Applying for a business loan can be confusing and complicated if you don’t have the documents required by the bank or lending institution. Although these financial institutions only want to safeguard their money and interests against unqualified borrowers, excessive paperwork makes it more difficult for business owners to take out a loan. This is where getting a low doc loan comes into play.
Keep reading this article to learn about a low doc loan and its five essential benefits.
What Is A Low Doc Loan?
Essentially, a low document loan, also known as a low doc loan, refers to a commercial loan for borrowers who can’t take out a traditional loan because they lack the usual documents to prove their income history. In short, it offers an opportunity for businesses and self-employed individuals to get the needed capital to finance their businesses even without the usual documentation required by their local banks.
However, like other business loans, a low doc loan has common minimum document requirements that must be complied with. These can include:
- A document to prove that the business is actively running. In most cases, this document is called a Business Activity Statement.
- A document, known as an income declaration, which the business owner signs. This document shows the current income of your business.
Depending on the lending institution you want to work with, you may also be required an additional document, such as bank account statements. Because of this, it’s best to check with your prospective lender the specific documents needed when getting a loan.
What Are The Benefits Of A Low Doc Loan?
Now that you know what a low doc loan is, it’s time to familiarize yourself with how it can benefit you and your business. The following are some benefits of a low doc loan:
- Convenient Application Process
Applying for low doc loans from a reliable provider is much easier and faster in today’s digital world. That’s because you can take out this type of loan over your laptop, mobile phone, and other electronic devices. As a result, you can reduce the amount of time required for completing the application process.
For example, if you need urgent funds to finance an unexpected business opportunity, a low doc loan can be the best option because you can apply for it from the comfort of your home or wherever you may be. Once you get approved, you can obtain the funds fast.
- Eligibility For Privileges Available To Traditional Loans
Taking out a low doc loan doesn’t mean you can’t avail of the privileges available to traditional commercial loans. Even if you can’t provide the standard documentation requirements required by loan providers, you can still enjoy great benefits, such as low-interest rates and flexible repayment terms when you get a low doc loan.
Due to this eligibility, you’re no different from the borrowers who can comply with the documents asked by the banks and other big loan providers.
- Easy Access To Loans For Small Businesses And Self-Employed Individuals Whose Incomes Aren’t Documented
As mentioned, borrowers who don’t have enough income documentation can still access additional funds by applying for a low doc loan. Although your income history isn’t properly documented, lenders who offer low doc loans can still consider you an eligible borrower. What’s important is that you generate business revenue that gives you the ability to repay the loan.
Hence, even if you’re a self-employed individual or small business owner who can’t show the usual financial documents required, you can still obtain additional funds through low doc loans.
- No Collateral Required
Although most conventional lenders would ask for security in the form of real property and other valuable assets, the majority of the lenders offering low doc loans won’t demand security for the money you borrow. In case of payment default, the lender can’t get a hold of your personal assets to pay your credit. This setup can save you from unnecessary hassle and worries, provided you find reputable lending institutions that offer low doc loans with reasonable rates and payment terms.
- Opportunity To Improve Credit Rating
Since most small business owners and self-employed individuals don’t have adequate financial documents required by big lending institutions, they can’t easily qualify for traditional business loans. Consequently, they have limited opportunities to improve their credit score and avail of more financial services in the future.
This is where getting a low doc loan becomes beneficial. If you’re a small business owner or a self-employed individual, you can use a low doc loan as a starting point to boost your credit rating and ensure a better credit report.
Several startups, small businesses, and self-employed people generate considerable revenue without properly sorting out their financial documents. They may be so preoccupied that they don’t pay attention to the documents needed by loan providers before taking out a business loan. When this happens, you need a low doc loan to access the funds you need for your business.
Therefore, if you want to understand better how this type of loan can help you, keep the benefits mentioned above in mind, and you’re good to go.