What is a Low Doc Business Loan?
Low doc and no doc business loans are similar to traditional unsecured and secured business loans. The main difference is that low doc (low documentation) and no doc (no documentation) business loans allow small businesses and self-employed borrowers to access vital cash flow when they cannot provide financial statements or supporting documentation that would be required for traditional business loan approval.
In this guide, you’ll learn:
Who uses low doc business loans in Australia
The differences between low doc and no doc loans
What you need to apply
How to choose the right lender for your loan
What you can use a low doc business loan for
Loan amounts, terms, and interest rates
Who uses low doc and no doc loans?
Low doc and no doc loans are mostly used by small businesses with a short operating history, and self-employed individuals. Importantly, they are used by borrowers who cannot provide the necessary documentation for standard business loan approval. Owning a small business isn’t always easy, and having fast and simple access to business funds can be the difference between growth and closure.
This type of finance is often used by:
- Self-employed individuals
- New businesses
- Businesses with complex structures
- Small Businesses
Low-doc loans are particularly useful for self-employed individuals, such as Australian tradies.
Differences between a low doc loan and a no doc loan
- Low doc loans are used when you are unable to meet qualifying criteria for a standard business loan and cannot provide business financial statements and tax returns for the past two years.
- No doc loans are used when you are unable to provide any evidence of your business income or supporting documents.
As interest rates and loan flexibility are assessed on the level of risk presented to a lender, low doc loans will have higher interest rates than standard business loans, and no doc loans will have higher interest rates than low doc loans.
What you need to apply for a low doc business loan
Applying for a low doc or no doc business loan will be easiest through non-bank or specialist lenders. You may be asked to sign an income declaration, and you’ll still need to meet basic lender criteria and have:
- An ABN
- A GST-registered business
- Permanent Citizenship or Residency
The most important aspect of your application is proving your ability to meet your repayment obligations. For the majority of non-bank and specialist low doc finance lenders, you may also need to provide:
- A letter from your accountant
- Business Activity Statements
- Bank Account Statements
Preparing the small amount of documentation you are able to provide before applying for a loan will ensure the fastest approval speed
Applying for a low doc loan with your bank
Applying for a low doc loan with your bank can be a time-consuming and stressful process - fast approval without needing to provide endless amounts of supporting documents is the main reason businesses apply for loans with non-bank lenders.
If you do choose to apply with your bank, you’ll need to supply extensive documentation about your business, such as:
- Your balance sheets for the past two or three years
- Details of any business equity or any existing debt finance
- Profit-and-loss statements for the past three financial years (provided by your accountant)
- Business revenue projections for the next 24 months
- A debtors and creditors report
- Copies of any significant contracts or sales agreements your business may rely on for continued revenue
- Your personal and business credit records
- Details of any assets you wish to use as security on the loan - such as vehicles and property
You may also need to provide:
- A business plan, showing your understanding of the market and how your business will compete with other, similar businesses to maintain a profit
- A detailed business case indicating how you will use the funds and how you plan to repay the loan
For the majority of self-employed individuals or small businesses, collating this much supporting documentation can be an arduous task. Even if you are able to provide this documentation, there is no guarantee you will be approved by your bank, and if you require fast access to finance, the length of the process may make applying a waste of time.
Low doc loans for small businesses
Low doc business loans are designed for business owners who have difficulty in meeting the strict approval criteria with their bank. This is why they are incredibly popular with new businesses and small businesses in Australia.
Small businesses benefit from the fast approval times offered by non-bank lenders - applying with these lenders requires minimal paperwork and provides access to finance which can then be used for a number of useful purposes.
