No Doc Business Loans: Pros and Cons of Getting Money Without (Much) Documentation
6 MIN READ
Published October 23, 2023 | Updated November 09, 2023
No doc business loans are a financing option that doesn’t involve a lot of paperwork or time. It’s worth noting that most loans will still require you to submit at least some documents. These loans have fewer requirements compared to traditional bank loans.
While no doc loans offer ease and speed of securing funds, they come with lower loan amounts, shorter repayment terms, and higher interest rates due to the considerable risk lenders have to take on.
What Are No Doc Business Loans?
No doc business loans are attractive for business owners who want to secure financing without submitting excessive paperwork. Traditional business lenders that offer personal loans for businesses may ask for financial statements, loan applications, tax returns, business licenses, and more.
Preparing the information requested can be a lengthy and time-consuming process. No doc loans offer a quick way to access funds, and you can get money in your bank account within one business day. You may have to accept lower loan amounts and higher interest rates in exchange.
Are You Eligible?
Although the eligibility requirements for no doc business loans are less stringent than traditional lenders, they’ll consider the following things:
- Creditworthiness: Lenders may require a business or personal credit check to assess your creditworthiness.
- Minimum Business Age: Many lenders may have requirements for how long your business has been operating.
- Collateral: In some cases, lenders may ask for collateral to secure the loan if there isn’t much information about your financial situation.
- Debt Information: If you’ve got any other financial obligations or outstanding business debts, lenders will evaluate if you can repay the loan.
Benefits of Loans Without Documentation
Here are some of the main benefits of getting a loan that doesn’t require extensive documentation:
- The processing time is much faster due to minimal paperwork.
- The qualification requirements are more accessible for non-traditional borrowers.
- The repayment terms are shorter, so you’ll pay less interest and repay the loan sooner.
- You’ll be able to access funding faster without providing a lot of paperwork.
“This type of loan is good if you need funds fast,” says Teresa Dodson, founder of Greenbacks Consulting and debt expert. “They can also provide you with a smaller amount for a short period time,” Dodson adds.
Risks of Loans Without Documentation
Like any other loan, there are several risks of no doc business loans that you should be aware of:
- Due to added risk, lenders charge a higher interest rate than documentation loans.
- The repayment period is shorter, so the monthly payments can be higher.
- Not many lenders offer no doc loans, so you’ll have limited ability to shop around.
- Loan amounts are usually smaller, which can be limiting for your business.
Types of No Doc Loans
You can get two main types of no doc loans: business and home loans. Within these categories, you can choose from many types of loans.
Business No Doc Loans
While there aren’t any truly no doc business loans, since all loans require some documentation, here are a few financing options you can choose from:
- Short-term loans: These are unsecured loans with terms ranging from a few months to a few years. Online lenders usually offer these loans without much paperwork.
- Merchant cash advance: With a merchant cash advance, lenders will give you a lump sum amount, and you’ll have to pay it back with a portion of your daily sales.
- Line of credit: Businesses can draw from a business line of credit as they need and pay interest on what they borrow.
- Invoice financing: With invoice financing, you can borrow funds by providing customer invoices and repay a portion of the loan once the customer pays you.
No Doc Home Loans
No doc home loans allow borrowers to qualify for a mortgage using alternative methods. Unlike traditional mortgage lenders, lenders offering no doc home loans can verify your income using assets and bank statements instead of tax returns, W-2s, and pay stubs. To qualify, you’ll still need to offer some proof of income and other documents.
There are several types of no doc home loans available. Stated Income Verified Assets (SIVA) loans require bank statements of at least 12 months to verify assets. Stated Income Stated Assets (SISA) loans will require you to disclose your assets and annual income, and the lender accepts the figures provided.
Where To Get a No Doc Business Loan
Traditional financial institutions usually do not offer no doc business loans, but you’ll be able to find a few options with alternative or online lenders.
Bank of America
Bank of America doesn’t offer a no doc business loan. Most of its small business loan products for businesses require submitting documentation. For example, the Business Advantage Credit Line requires you to demonstrate at least two years in business and $100,000 in annual revenue. You must also submit copies of your financial statements, personal and business tax returns, and other documents.
Like Bank of America, Wells Fargo doesn’t offer a no doc business loan. It’s also typically hard to qualify for their loan products because they require excellent credit, strong financials, and multiple years in business. Wells Fargo also doesn’t offer business term loans, and online application is only available for business lines of credit.
Truist offers a Simple Business Loan that allows business owners to borrow up to $50,000 without collateral, liquidity verification, or financial statements for eligible requests. You’ll still be subject to bank underwriting standards and credit history review. This option is not available for start-ups, non-profits, and businesses operating for less than two years.
Several online lenders offer no doc business loan options. For example, Lendio is a business loan marketplace that allows you to borrow up to $5 million and compare options from multiple no-paperwork lenders.
BusinessLoans.com works like Lendio by matching small businesses with their lending partners. You’ll need to provide basic information about your business online, and the service will connect you with different partners that provide offers based on your qualifications. If you’ve been in business for two years and satisfy the lender's minimum annual revenue requirements, you may qualify for a no doc short-term business loan.
How To Get a No Doc Business Loan
Getting a no doc business loan is not always easy because limited options exist. However, there are several things you can do to ensure you’re getting a good deal.
Research and Compare
The interest rates for no doc loans can often be high due to the risk the lenders have to take on. This is why it’s crucial to research and compare loan offers from different lenders before you sign the final paperwork. Prequalify to see how much you’ll qualify for and if you can pay the monthly installment.
You’ll still be a few documentation requirements for no doc loans to qualify, but they won’t be as extensive as conventional loans. Check the lender’s website or speak to a loan officer to ask what documents you need to submit with your application. In most cases, you can submit your application online to save time.
Seek Professional Advice
If you’re seeking credit for business, it’s best to speak to a loan specialist or financial advisor to explore your options. No doc loans can be quite expensive, and better alternatives may be available at a lower interest rate, depending on your needs, like C&I loans.
Should You Get a No Doc Business Loan?
A no doc business loan may be a good idea if you don’t have sufficient business or credit history to qualify for traditional business financing. These loans often come with high interest rates, so they’re a good fit only if you’ve got the sufficient cash flow to cover monthly payments and need quick access to funds. Otherwise, it may be better to explore alternative types of financing.