No-Doc Business Loans: What to Know
Laura Roden’s career in financial services has covered the spectrum from investment management, brokerage, banking and corporate finance to teaching finance and entrepreneurship at the college and graduate school levels. She earned both her undergraduate and MBA degrees from Harvard University, and holds Series 7, 63 and 65 FINRA licenses. She has been a featured speaker on finance topics at the Milken Global Conference, the New York Society of Security Analysts, the Inc 500 conference and the Angel Capital Association as well as many other venues.
Short for “no-documentation,” no-doc business loans offer a streamlined process that allows borrowers who may not otherwise qualify for financing to access fast funding.
While true no-doc loans are few and far between, there are low-documentation options available as an alternative to traditional bank funding. Here’s what you need to know before taking out one of these loans.
What is a no-doc business loan?
The term “no-doc business loan” refers to any small business loan that requires minimal paperwork for approval. These loans typically have higher interest rates and shorter repayment terms than traditional loans from a bank or a Small Business Administration (SBA) loan. However, they’re often a good option to help those who may not be able to qualify through traditional lenders.
Although they’re called no-doc loans, lenders typically require some proof that you’ll be able to repay the amount you want to borrow. This proof can come in a variety of forms, such as:
- Bank statements
- Personal credit score
- Business credit score
- Personal guarantee or another form of collateral.
Some lenders may also ask to see additional documentation once you submit your loan application, but once approved, you can expect to receive funding fairly quickly. Occasionally, lenders will be able to offer same-day funding. However, it may take others a few business days to fund your request.
Pros and cons of no-doc business loans
| Pros | Cons |
|---|---|
Receive funding more quickly than traditional loans Apply for loans without extensive documentation Lenders may be more likely to work with bad credit | Higher interest rates and less favorable repayment terms May require granting access to business accounts or software Often have lower funding amounts than traditional loans |
How to get a no-doc business loan
In general, the process for getting a no-doc business loan is very similar to applying for a traditional business loan. However, there are some unique considerations that you may want to weigh before you submit your loan application, including:
- Research online lenders: As a rule of thumb, online lenders are more likely to offer low- and no-doc business loans. Research lenders to find out which ones may be a good fit.
- Compare documentation requirements: Research each potential lender’s eligibility requirements as you create your shortlist. If you need help getting started, LendingTree small business lender reviews cover general qualification criteria.
- Shop around for the best rate: Gathering loan offers from multiple lenders is a great way to save money on your small business loan. Getting preapproved can help you estimate your loan terms without impacting your credit score, so you can compare terms to see which one is the best fit for you.
- Apply for the loan: Once you know which no-doc business loan lender is the right fit for you, gather the required documents and start the application process. You can typically do this online or over the phone with an account representative.
Types of no-doc business loans
Here are some types of no-doc or low-doc small business loans and financing options that feature reduced paperwork:
Short-term business loans
- Documents required: Expect online lenders to request basic documents such as bank statements or tax returns. They might also run a credit report and request a personal guarantee from the business owner(s).
Online lenders may offer low or no-doc short-term loans requiring much less borrower documentation than traditional lenders like banks and credit unions. Many of these loans are unsecured, meaning collateral isn’t required, which also reduces documentation.
Short-term loans have a fixed term length ranging from a few months to a few years. Loan amounts start at a few thousand dollars and can reach as high as $100,000, depending on the lender’s criteria and borrower qualifications. Minimum payments often begin as soon as the day after the loan is funded and continue throughout the term of the loan. Lenders may deduct payments automatically from your bank account.
Business line of credit
- Documents required: Expect lenders to ask for a combination of simple documents like bank statements, proof of business operations (e.g., credit card sales) or a list of assets. Lenders may also run a credit report to help determine your creditworthiness.
A business line of credit is a flexible form of financing that a business can draw from as needed instead of borrowing a lump sum. You’ll only pay interest on the amount you use, which is great if you need less than you expected or you’re able to pay it back faster than the repayment term, which is typically between six and 18 months.
Invoice factoring
- Documents required: Factors want to see a sample of your customer invoices to estimate how risky and time consuming it will be to collect payment.
Invoice factoring involves selling your unpaid customer invoices to a specialized finance company called a factor instead of waiting for your customers to pay you. Factoring provides business owners with fast cash and saves them the time and effort of collecting money. The factor charges a fee calculated as a discount on the value of the invoices they buy.
Invoice factoring providers care more about your customers’ creditworthiness than yours, since they get repaid by your customers. As a result, factoring terms are most attractive if you have reputable customers like corporations or the government. Keep in mind that you will likely still be on the hook for repaying the factor if the invoices are determined to be uncollectible after the payment due deadline, which is typically 30 to 90 days after invoicing.
Merchant cash advance
- Documents required: The MCA lender needs documentation of your credit and debit card sales history with statements from your card processors and banks.
A merchant cash advance (MCA) works differently than other types of financing: Businesses receive funding in a lump sum and then pay back the advance plus fees over the next few months with a portion of their ongoing credit and debit card sales.
MCA lenders typically collect payments daily or weekly directly from the borrower’s credit or debit card processing account or bank. Like other loans for bad-credit borrowers, MCAs carry high interest rates, but can be an option for businesses with poor credit that urgently need funding.
What lenders offer no-doc business loans?
No-doc business loans are generally offered by online, alternative lenders who specialize in loans for bad credit borrowers and others who struggle to qualify for a traditional loan. These no-doc lenders provide loans to startups, businesses with bad credit and businesses whose urgent need for funding outweighs the high interest rates and harsher repayment terms.
Banks and credit unions are unlikely to offer no-doc business loans. SBA loans, which are offered through traditional lenders, require extensive documentation.
Lenders that offer loans with minimal paperwork include:
| Lender | Type of Financing | Min Credit Score | Min Time in Business | Documents required | |
|---|---|---|---|---|---|
 | Short-term business loans | 625 | 1 year |
| Get business loan offers |
 | Line of Credit | 625 | 2 years |
| Get business loan offers |
 | Invoice Factoring | 550 | 6 months | 4 months of bank statements | Get business loan offers |
 | MCA | 525 | 6 months | Not disclosed | Get business loan offers |
Alternatives to no-doc business loans
There are other funding options for business owners who don’t qualify for a traditional business term loan.
- Microloans are loans of very small size; for practical purposes most microlending programs focus on underrepresented or disadvantaged communities or populations and businesses that serve them.
- Bootstrapping means funding your business through your own sales and savings rather than borrowing money.
- Personal loans are based on an individual’s credit and assets; examples include credit cards, mortgages and home equity lines.
- Crowdfunding works through peer-to-peer (P2P) platforms where you publish a campaign explaining your business, hoping to catch the interest of individuals willing to lend to it.
- SBA loans are made by traditional lenders to borrowers who meet the criteria for an SBA guarantee. Documentation is more extensive and approval time is longer than standard business loans, but, if approved, the rates and terms can be very favorable for small businesses.
Frequently asked questions
No-doc business loans may help if your credit score or lack of credit history could make it hard to get a business loan. But if you can meet the requirements for one, you may find better rates and longer repayment terms with standard loan products.
Minimum credit score depends on the lender and the type of no-doc loan. Unsecured short-term business loans and revolving lines of credit may require credit scores of 600+, but invoice factoring and MCAs place less importance on borrower credit score.
The citizenship requirements for no-doc business loans will vary by lender. You’ll need to research lenders to get a sense of their business loan requirements before applying.
It may be possible to get a business loan with just an EIN if you have a strong credit score. But most lenders will require some additional documentation to prove you can repay the loan.