making payments.
Step 2: Gather Your Documents
Depending on the loan type, the application may require some minimal documentation, such as the following information:
- Driver’s license
- Voided business check
- Business bank statements from the past three months
Step 3: Fill Out the Application
You can begin the process by calling us or filling out our one-page online form. Either way, you’ll be asked to enter the information from the previous section along with your desired funding amount.
Step 4: Speak to a Representative
Once you apply, a representative will contact you to explain the repayment structure and rates of your available options. This way, you won’t have to worry about surprises or hidden fees during repayment.
Step 5: Receive Approval
If and when you’re approved, funds should appear in your bank account in 1-2 business days.
Frequently Asked Questions
Here are the most common questions about no-doc business loans.
Do banks offer No Doc Business Loans?
It’s doubtful that a bank or credit union would offer a no-doc business loan. Traditional lenders typically have a much more involved loan process, including due diligence with extensive documentation. You’ll generally need excellent credit if a traditional financing provider offers no-doc business loans. To apply for a no-doc business loan, you’ll need to assess your credit score to ensure it is strong, typically above 700.
Online lenders are generally more likely to offer no-doc business loans than traditional banks. Many lenders evaluate business cash flow by reviewing bank statements for monthly revenue consistency and spending patterns. Without other revenue documentation, some lenders may consider your personal income when approving.
You may need to provide a business plan that outlines your business model, market strategy, and intended use of the loan proceeds. Many lenders that offer no-doc business loans focus on collateral or other financial indicators instead of detailed financial documentation. You should prepare basic business information for the application, including its legal structure, industry, and length of operation.
Can I get a No Doc Business Loan with bad credit?
Yes, getting a no-doc small business loan is possible if you have bad credit, but your business must have consistent revenue. In addition, bad credit business loans carry higher interest rates and fees.
A small business owner might use bad credit business loans as bridge financing. After building their business credit, they can qualify for lower-cost business financing options.
What are my alternatives to No Doc Business Loans?
Small business owners can consider equity financing through investors to raise capital. Crowdfunding connects businesses with individual investors willing to lend money.
Several small business loan options still have low eligibility requirements but require more documentation.
Equipment financing is another option for businesses that can provide documentation such as bank statements and equipment invoices. Equipment financing allows businesses to borrow money specifically to purchase equipment.
SBA loans are often considered the gold standard of small business financing. The US Small Business Administration partially guarantees these loans, allowing lenders to offer low interest rates and extended terms. However, they often require the most documentation of all loan types, including tax returns, financial statements, and more.
No Doc Business Loans – Final Thoughts
No-doc business loans are suitable for younger businesses with urgent funding needs. Although the costs are higher, the speed and convenience may be worth the cost.
More established businesses with the available documentation can likely qualify for a lower-cost conventional business loan. But remember, traditional business loans usually take longer to close and fund. The extra costs of alternative business loans could be justified if you need urgent funding.
Contact us if you have more questions about no-doc business loans or want to apply for a small business loan. Our loan executives can help you find the best funding program for your business needs.
