What are low doc business loans? A small business guide

Running a small business comes with plenty of challenges, and securing financing is often one of the biggest. That’s where low doc business loans come in. Designed to give businesses access to funding without the need for detailed financial statements, low doc loans can be an incredibly valuable option when time is short or paperwork is limited. In this guide, we’ll cover what they are and when they might be right for you—let's dive in.

What is a low doc business loan?

Low-doc, or low-document, loans allow businesses to access funding with reduced documentation requirements. They're typically used by sole traders, businesses with cash flow issues, and self-employed people for a range of purposes, from covering operational costs to funding equipment to investing in growth initiatives.

Usually, low doc applicants only need to provide lenders with their ABN, GST registration (if their turnover exceeds $75,000 per year [1]), proof of Australian citizenship or permanent residency, and proof that they'll be able to make their repayments (for instance, a letter from their accountant, business activity statements, or bank statements).

Pros and cons of low doc loans

A low doc loan may not be the right fit for every company, so it's important to carefully consider the benefits as well as the drawbacks:

The benefits

• Approval times are typically quicker. Since there's less paperwork for the lender to assess, loan processing times are significantly reduced—a big perk if you need to cover an unexpected expense or want to jump on a time-sensitive opportunity.
• Good option for business owners with unconventional income sources, bad credit, or no credit history. Borrowers in these circumstances are often denied traditional loans, but they still need capital to grow, which is where a low doc alternative can come in handy.
• Flexible use of funds. Low doc finance doesn't usually come with strict usage restrictions, so you have broad freedom to use it across your business, whether that's for buying stock, hiring casual staff, funding a marketing campaign, or upgrading equipment.

The drawbacks

• Interest rates tend to be higher. Since lenders have access to a limited set of your financial documents, they tend to charge higher interest rates as a way to offset the increased risk.
• Lower borrowing amounts. Without solid financials or a long business track record, lenders are less inclined to approve large loan amounts. So if you're hoping to fund a large project, low doc may not be the right choice for you.
• Shorter term loans. Lenders may limit the duration of your loan, sometimes just to a few months. As a result, you may have to repay it in a shorter period, which can put pressure on your cash flow.

When to consider a low doc loan

There are situations where a low doc loan can be particularly useful, helping you access the funds you need when traditional financing isn’t an option. It may be suitable if:

• You're self-employed or a sole trader
• You're a new business with less than 1-2 years of trading history
• Your business has irregular or seasonal income
• You have bad credit or a limited credit history
• You need funds urgently
• You don't have full financial statements but can show alternative evidence

Tips for a successful low doc loan application

If you're ready to apply for low doc finance, here's what you can do to make sure you have the best shot at approval:

• Get your paperwork together ahead of time. Even though it's minimal, it still needs to be accurate and up-to-date.
• Don’t overstate income or understate expenses. Doing so may make your business look better on paper, but if it doesn't reflect reality, it will backfire. Be realistic and get a loan you can manage based on your current financial situation.
• Strengthen your credit profile where possible. Even though low doc loans are designed for borrowers with limited or poor credit history, having a stronger credit profile can still up your approval chances and potentially give you access to better rates or terms.
• Shop around and compare lenders. There are plenty of lender options on the market, and not all will be suitable for your business goals. A Valiant lending expert can take on the heavy lifting for you, saving you time while finding a low doc finance solution that makes sense for your business.

FAQs

Do low doc loans have higher interest rates?

Low doc loans may have higher interest rates than full doc loans, since there's a higher risk level. Having said that, interest rates will vary depending on factors like the lender and loan amount.

What's the difference between low doc and no doc loans?

While low doc loans allow you to access funding with minimal documentation requirements, no doc loans don't require any paperwork at all. No doc financing may be a good option for businesses with no financial records, but typically comes with higher interest rates.

What are some alternatives to low doc business loans?

If a low doc loan isn’t the right fit, you might consider alternatives like full-doc business loans (if you can provide complete financials), equipment finance (for acquiring assets), invoice finance (to access cash from unpaid invoices), or a business line of credit (for flexible cash flow management).

If you're not sure which type of business finance is right for you, we can help. Our platform compares loans from over 90 lenders to connect you with ones that work with your unique needs. We manage the paperwork, handle the application, and help get your funding sorted—so you can stay focused on growing your business. Reach out today.

References:

1. ‍https://business.gov.au/registrations/register-for-taxes/register-for-goods-and-services-tax-gst