You can often get fast approval for small business loans through specialist online lenders
Low doc and no doc business loan benefits and uses
There are no restrictions on how you can use a low doc or no doc business loan. The number of uses for low doc business finance is as varied as the businesses who apply. You may wish to use funds to increase working capital, or purchase time-sensitive inventory or stock. Other popular uses include:
- Paying BAS or Tax Payments
- Buying equipment or machinery
- Balancing seasonal cash flow
- Employing new staff
- Renovating your offices
- Buying a competitor business
The three primary benefits are:
- Fast access to funding for small businesses
- They don’t require security or extensive supporting documentation
- Simplified application process - non-bank lenders will often allow you to apply online
Financing a vehicle with a low doc or no doc business loan
Low-Doc business car finance and No-Doc business car finance are specific vehicle finance products available if you are self-employed, or own a small business. Just like low doc and no doc business loans, this type of vehicle finance will have higher interest rates and fees than a secured car loan.
You can read more about low doc and no doc business car finance in our Business Car Loans Guide.
Low doc and no doc vehicle finance often won’t provide the flexibility of standard car finance
How much can I borrow with a low doc business loan?
In Australia, the minimum amount for a low doc business loan is currently $5,000. Lending criteria and maximum loan amounts vary between lenders, though the most crucial aspect of approving any finance amount is your ability to show a lender you can service the loan amount.
Maximum and Minimum Amounts
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What is the term or length of a Low Doc business loan?
In Australia, the minimum term for a low doc business loan is 3 months, and the maximum term is 5 years. Some lenders may allow you to switch from a low doc business loan to a full doc (standard) business loan after a period of time - around two years - if you have made all payments on time during that period.
Minimum and Maximum Terms
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Low doc business loan interest rates
Interest rates on low doc business loans will vary between lenders. The actual rate applied to your loan will be dependent on a number of factors, including:
- The trading history of the business
- The reputation of the business with suppliers and customers
- The credit history of the business
- The length of the loan period
- The value of any deposits or security - if any - used on the loan
Similar to unsecured business loans, low doc and no doc lenders may apply a factor rate to your loan instead of an interest rate. A factor rate is expressed as a multiple of the loan, which can make it more difficult to understand than an interest rate percentage - the amount of interest you pay on a low doc business loan will be calculated on the initial loan amount, not the ‘reducing balance’ - i.e. loan amortisation.
You can see learn more about factor rates and how they apply to low doc business loans in our Unsecured Business Loans Guide.
Alternatively, you can use our Factor Rate to APR Calculator to see how the factor rate applied to a loan translates to an Annual Percentage Rate.
Low Doc Loans Summary
Low Doc and No Doc business loans allow self-employed individuals and small businesses to access business finance without providing extensive financial statements. The easiest and most popular method to gain fast approval is by applying online with a specialist non-bank lender.
In summary, low doc and no doc business loan in Australia:
- Require limited paperwork and supporting documents for approval
- Are time-consuming and difficult to apply for through a bank
- Can be accessed from non-bank lenders much faster
- May have a factor rate applied instead of a percentage rate
- Will have higher interest rates and fees than a standard business loan
- Can be used for almost any business purpose
Low Doc Business Loans FAQ
What does low doc and no doc mean?
Low doc (low documentation) and no doc (no documentation) business loans are used when an individual or business owner cannot provide sufficient paperwork or supporting documentation to qualify for a traditional business loan. The main difference between a low doc or no doc business loan and other loans is the required paperwork to qualify for approval.
Where can I apply for low doc business loans?
Many lenders in Australia offer low doc business loans. You can apply through your bank, however a low doc or no doc business loan will be easier to apply for through non-bank or specialist lenders - you can even apply online!
What is a Factor Rate for an Unsecured Business Loan?
Lenders may also advertise a factor rate instead of an interest rate, and will be fixed for the entire term of your loan. A factor rate is a fixed amount calculated upfront on the full balance you apply for when taking out your low doc business loan. Even if you decide to make extra payments on the loan balance during the term, the amount of interest you pay won’t change.
Are low doc and no doc business loans the same as an unsecured business loan?
No, a low doc or no doc business loan is defined by the application process - i.e. limited documentation is required to grant approval. Low doc and no doc loans can still be unsecured, however an unsecured full doc business loan will provide lower interest rates than an unsecured low doc business loan or unsecured no doc business loan.