No-doc business loan

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Page written by Chris Godfrey. Last reviewed on October 29, 2024. Next review due October 1, 2025.

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No-document or ‘no-doc’ business loans are streamlined financial products designed to offer quick access to cash with minimal paperwork. These type of loans can provide a simplified application process and fast access to capital, sometimes funding the next business day.

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What is a no-doc business loan?

Technically, a no-doc business loan should require nothing more than your name and address to obtain financing. However, the truth is, these loans do not exist. Even the simplest financial products, such as business credit cards, will also require income verification and a hard credit check.

So, when people talk about no-doc loans, what they really mean are low-doc or nearly no-doc loans – financing that requires far less documentation than traditional business loans but are not entirely paper-free. Many no-doc loans are provided as short-term loans or revolving credit lines – options where you may only need basic business information such as bank statements or tax returns.

No-doc loans are typically easier to get from online lenders instead of traditional banks or credit unions, and they can be an attractive option for businesses that are unable to qualify for traditional financing, or for those who need funding quickly. Borrow up to $10million depending on your business circumstances and the value of your collateral.

No-doc business loans at a glance:

Low documentation required, but not entirely paper-free
More easily available from online lenders instead of banks or credit unions
Borrow up to $10million
Can fund within one or two business days
May come with higher interest rates and fees that standard business loans
Collateral may be required
Good option for businesses that need cash fast or may not qualify for traditional financing

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

Although every lender will have their own criteria, you’ll usually need the following to get a no-doc loan:

Basic business information – (address, details of owners, type of structure, etc)
Minimal paperwork – (such as recent bank statements or tax returns)
A good credit score – (typically a personal FICO score of 600+ unless collateral is provided)
A business bank account
At least six months in business – (although some lenders may have no-doc loans specifically for business start-ups)
Details of provided collateral – property deeds, list of machinery or plant, etc

How do no-doc business loans work?

Instead of plowing through piles of documents – as preferred by traditional banks – no-doc lenders typically rely on advanced computer modelling and factors such as credit scores or unpaid invoices to approve your loan request. Because this process is more beneficial to the borrower but creates higher risk for the lender, no-doc loans usually come with elevated interest rates and fees and may require more frequent repayments – possibly weekly or even daily.

No-doc business loan options

No-doc business loans come in various forms and may require collateral as security for the loan. The following are common types of low-doc or nearly no-doc business financing:

Short-Term Business Loans

Short-term business loans provide businesses with quick funding that must be repaid within a short period, typically less than two years. These loans may be obtained with minimal documentation and may or may not demand collateral. Alternatively, you may be asked to offer a personal guarantee, which makes you personally liable for the repayment of the loan if your business cannot cover the debt.

Short-term business loans include:

Term Loan: Term loans are the most common form of business loan. This type of financing offers a lump sum of money which you repay over a fixed period that can range up to 25 years but is often 24 months or less. Document requirements can be minimal and borrowing limits will vary according to the borrower’s loan profile. Collateral may be required, especially if you’re seeking a larger sum or a long repayment period.

Business Line of Credit: A business line of credit works like a high-value business credit card. Withdraw what you need when you need it up to the limit of your borrowing. The key advantage of a business line of credit is that you only pay interest on the amount you use, not the total loan amount. This can significantly lower your borrowing costs. Collateral may be required.

Business Credit Cards: Business credit cards are useful for covering small business purchases, building your credit history, and may deliver extra perks such as travel points or cash back. Business credit cards often have higher borrowing limits than many personal credit cards, but they may require collateral or a personal guarantee. Higher fees and interest rates can also apply if you don’t pay back the total balance every month.

Self-collateralizing business loans:

Some no-doc business loans are self-collateralizing – which means they use the purchased asset as security, such as auto loans and residential mortgages. This type of financing may be easier to obtain if your credit is weak or you cannot provide collateral for a regular business loan. Note that even though the asset provides security for the loan, in some cases, you may still be required to provide a personal guarantee.

Self-collateralizing business loans include:

Invoice Financing: Also known as account receivables financing, this type of loan allows you to borrow against the value of your unpaid invoices and it can be a solid option for businesses that lack other forms of collateral. Instead of waiting 30, 60, or 90 days to get paid, the lender may provide up to 95% of your invoice value within a few days or even hours of the bill being raised. Your invoices act as security for the loan, no added collateral is required.

Unlike invoice factoring, invoice financing allows you to retain control of your sales ledger and to continue to manage your customer payments. This type of financing also remains confidential. Your clients may never know their invoices have been used to secure a loan.

Invoice Factoring: Invoice factoring is similar to invoice financing but with one key difference: You sell your unpaid invoices outright to a third party, known as a Factor. The Factor advances you a percentage of the invoice value—typically between 75% and 95% – and takes over the management of your sales ledger and is responsible for collecting payments from your customers.

