No-doc business loans

Getting a loan with less paperwork can be easier but more costly

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For many small-business owners, cash flow is key. Unexpected opportunities or expenses often require access to funding quickly. No-doc business loans aim to fill this need by providing a streamlined application process that can deliver funds in as little as a few days.

Although they involve less paperwork, no-doc loans still involve trade-offs, like higher interest rates and shorter repayment periods. Here’s what you need to know.


Key insights

  • A no-doc business loan requires less upfront documentation than a traditional business loan.
  • It allows faster access to capital but usually at a higher interest rate due to increased risk for the lender.
  • A no-doc loan can be a good short-term solution if you can't wait for full bank underwriting or don't qualify through normal channels.
  • Compare all available options before committing to high-interest debt that may prove difficult to pay off.

What is a no-doc business loan?

No-doc business loans are a type of financing designed to provide entrepreneurs with quick access to capital without requiring extensive financial documentation. They’re also sometimes called “low-doc” loans.

As the name implies, no-doc loans limit the amount of paperwork needed to verify your business's income, expenses, tax returns and other financial details that are typically required for a conventional business loan.

“No-doc loans probably work best for small businesses that need quick access to capital and easy qualification requirements and are willing to pay that higher interest rate," said Marie Cano, commercial lending officer at Agility Bank in Houston.

» MORE: How do business loans work?

Types of no-doc business loans

While true no-doc loans don't exist (since lenders still need some basic information), there are several financing options available that require less rigorous application requirements compared to traditional business loans.

Invoice factoring

Invoice factoring allows business owners to access cash quickly based on the value of unpaid invoices. The lender will pay a percentage of the invoice amount upfront, usually 70% to 90%, and then collect repayment plus interest when the customer pays the invoice.

Lenders look at customer payment histories rather than credit scores to assess risk. This type of financing provides immediate access to cash without waiting for customers to pay outstanding invoices.

Merchant cash advances

Merchant cash advances (MCAs) offer short-term funding using credit card sales as collateral. MCA companies deduct loan repayments directly from future credit card transaction amounts, usually on a daily basis.

Interest is calculated as a factor rate, typically 1.1 to 1.4 times the advance amount. While MCAs allow quick funding approval, the daily repayment structure is best for businesses with high and consistent credit card volumes.

Short-term business loans

Short-term loans, also known as working capital loans, cover immediate needs like inventory or payroll over three months to 18 months. Due to their short repayment periods, monthly payments on these loans may be high and interest rates range from 8% to 36% (although some lenders may have rates outside of this range).

While these loans are fast, high interest rates make them best for temporary cash flow solutions. Determine what you can afford to borrow before committing.

Business lines of credit

Business lines of credit function as revolving loans that allow drawing from an approved limit as needed. Common uses include equipment, marketing and other long-term investments. Interest is charged only on balances used rather than the full line amount.

Rates usually start around 8%, which is on par with some short-term options. Business lines of credit are better for ongoing operational expenses versus large one-time expenses.

Pros and cons of no-doc business loans

While no-doc loans provide an alternative to entrepreneurs who may not qualify for traditional financing, it's important to weigh the pros and cons versus other options.

“Because these loans are issued with relatively little due diligence and often without collateral, the loss rates on no-doc business loans tend to be higher than full-doc loans. As a result, their cost is also higher,” said Ben Johnston, chief operating officer at Kapitus, a direct lender headquartered in New York.

Pros

  • Simple application process can be completed online in a matter of minutes
  • Faster approval process due to reduced documentation requirements
  • Flexible qualifications consider business assets rather than personal credit alone
  • Shorter repayment periods mean paying off debt quicker
  • May be ideal for businesses with bad credit, low credit or no credit

Cons

  • Higher interest rates are charged to offset increased risk
  • Short repayment windows mean larger monthly payments
  • Limited refinancing or modification options if repayment becomes difficult
  • Fewer lenders offer no-doc loans, which restricts your ability to find affordable rates
  • Loan amounts may not be as large as what you could get with traditional bank financing

How to get a no-doc business loan

While traditional banks typically don't offer true no-doc loans, several specialized lenders provide these types of financing options. You can find them at:

  • Online marketplace lenders
  • Merchant cash advance companies
  • Invoice factoring firms
  • Alternative small-business loan providers

Even though you won't need to provide extensive tax returns, financial statements or personal credit reports, lenders will still require some basic application materials. This usually includes your business name, tax ID number, length of time in operation, average monthly revenues and a personal guarantee. Some may ask for bank or credit card statements to verify revenue amounts.

With no-doc loans, the application process is almost entirely online. Most lenders offer applications that take a few minutes to complete. You can expect a funding decision within one to three business days once the application is submitted. If approved, funds are deposited directly into your business bank account via Automated Clearing House (ACH) transfer.

“Before choosing a no-doc lender, be sure to read the company’s reviews and search for information about that company online,” Johnston said.

“See if they are mentioned in the press and if they disclose their management team and company history. Generally speaking, the longer a company has been in business and the more positive information that is available about them, the more sustainable and reputable they are.”

» MORE: How to get a business loan

The best no-doc business loans

Below are some of the best lenders and online marketplaces to find low-doc and no-doc business loans.

“No-doc business loans are frequently advertised online, on the radio and on television,” Johnston said. “A simple Google search will reveal many types of no-doc lenders, as well as aggregation sites that compare different lenders.”

» COMPARE: Best business loan companies

Should you get a no-doc business loan?

While no-doc loans fill an important niche, they are not the best option in every situation. Carefully consider your funding needs and how likely you are to qualify for a traditional loan before pursuing a no-doc alternative.

No-doc loans may make the most sense when:

  • You have been operating your business for less than a year and can't provide extensive financials.
  • You have personal credit issues that would disqualify a standard bank application.
  • You need a short-term cash infusion for a specific project or expense.
  • Timeliness is critical and full bank underwriting would delay funding.

If you have strong personal and business credit, qualify for a Small Business Administration (SBA) loan or need long-term financing, a traditional loan may have lower costs.

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FAQ

Is it easy to get a no-doc business loan?

Applying for a no-doc business loan takes less time than a traditional loan because it requires less paperwork. But approval is not guaranteed because lenders still take steps to assess your risk. Having a solid business plan, a steady revenue history and a personal guarantee can help.

Do no-doc business loans hurt your credit score?

No-doc business loans can hurt your credit score if you miss payments. Otherwise, they can generally improve your score.

Do banks offer no-doc business loans?

Not usually. Banks follow stringent underwriting guidelines set by regulators. Most no-doc loans come from alternative small-business loan providers that have more lenient qualification standards.

Bottom line

No-doc business loans provide an alternative funding option but come with higher costs and risks than traditional financing.

"No-doc loans are likely a better option if a business owner can’t qualify for a traditional loan for some reason (i.e., FICO score) but needs quick access to capital to grow their business," Cano said. “They often have higher interest rates and shorter repayment terms, but they can provide flexibility for borrowers who can’t qualify for a traditional loan.”

While the application is simpler, weigh your ability to qualify for a lower-rate bank loan or SBA program before choosing a no-doc loan.

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