Are there any advantages with this type of Loan?
Of course! The most obvious one being that low doc business loans simplify the application process when applying for any business loan. And although you may not be able to apply for a very large loan, a lot of low doc business loans are available for existing and start-up businesses, adding that to one of the advantages of this kind of loan.
These types of loans are also unsecured loans and that is a big advantage. But what is an unsecured loan? This means that the applicant does not need to provide the bank or the financial institution any security of any form or any collateral when applying for the loan. With proper research and inquiry, you are bound to find several financial institutions that offer low doc business loans.
An additional advantage to this is that having no credit history, or even a bad credit history is of no effect for your loan approval. This can take some thorns out from a person with bad credit looking for an opportunity to change the tides with a new business opportunity.
Another advantage is that these loans generally have very minimal wait time, which means that an applicant does not need to wait that long in order to be approved.
And lastly, low doc business loans most often are loans that can be applied for using the internet or over the phone. This reduces the amount of time needed in the actual application process. Add this to the advantage of having minimal wait time, these types of loans are best when any business needs a quick loan cash out to use when there is an unprecedented or unforeseen opportunity comes knocking at their doors. Low doc business loans are at the top of the list of the quickest options to get funds quickly.
Who best benefits from a Low Doc Business Loan?
You’ve read that this kind of business loan is usually used by start-ups and small businesses, and that is true. But why is this so? Imagine yourself as a self-employed person who suddenly has that window of opportunity and yet has limited time to grab it. Now imagine that you would need to shell out funds for that opportunity, and when you finally decide to apply for a regular business loan, it would take weeks to finish and comply with all the necessary paperwork and then you’d have to wait for about another week up to 3 months and when you get an answer, it is a decisive denial of application.
So you’d have to start over again, but by this time your window of opportunity has dwindled, or maybe even closed. That’s what low doc business loans help with. Not only does it cut the amount of time needed for a loan application, but it also ensures the applicant time for a back up plan should the loan be denied.
Traditional Business Loan Requirements
With the mention of the usual requirements of documents, financial statements, and other financial documents that banks or financial institutions require, what exactly are these requirements?
Business loans require a lot of legal paperwork when applying for them. These requirements cover detailed accounting documents and financial statements, comprehensive business plans, and other financial documents. This means that for small businesses that are a one-man-team, most of them do not have time to spare, nor have the capability of actually producing these kinds of documents. Why?
Take a self-employed artist for example. They may not have the capacity to hire an accountant and would delegate the accounting portion of their small business to a few taps on the calculator app on their smartphones. But say for example that they want to apply for a business loan with a bank who wants to see a detailed report of their accounting for the last year or so of their business operations.
Small businesses most often don’t start their journeys with a well written business plan for their first years of business, much less a well detailed plan on expansion. To actually be able to expand the business, they would need a business loan in order to procure funds for this very reason. However, to get a business loan, almost every bank will require the very same documentation, and in order to get this, a business owner would need to take a week (sometimes two) off from their daily business routine to be able to put this together, and considering the amount of risks involved in not running a business even just for a few days, most business owners would not want to do this.
In the same manner, hiring an accountant to handle and put together a basic accounting model for any self-owned business in order to get a business loan is an unnecessary and added expense. In fact, this can be associated as another hidden fee that comes with the business loan.