No-doc business loan

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    Chris Godfrey

    Page written by Chris Godfrey. Last reviewed on August 22, 2024. Next review due July 1, 2025.

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    No document, or ’no-doc’ business loans are streamlined finance products designed to deliver funding with (almost) zero paperwork. No-doc loans have simple application processes and may provide funding very quickly, but simplicity and speed come with a price – borrowers should expect to pay high interest rates and fees.

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      What is a no-doc business loan?

      Technically, a no-doc loan requires nothing more than your name and address to deliver funding. In reality, these types of business loans do not exist. Even a basic business credit card application will ask you for far more information and you will usually have to provide documents that show income and proof of address.

      So, when we talk about no-doc loans, we really mean low-doc or nearly no-doc loans – financing that requires a lot less documentation than typical business lending but is not entirely paper-free. More readily available from online lenders instead of banks and credit unions, some no-doc loans can work without the need for collateral which automatically reduces documentation requirements. Many no-doc loans are short-term or ‘revolving’ types of lending (think credit card), and you may be able to obtain them by simply providing your basic business information and recent bank statements or tax returns.

      No-doc business loans may be a good option for businesses that can’t qualify for more traditional funding options and/or those who need capital quickly. No-doc business lenders often offer flexible qualification requirements and fast funding times.

      What do you need to get a no-doc business loan?

      • Basic business info
      • Minimal paperwork – often only bank statements or tax returns
      • A good credit score
      • Business bank account
      • +6 months in business

      How do no-doc business loans work?

      Traditional lenders ask for lots of documentation so that they can get a true picture of your business. This enables them to judge risk more accurately. No-doc lenders do not have this comfort, which means they are vulnerable to greater risk. Typically, no-doc lenders base their lending decision on factors such as your credit score, the collateral you can pledge or the value of your unpaid invoices. To offset risk, they may set high interest rates and demand daily or weekly payments. This can help them feel more confident that they’ll get their money back. 

      Nearly no-doc business loan options

      Here’s a rundown of the most common types of low-doc or nearly no-doc business loans. Some of these types of financing require collateral, or they use the assets you are buying as security for the loan.

      Unsecured short-term business loans

      An unsecured short-term business loan is exactly what it sounds like – money that your business borrows and then pays back quickly – usually in less than one year. These types of loan can often be obtained with minimal documentation, and there be may no need to provide collateral. Instead, you will usually have to give a personal guarantee that makes you personally liable to repay the debt if your business cannot. Unless the loan is ‘self-collateralising’, which means it uses an asset that you are buying as security – like an auto loan or a residential mortgage – you will usually require good credit to obtain an unsecured business loan. 

      Unsecured short-term business loans that may not need collateral:

      Unsecured short-term business loans that ‘self-collateralise’:

      Term loan

      The most common type of low-doc loan. Term loans provide a lump sum that you pay back over time. Borrow up to $5million over as long as 25 years. Collateral may be required.

      Business line of credit

      This is a business loan that functions like a high-value credit card but comes with lower interest rates and fees. Organisations can withdraw as much as they want when they want from a loan facility up to the limit of their borrowing. The best thing about a line of credit is that you only pay interest on the sum you withdraw, not the whole line. This can significantly reduce your borrowing costs. Collateral may be required.

      Business credit cards

      It may be possible to secure a business credit card with a high limit to fund your organisation. Business credit cards are also great for building a good credit history if you pay off the balance every month. You may even get free travel and shopping rewards with the points you accrue. Collateral may be required.

      Invoice financing

      Also known as account receivables financing, invoice financing uses your unpaid invoices as collateral for a loan. Invoice finance lenders typically provide up to 95% of invoice value. Instead of waiting 30, 60, 90 days or more, you get most of your invoice paid within a day or two of the bill being raised. This type of borrowing can be particularly useful for businesses that have few assets to offer as collateral for a bank loan. Their unpaid invoices are the collateral. There is usually no need for additional security.

      With invoice financing, you are still responsible for chasing payment from your customers and you retain control of your sales ledger. The deal is confidential. Your customers need never know that you are using your invoices as collateral for a loan.

      Invoice factoring

      Invoice factoring is similar to invoice financing, except now you don’t use your invoices as collateral for a loan, you sell them outright to a third party – known as a Factor. When a Factor buys your invoices, they take control of the sales ledger and provide an advance against each invoice. The Factor also becomes responsible for chasing your customers for payment. This means factoring is not confidential. Customers will be aware that the Factor has taken control of your sales ledger. This could be a problem for businesses in debt-sensitive industries, such as recruitment or law. 

      Factors typically advance 75% to 95% of invoice value. After deducting their fees, the factor transfers the remaining balance to you when the invoice is paid by your customer. 

      Merchant cash advances

      Available for businesses that accept customer payments by credit and debit card. You borrow against the value of your card sales. As your card sales increase, your borrowing limit goes up. Pay the loan back with a fixed percentage of your card sales on a daily, weekly or monthly basis. Your sales act as security for the loan, no added collateral is required.

      Equipment financing

      Equipment loans use the asset you’re financing as security, so no added collateral is required.  Buy machinery, furniture, technology, etc. Use the equipment as you pay for it.

      What are the pros and cons of no-doc business loans?

      Like all finance, no-doc loans have advantages and disadvantages:

      Pros:

      • Minimal paperwork
      • May fund faster than traditional lending
      • If you can provide collateral, you may get a no-doc loan with weak credit

      Cons:

      • Higher interest rates and fees than traditional business loans
      • Lower sums available
      • May need to surrender your sales ledger or give the lender access to your accounts

      How do I get a no-doc business loan?

      Interest rates and terms and conditions for no-doc business loans can vary significantly, so it makes sense to shop around before settling on a lender. You can do this by approaching banks, credit unions and online lenders one by one, or you can use the services of a loan marketplace that will immediately introduce you to a choice of no-doc loans from different lenders. Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for borrowers who have never taken out a no-doc business loan before.

      What credit score do I need for a no-doc loan?

      Because no-doc lenders have less documentation to work with, they expose themselves to greater risk. One way they mitigate this issue is to limit their lending to businesses and individuals with good credit. Typically, you will need a personal score of 600 or more to get a no-doc loan. However, loans that self-collateralise – such as invoice-financing – place less emphasis on credit scores and applicants with a score below 600 may be successful.

      Are no-doc business loans available for startups?

      Yes, although you will need to shop around to find this type of finance. Startups typically need to provide collateral to get any sort of lending and no-doc loans are no different. Additionally, the business owners will usually need to provide a personal guarantee.

      What are the alternatives to no-doc business loans?

      No matter if you’re seeking a no-doc loan, a nearly no-doc loan or a full-doc business loan, working with business finance experts can make all the difference when applying for funding. Contact Swoop to discuss your borrowing needs, get help with your application and to compare high quality business loans from a choice of lenders. Get the loan you need with or without the paperwork. Register with Swoop today.

      Get started with Swoop

      No matter if you’re seeking your first revenue-based loan or you’re a seasoned borrower, working with business finance experts can make all the difference when applying for funding. Contact Swoop to discuss your borrowing needs, get help with your application and to compare high quality revenue-based financing deals from a choice of lenders. Make your revenues do more for your business. Register with Swoop today.

      Written by

      Chris Godfrey

      Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.

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