Quick Guide To Low Doc Small Business Loans

New businesses and self-employed individuals require capital to start, sustain, and grow their businesses. Unfortunately, the process of obtaining a business loan through traditional banks can be time consuming and require a large amount of supporting documents. In such cases, small business loans like low doc loans provide one of the most effective alternatives through less paperwork and faster approval. Low doc loans are to support small businesses. So, let us take a tour of low doc business loans.

The Definition of Low Doc Loans

A low documentation loan is a type of private business loan that is available to businesses who do not have the required documentation. While applying for this type of loan, you do not need to bother about many documents to qualify for the loan. As a result, low doc loans are also an ideal funding alternative for borrowers who never want to deal with lots of paperwork. Low doc loan borrowers are commonly self-employed or entrepreneurs who might not possess financial statements to qualify for traditional bank loans.

The Required Documents

The low doc small business loan requirements will change, depending on the lender you select. But in general, lenders will ask for some documentation to verify your proof of income and creditworthiness. As a result, you need to supply the below documents while applying for low doc loans.

• ABN or ACN
• Personal identification
• Rates notice and mortgage statement

Different Types of Low Doc Loans

Like a second mortgage loan or other funding types, a low doc loan has two types. They are as follows.

• Secured Loans

A low doc secured loan uses real estate property to secure the loan, some lenders will also take a charge over equipment or machinery that is used in the business.

• Unsecured Loans

Contrary to the above, you do not need to submit any asset or collateral to the lender when applying for a low doc unsecured loan. This type of lending is also known as cash flow loans as the amount you can borrow is determined by the turnover of the business.

Tips For Applying For Low Doc Loans

While the second mortgage loan or other mortgage market is becoming more competitive, it is not always hassle-free getting the low doc loan approval. That is why you need to meet some criteria to apply for this kind of funding adequately. To know this, go through the below points.

• Always apply for the lower amount to get quick loan approval.
• If you are applying for low doc secured loans, you must consider its pros and cons because if you default the loan, the lender could take action to recover the security.
• Makes sure you know the lenders criteria so you can produce the necessary documentation.

The Pros of Low Doc Loans

• When you apply for low doc small business loans, you can secure the funding without much effort. Unlike traditional banks, the lenders of low doc loans offer an online application facility so that you can apply for the funding quickly and easily.
• The low doc loan application and approval process are also fast because there are less documents required so the verification process is quicker.
• The biggest advantage of these private business loans is that you do not to have minimum 2 years of tax returns or financial information. With minimum documents, you can easily qualify for the loan.
• The lenders of low doc loans also offer flexible repayment options.

The Cons of Low Doc Loans

• The biggest drawback of low doc loans is that not all banks and second mortgage loans or other business loan lenders offer low doc loans. Due to this, you need to research a bit to find a low-doc loan lender.
• A low doc loan has more risks than other funding types. You also need to pay a higher interest rate and other charges.

The Risk of Low Doc Loans

Like any private business loan, there are risks to consider when applying for a low doc loan. For instance, when applying for a low doc mortgage loan, some lenders will let you borrow up to 75% of the property’s value. Besides, you also need to pay higher interest rates than many other loan types.

Final Verdict

So, a low doc loan can be your best solution if you are a small business owner looking for some additional cash. But always consider the pros and cons before applying for it.