By Bill Lyons | Published on March 5, 2024
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    While “no doc” is short for “no documentation,” there are actually no true no doc loans. Instead, they’re low doc loans that require minimal paperwork for loan approval. This approach caters to the needs of business owners who may face challenges in providing the extensive financial documentation required by traditional lenders, such as tax returns, profit and loss statements, and detailed business plans. 

    Keep reading to learn more about no doc business loans and the key aspects you need to know before considering this financing option. 

    KEY TAKEAWAYS

    • No doc business loans are designed for investors and entrepreneurs to minimize the documentation requirements associated with traditional investment loans. 
    • Despite the term “no doc,” these loans are low doc, requiring some documentation but streamlining the application process. 
    • Common no doc loans include business bank statement and asset-based loans. 
    • Pros of no doc business loans include a streamlined application process, quick access to funds, and flexibility in approval.

    What Is a No Doc Business Loan?

    A no doc business loan is a type of non-QM loan option designed for investors or entrepreneurs that minimizes the documentation requirements typically associated with traditional business loans. There is no such thing as a “no doc loan,” only a low doc loan — every loan will require at least some documentation. Ultimately, a business loan with no documentation doesn’t exist. However, no doc business loans are designed to minimize paperwork and provide more flexible lending requirements while streamlining the application process. 

    Similar to a no doc loan for home buyers, the primary feature of a no doc business loan is its relaxed documentation requirements, making it a potentially faster and more accessible option for certain borrowers. While traditional business loans often demand extensive documentation, such as tax returns, financial statements, and business plans, a no doc business loan typically requires less paperwork. Instead, no doc loans are more like bank statement loans and only require the borrower to submit bank statements. An asset-based loan can also be considered a type of no doc business loan. 

    This type of loan can be particularly appealing to entrepreneurs who may face challenges in providing the extensive documentation required by traditional lenders. 

    There are also no doc home equity loans and no doc business line of credit loans available for those who want to tap into their property’s equity and access funds for various investment needs. 

    How Does a No Doc Business Loan Work?

    A no doc loan is typically either a bank statement loan or asset-based loan, both of which work similarly. With a bank statement loan, the documentation focuses on bank statements. With these loans, lenders assess the health of the business by reviewing bank statements to analyze cash flow, incoming revenue, and overall financial stability. 

    A man in a blue button-down and tie types on a calculator while analyzing a document.

     

    Asset-based loans are similar to bank statement loans. However, these loans center around the borrower’s assets, which are converted to income to qualify for the loan. Lenders evaluate the value and liquidity of the assets to assess the overall risk involved. 

    For both types of no doc business loans, the process looks like this: 

    • Application: Borrowers initiate the process by submitting a loan application. The application often requires basic information about the business, its financial health, and the purpose of the loan. 
    • Limited documentation: Unlike traditional loans that demand extensive documentation, a no doc business loan requires minimal paperwork. Your lender will tell you the type of documentation they need to proceed with evaluating your application. 
    • Credit evaluation: Lenders typically place emphasis on the creditworthiness of the borrower for most loans. A strong credit history may play a significant role in the approval process and help you get a lower interest rate. 
    • Approval and terms: Upon reviewing the limited documentation and evaluating creditworthiness, lenders decide on loan approval and establish terms, including interest rates, repayment periods, and the total loan amount. 
    • Funding: once the borrower agrees to the terms, the funds are disbursed. Borrowers are responsible for repaying the loan according to the agreed-upon terms. 

    Pros and Cons of No Doc Business Loans

    No doc business loans are a compelling alternative for entrepreneurs seeking expedited access to capital for their next real estate project or business venture. However, like all loans, they come with their pros and cons. 

    The pros of no doc business loans include the following: 

    • Streamlined application process: The reduced documentation requirements result in a faster and more straightforward application process compared to traditional loans. 
    • Quick access to funds: With fewer documents to review, lenders can expedite the approval process, providing investors with quicker access to capital. 
    • Flexibility in approval: No doc loans may offer greater flexibility in approval, as they rely less on traditional documentation. 

