Low Doc Loans for Businesses

Low Doc Loans are thriving for many reasons. The most valued reason is that you can get a loan with a minimum amount of documented proof of income. For self-employed or small business owners, this is the ideal loan because many cannot afford to hire a CPA for proper record keeping because business loans usually require professionally kept records, certified by CPAs.

How to Get a Low Doc Loan

Most financial institutions will offer low doc loans; however, the interest rate will be higher than traditional loan products because the institution is taking on a high risk loan. Low doc loans are in the high risk category because the company is not large enough to afford a professional record keeper. This usually means that you are just starting out and need a few years to get built up. 

What Is Needed?

You will need some proof of income, whether it is banking records or income tax information.  You will also need some sort of collateral, such as property or money in the bank. You always need some form of collateral when asking for a larger loan. Most financial institutions will only allow a minimum loan of ten thousand dollars. Smaller loans are easier and safer to obtain as a method of a personal loan. Lastly, you will usually need to have a good credit history to get a low doc loan.

Why Low Doc Loans Are Popular

Low doc loans work for small companies that are just starting out. For example, a small company that is in the baby blanket industry is just starting out. They are selling their products at the local swap meet and are doing pretty well. They decide they want to lease a storefront facility to sell their handmade baby blankets and will need a loan. However, without precise record keeping, they will not get a typical loan. They can however get a low doc loan assuming they have some records and a form of collateral that can be levied.  

Low doc loans are risky for both the financial institution allowing the loan and the borrower. It is a great method to get on you on track with your young company. However, if your business goes under, you will still have to pay back that loan, or lose what you put up for collateral.

There are not many lenders that are willing to take a large risk so it is nice to know that you can get a loan, as long as you have some collateral. Keep in mind that you may catch the IRS’s attention if your records are not kept up-to- date when applying for this loan, so be careful about what you report. If you have something to hide, you be caught.