Unlike invoice financing, factoring is not confidential. Your clients will know that a third party is handling their payments. This may not be ideal for businesses operating in industries where discretion is important, such as legal or recruitment services.

Merchant Cash Advance: A merchant cash advance (MCA) is a form of financing available to businesses that accept customer payments via credit or debit cards. With an MCA, you receive a lump sum advance against your future card sales, and the loan is repaid through a percentage of your daily card transactions. The amount you can borrow increases as your card sales grow, making it a good option for businesses with fluctuating revenue. No additional collateral is required.

Equipment Financing: With equipment financing, you use the asset you’re purchasing (such as machinery, technology, or vehicles) as collateral for the loan. This type of borrowing is ideal for businesses with erratic cash flow or low working capital. Use the asset as you pay for it. Spread the cost over time.

Pros and cons of no-doc business loans

Like any type of financing, no-doc business loans come with advantages and disadvantages:

Pros

Minimal paperwork: These loans require much less documentation that traditional financing
Fast funding: Because of the streamlined application process, you may receive funds much sooner
Weak credit options: If you're able to provide collateral, you may still qualify even if your credit score is not ideal

Cons

Higher costs: Interest rates and fees are typically higher for no-doc loans than traditional business financing
Lower borrowing limits: You may not be able to secure as much capital as you would with a traditional loan
Potential loss of control: If you opt for invoice factoring or similar solutions, you may have to give up control of your sales ledger or grant lenders access to your accounts

How do I get a no-doc business loan?

Even though the process is streamlined, obtaining a no-doc business loan can still be complicated. The sum you can borrow and the interest rate you’ll pay will vary from one lender to another, so you should always shop around before settling on a deal. You can do this by approaching banks, credit unions and online lenders one by one over days, weeks or months, or you can use the services of a loan marketplace that can quickly introduce you to a choice of financing offers from a range of 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 loan before.

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

No-doc business lenders typically require borrowers to have good credit. For most no-doc business loans, you will need a personal FICO score of at least 600.

Can I get a no-doc business loan with bad credit?

It’s always challenging to obtain a business loan if you have bad credit. In most cases, if your credit score is less than good, you’ll be asked to provide collateral to the full value of the loan. Alternatively, you may be asked to bring a co-signer into the deal to act as a financial backstop in case you default on the loan. If you can’t pay, they will. Find out more about getting a business loan with bad credit here.

Are no-doc business loans available for startups?

No-doc business loans are available to start-ups, but they’re typically more difficult to obtain compared to established businesses. Start-ups will usually need to provide collateral and business owners may also be required to give a personal guarantee. You should also expect to pay higher interest rates and fees, borrow smaller sums and repay the loan over a shorter duration.

What are the alternatives to no-doc business loans?

If you cannot qualify for a no-doc business loan, there may be other ways to obtain the funding you need:

Business Grants: Business grants are effectively free money – they do not have to be repaid if you spend them properly. The good news is there are literally thousands of grants available across the US and they are provided by federal, state and local governments as well as foundations, non-profits and other organizations. The bad news is that small business grants are usually highly competitive, slow to fund and often come with strict qualifying rules.

Personal Loan: Personal loans for business function similarly to business term loans – you receive a lump sum of money and repay it over time. However, personal loans tend to have lower borrowing limits, higher interest rates, and stricter repayment terms compared to business loans. Collateral may be required.

External Investors: If you’re seeking outside investment, there are networks of venture capitalists and angel investors readily available online. Bringing in external investment can give you the cash you need, and it may also deliver a unique and extra set of skills and contacts that can help your organization grow even faster.

Note that investors will usually want a piece of the action in exchange for their money. This will mean you give up a share of your ownership and may loosen your overall control of the business. Some investors may also want higher dividends or royalty payments as well as their share of equity. Venture capitalists and angel investors are also notoriously picky about the businesses they choose to back. You could spend many months pursuing one lead after another before you find the right match.

Crowdfunding: Available via various online platforms, crowdfunding can bring in large sums if your presentation hits the right spot. Although it may be tough to raise big money in small donations from hundreds of donors, this cash is essentially free as there is no interest to pay and you do not need to repay the money if you spend it where you said you would. An eye-catching idea and a powerful pitch is essential to succeed with this funding option.

Get started with Swoop

Working with business finance experts can make all the difference when applying for a no-doc loan. Contact Swoop to discuss your borrowing needs, get help with your application and to compare high-quality no-doc business loans from a choice of lenders. Don’t get lost in a maze of paperwork. Concentrate on building 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 Wells Fargo Bank, Visa, Experian, Ebay, Flywire, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of US consumer and business finance.

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