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If you’ve ever applied for business financing and been denied, you may assume there are no other options. Perhaps you were denied because your business hasn’t been in business for the lender’s required period of time. Or, maybe you needed money fast and didn’t have time to gather the required statements, tax returns, and other financial documents.Whatever the reason, you may still need additional financing for your business.One last resource is a type of financing called 'no doc' business line of credit (aka ‘no doc’ BLOC)—a form of business lending.
What Is a ‘No Doc’ Business Line of Credit?Some specialized lenders offer unsecured business lending that require zero documentation or have fewer application requirements than conventional loans. Usually, 'no doc' business lines of credit don’t require collateral. Lack of collateral can sometimes hold some business owners back from being approved for financing from traditional lenders.An unsecured business line of credit could help certain business owners get financing fast—even if you don’t currently qualify for other business lending options.
Secured vs. Unsecured Lines of CreditUnsecured lines of credit, unlike secured lines, do not require collateral to guarantee the funds. For secured lending, collateral might take the form of an asset—like real estate or equipment. With secured financing, lenders can seize assets to cover what’s owed when a borrower defaults. If you’re not sure how to secure a business line of credit or loan but you don’t own any assets a lender would consider valuable, a no doc BLOC may be one option. Typically, a BLOC is unsecured. And, unsecured lending products do not generally require collateral.
Types of 'No Doc' Business Lines of CreditThere are a few versions of the 'no doc' BLOC. Some lenders offer lines of credit you can pull from when you need cash, while others offer you a fixed sum all at once.Some of these ‘no doc' financial products don’t require any documentation. You fill out an application online. Others ask you simply to state your income or demonstrate your gross sales. Depending on the lender, you may or may not need to provide bank statements or profit and loss reports. Types of short-term 'no doc' business lines of credits or short-term business financing might include:And then, there are also ‘low doc’ loans. A low doc business loan generally requires less paperwork (i.e., bank statements or merchant statements) during the application process.
Pros and Cons of 'No Doc' BLOCsWhen it comes to unsecured business lines of credit, 'no doc' options have benefits and drawbacks you might want to weigh:
ProsIf you aren’t able to qualify for other financing options, a 'no doc' business line of credit could help business owners to access funds. Typically, approved 'no doc' BLOC applicants can access their borrowed funds quickly. The application process for conventional loans, by contrast, can take weeks. 'no doc' lines of credit, in some cases, can be processed in as little as one day.And then, of course, there’s the potential upshot of not having to compile detailed documentation of your finances before applying for this sort of financing.
Cons'No doc' lines of credit are more risky for the lenders, since the lenders have limited evidence (aka documentation) of your likelihood to repay or to afford the financing. So, usually, these options are more expensive than any other type of business loans or lines of credit for borrowers. Consequently, the rate you pay for a 'no doc' line of credit could be significantly higher than with other financing options. So, business owners may want to evaluate how much they need the financing before pursuing a 'no doc' BLOC. In addition to less competitive interest rates, 'no doc' lenders may also charge additional fees that could increase the overall cost of this type of business financing.BLOCs may also have shorter repayment periods, too. An SBA loan, for example, would have a repayment period of 10 or 25 years. But, a business line of credit may need to be paid back in months or just a few years—so, it may not be the preferred financing option if your business is seeking a longer repayment term.
Lenders Offering 'No Doc' Business Lines of CreditThere are a handful of online lenders who specialize in 'no doc' business lines of credit. Here’s a sampling of lenders who offer this sort of financing—based on searches of the internet:
Advance Point CapitalAdvance Point Capital offers several types of financing for small businesses, including unsecured business lines of credit. The one-page application takes just minutes to fill out, and requires minimal financial paperwork (they require only bank statements, and focus on gross sales). You can be approved typically within just 4-6 hours and you can get funds the same day.
- Amount: up to $100k
- Terms: 12 months
- Credit score: from poor to excellent
Sunwise CapitalAnother lender is Sunwise Capital. With approval times of 24-48 hours and funding in 2-5 weeks, it’s on the slower end for application processing. Some applicants may qualify for a 0% introductory interest rate for anywhere from 6 to 24 months—after which the average blended interest rate is 12.99% to 15.99%. While Sunwise Capital’s ‘no doc’ BLOC comes with some specific requirements, there are other financing options—if your credit isn’t great.
- Amount: $20k to $200k
- Terms: 12 months
- Credit score: 700 FICO® Score (or better)
FundboxFundbox also offers 'no doc' business lines of credit. Rather than asking you to submit bank statements or financial records, you will connect your accounting software or bank account as part of the application process so the company can confirm your revenue and determine eligibility. Funds are available, if approved, the next business day.
- Amount: $100 to $100k
- Terms: 12 or 24 weeks
- Credit score: 500 minimum
OnDeckAnother potential lender is OnDeck. You can fill out the short application online or over the phone. And, approved applicants can get BLOC funds deposited into their account the next business day.
- Amount: $6k to $100k
- Terms: 12 months
- Credit score: 600 personal FICO® Score
Business Advance FundingBusiness Advance Funding may be one other option for unsecured business line of credit, if you’re seeking a larger amount of money. It has a fast online application and requires minimal documentation requirements—including no open bankruptcies, $5,000/month in gross sales, and being in business for at least 6 months . Approved funds are deposited the next business day.
- Amount: $5k to $500k
- Terms: 4-12 months
- Credit score: from poor to excellent
Are 'No Doc' Business Lines of Credit a Good Idea?The question remains: are 'no doc' BLOCs a wise financial decision?Here’s the thing: there are less costly financing options out there—as long as you qualify in terms of annual revenue, credit score, or time in business. If you have the luxury of waiting a few weeks (or even months) to be approved and then receive your funds, you may pay a lot less in interest and fees with a more conventional business loan or line of credit. But, some business owners need cash now or don’t have other financing options. In that case, some business owners may opt to research a 'no doc' business line of credit. But, it’s key to know what sort of lending you’re dealing with. The amount you pay in interest will be higher with no doc options than with traditional loans. You might even find a business credit card with a low (or no) introductory APR that could cover the purchases you need.Or, you could wait to get funding, focus on building your credit so that you can try to qualify for more competitive rates later, and seek out more affordable financing options.
The TakeawayNo business owner wants to be caught without having the capital they need to run day-to-day operations or even to take advantage of emerging opportunities for growth. But, taking out a line of credit can be a big decision—as withdrawn funds aren’t free money.If you do decide to take out a BLOC, be sure you can afford to pay any withdrawals—especially if the repayment terms are limited to just a few months.
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About the Author
Susan Guillory is the President of Egg Marketing, a content marketing firm based in San Diego. She’s written several business books, and has been published on sites including Forbes, AllBusiness, and Cision. She enjoys writing about business and personal credit, financial strategies, loans, and credit cards. Follow her on Twitter @eggmarketing.