The economic climate remains tough, so it’s no wonder there’s a growing interest in low doc business loans. It’s been a challenging few years for Australian businesses. While 406,365 new businesses started up during the 2022/2023 Financial Year, 386,392 businesses also ceased trading. Compared to the previous year, that’s fewer businesses starting and more businesses closing.
What exactly are low doc commercial loans? Who can benefit from them? And what are the requirements when applying for a low doc business loan?
What are Low Doc Business Loans?
A low doc commercial loan is similar to a traditional business loan in that it provides finance solutions for businesses. The key difference is the application process. While a standard loan application will ask for extensive documentation (including detailed financial statements, business plans, tax returns, etc.), a low doc loan offers a streamlined application process with minimal paperwork.
- Some of the advantages of commercial low doc loans include:
- Limited paperwork
- A simplified process for applications
- Great borrowing flexibility
Who Benefits from Low Doc Commercial Loans?
Whilst low doc business loans may suit a variety of applicants, they’re tailored towards businesses under the following circumstances
- Not able to provide full financial documentation, or insufficient “on paper” income
- New or start up businesses with limited financial history
- Business with seasonal or fluctuating incomes
- Businesses who have had an increase in profit, which isn’t reflected on current/previous financial statements
Understanding the Requirements of Commercial Low Doc Loans
What are the requirements for business owners seeking a low doc business loan? First of all, you will need some documentation to support your loan application. This generally includes Identification Documents, an Asset and Liability Statement and a self declaration confirming the details you’ve provided are accurate.
When preparing these documents, accuracy is crucial to achieving a successful outcome. The lender will carefully scrutinise the information you’re providing to ensure the viability of your business. Any discrepancies can be seen as a red flag and could lead to your application being rejected. To prevent this from happening, make sure you follow these 5 simple suggestions:
#1 Organise Your Financial Records
Make sure everything is up to date and filed for easy access.
#2 Seek Professional Help
Ask your accountant or financial advisor to help you prepare accurate financial statements. It’s also a good idea to consult with a broker who specialises in business loans to help you find the easiest solution based on the documentation available.
#3 Double-Check Everything
Review all documents thoroughly for accuracy and completeness before submitting your application.
#4 Be Transparent
Transparency builds trust, so make sure you’re clear and honest in your application.
#5 Anticipate Lender Requirements
Find out the specific requirements of your preferred lender to streamline the application process and avoid delays.
Common Myths about Low Doc & No Doc Business Loans
There are a few common misconceptions about low doc loans in Australia. Some people think they’re:
- Only for High-Risk Borrowers: Low doc loans are suitable for a range of business owners seeking financial flexibility. This includes self-employed sole traders and businesses with fluctuating income.
- More Expensive: Low doc loans are usually offered at the same terms as full doc loans. Lenders offer low doc loans to clients who meet their eligibility criteria.
- Tough Eligibility Criteria: With relaxed documentation requirements, low doc loans can be easier to apply for compared to traditional business finance.
- Same as No Doc Business Loans: Unlike no doc business loans, low doc loans will require some financial documents to support your application. With recent regulatory changes, no doc loans are becoming less common in Australia.
Talk to Muscle Money About Low Doc Business Loans
Low doc business loans can be the ideal financial solution for small business owners. But how can you ensure you’re getting the right loan to suit your business? The key is to start with the right advice.
At Muscle Money, our team of experienced business loan brokers can answer all your questions and find you the most competitive loan product for your situation. To get started, contact the team at Muscle Money today.
Caleb Waye-Harris, Senior Manager of Asset Finance at Muscle Money, has almost 15 years of relevant experience in the finance industry. His extensive background includes project management, consumer and commercial lending and asset-based lending.
