No-doc business loan

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:

• Term loans
• Business lines of credit
• Business credit cards

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

• Invoice financing
• Invoice factoring
• Merchant cash advance
• Equipment financing
• Commercial vehicle finance
• Asset finance
• Commercial mortgage 

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 R5million 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.