What's to like about business loans with no doc requirements? Plenty. They require less paperwork, and some may be easier to qualify for than traditional loans—even with poor credit.
To be clear, there’s really no such thing as a loan that doesn't require any documentation at all. You’ll need to provide identification. You might need to prove how much revenue you bring in. What we’re talking about are types of financing that don’t require traditional documentation like tax returns. Some no-doc loans may be more favorable than traditional business loans for applicants with less than stellar credit or uneven revenue streams.
No-doc business loans could be ideal in a few circumstances like these.
1. Limited documentation
Startups are sometimes turned down for business loans because they have no financial history or proof of sales revenue yet. Take the tech startup with a great idea but not enough money to make it a reality. A cash infusion could help that startup launch to success. But many Small Business Administration (SBA) and bank loans only approve applicants who have been in business for at least two years.
No-doc loans may have more flexible requirements for approval, which means that even a startup that can't yet prove its success may qualify. For example, some lenders require just six months in business and at least $100,000 in annual revenue. Lenders may look at the business plan, customer base, or owner’s industry experience as qualifiers for a loan.
2. Quick cash
Business loans with no doc requirements could also come in handy for the business that needs fast funding. No-doc loans often have a faster approval process than traditional loans. Some online loans can give approval within minutes of applying. And many will deposit the loan funds into your bank account within one business day.
Let’s say your largest competitor just announced he's selling his business. You know that buying his business could amplify your own company's success… but you need to move fast. You don't have time to wait months for an SBA loan to process, so a no-doc loan could help you jump on the opportunity.
3. Poor or no credit history
Many lenders look at your personal credit, not just your business' credit. But what happens if you have poor credit? Many traditional lenders won't even consider an application from an entrepreneur with a low credit score. But business loans with no doc requirements often have more forgiving credit score thresholds. They may look at other factors in the approval process, like a business's overall financial health or sales history.
4. Fluctuating income
Businesses that operate seasonally may find funding a challenge because income varies throughout the year. A boat rental business may see skyrocketing summer sales, followed by a slower fall, and a complete halt in winter. If your business can't show steady income, you may not qualify for traditional financing.
Again, many no-doc loan specialists look at other factors to approve businesses for loans. If you have a high credit score or can show a history of revenue, even if it’s only for part of the year, you may qualify.
5. Independent or contract work
Freelancers and independent contractors may have a hard time getting traditional loans. Their revenues may be low, and many lenders look for a certain annual revenue from applicants. Say you’re a freelance writer just getting started, and you need $5,000 for a new computer and office furniture.
No-doc loans can help freelancers and contractors get the funding they need by considering other factors in addition to revenue. For example, American Express’ Business Line of Credit requires just $3,000 a month in revenue, as well as a credit score of 660 and a year in operation.
6. Rapid expansion
Sometimes you need money quickly so you can grow. No-doc loans can get a business the capital it needs fast. If your business wants to take advantage of growth opportunities, a no-doc loan could provide quick access to funds. Take a restaurant chain that wants to open multiple locations. Getting approved for traditional financing could take months, but a no-doc loan could bring in the money within days or weeks.
When time is of the essence, no-doc loans can be a big help.
7. Bridge financing
No-doc loans can act as bridge financing, which is short-term financing that covers expenses until you can get longer-term capital. Let’s say you run a construction company and you're waiting for a client to pay an invoice on a project that ate a lot of your working capital. Meanwhile, you have a new project that needs capital so you can start. No-doc loans can provide that bridge. You won't have to delay the new project while waiting for your client to pay the outstanding invoice.
8. Avoid extensive paperwork
Really, who doesn't want to avoid filing a lot of paperwork when applying for a loan? Business loans with no doc requirements ask for much less documentation than other loans.
Applying for a traditional loan can eat up a lot of time since you have to gather the documents the application requires. You may have to dig up old tax returns or generate financial statements. That's time you're not spending on running your business.
But no-doc loans give you your time back. Many require just a few basic documents you can put together in minutes, not weeks.
9. Sole proprietorships and small businesses
Smaller businesses may not keep formal financial statements the way larger ones do. This may make it more challenging to qualify for loans that require these documents. For example, a lender may turn down a small business owner who wants a loan to expand her home-based business because she doesn't have the right documents.
A no-doc loan can provide easier access to funds for small businesses and home-based businesses.
10. Confidentiality
Business owners sometimes prefer to keep their financial details private. They don't want to present a business plan or go into details about what their business does in a loan application. Maybe an investment company doesn't want to reveal details about its clients for privacy reasons. No-doc financing can have a less-invasive application process, protecting business confidentiality.
Navigating the world of business finance can be tricky, especially when the lender wants all kinds of documents you don't have.
Business loans with no doc requirements are helpful in many situations for entrepreneurs, freelancers, startups, and sole proprietors. Whether your business doesn't qualify for other types of financing, you don't have the required documents, or you’re just looking to simplify the loan process, no-doc loans could be a great fit.
Shop around to find the best rates and terms that you qualify for, as rates and terms can range across lenders.