    While no doc loans can be a great alternative for those struggling to get approval for traditional loans with limited documentation, they come with potential cons, such as: 

    • Higher interest rates: Due to the perceived risk associated with limited documentation, lenders may charge higher interest rates compared to traditional mortgages. 
    • Potential for overleveraging: The ease of obtaining funds with minimal documentation may pose a risk of overleveraging, where investors borrow more than they can reasonably handle. 
    • Varied terms and conditions: No doc business loans may come with less standardized terms, necessitating careful review to ensure the terms align with your business or investment goals. 

    Alternatives to No Doc Business Loans

    There are several alternatives to no doc business loans that investors can explore, each with its own set of requirements and considerations. Here are some types of non-QM and traditional loans investors can consider for financing: 

    • Bank statement loans: Bank statement loans are a type of no doc loan. Instead of traditional income documentation, lenders review the borrower’s personal and/or business bank statements to assess financial stability. This option is suitable for self-employed individuals and business owners who may have irregular income streams. There’s also a bank statement HELOAN option if you want to tap into your property’s equity and increase your cash flow for other investment purposes. 
    • Asset-based loans: Asset-based loans are another type of no doc business loan. Instead of focusing solely on bank statements, lenders assess the borrower’s assets and determine the loan amount based on the value of those assets. This option is useful for investors with valuable assets but potentially irregular income. 
    • DSCR loans: DSCR loans flip the focus from the borrower to the property, focusing solely on its income-generating potential rather than the borrower’s personal income. The lender assesses the property’s ability to generate sufficient income to cover the debt service, including the mortgage. These loans are ideal for commercial real estate investors and may offer higher loan amounts for properties with strong income potential. 

    Determine Whether a No Doc Business Loan Is Right for You

    As an investor or entrepreneur exploring financing options, the decision to opt for a no doc business loan depends on your specific circumstances and financial goals. The streamlined application process and reduced documentation requirements make these loans appealing, especially for those in need of quick access to capital for real estate projects. 

    Consulting with mortgage professionals like Griffin Funding can provide valuable insights and help you determine the most suitable financing solution for your investment endeavors. Download the Griffin Gold app today to assess your financial situation or apply for a loan online. 

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    Frequently Asked Questions

    Is it a good idea to take out a no doc business loan?

    Whether taking out a no doc business loan is a good idea depends on your specific financial situation, investment goals, and risk tolerance. These loans offer a streamlined application process and quicker access to capital, making them appealing to investors with irregular income or difficulty providing extensive documentation.  However, it’s crucial to weigh the advantages against the potential drawbacks, such as higher interest rates and varied terms. Carefully assess your needs and consider consulting with financial professionals to determine if a no doc business loan aligns with your financial strategy.

    What banks offer no doc business loans?

    Traditional banks have become more cautious about offering no doc business loans due to regulatory changes and a focus on risk management. Banks typically prefer thorough documentation to assess a borrower’s creditworthiness and financial stability.  Private lenders like Griffin Funding are more likely to offer no or low doc business loans. These lenders often specialize in providing more flexible and expedited financing solutions, catering to borrowers who may face challenges with traditional banks’ documentation requirements.

    Do no doc loans require a credit check?

    Yes, generally, no doc loans require a credit check. While these loans are known for reduced documentation requirements, lenders still assess the creditworthiness of borrowers to determine their eligibility and establish loan terms. A credit check provides lenders with insights into the borrower’s credit history, repayment behavior, and overall financial responsibility.  Compared to traditional loans, there’s typically more flexibility around minimum credit score requirements for certain types of non-QM loans, including some no doc loans. However, a credit check is still a standard practice to evaluate a borrower’s risk profile.  Individual lenders have varying criteria, so it’s important to check with the specific lender offering the no doc loan to understand their credit score requirements and other eligibility criteria.
    Bill Lyons

    Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 22 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list five times in its 10 years in business.