Written by A low doc business loan (short for “low documentation”) is a type of loan designed for businesses that don’t have the extensive financial records typically required for traditional business loans. Unlike standard business loans, which often require two years of tax returns and business financials, low doc loans are structured with more flexible documentation requirements.
Low doc loans are popular among certain groups, such as:
- Startups that may not yet have a complete financial track record
- Self-employed individuals who may not need detailed records for tax or other reporting purposes
- Businesses seeking quick access to funds and wanting to avoid lengthy application processes
- Small business owners with fluctuating cash flow who might not have steady income records to show
Because low doc loans don’t require as much paperwork, they’re generally easier to apply for and have faster approval times. However, these loans may come with slightly higher interest rates compared to standard “full doc” loans due to the higher level of risk lenders face for lending to businesses with limited documentation.
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What do I need to apply for a low doc business loan?
When applying for a low doc business loan, you’ll need to show alternative proof of income in place of detailed financial records. Requirements vary, but you'll commonly be asked to provide:
- Business Activity Statements (BAS)
- Business bank statements
- An accountant’s letter confirming projected earnings
You’ll also typically need to have an ABN registered in your name that has been active for at least six months (or more, depending on the lender), and to be registered for GST.
This is on top of standard eligibility requirements for a business loan, namely:
- Being at least 18 years old
- Being an Australian citizen, permanent resident or eligible visa holder
- Meeting your lender’s minimum personal and business credit score requirements
Can I get a business loan with no documentation?
If you don’t have any financial documentation to prove your business activity, a no doc loan may be a solution. These loans are generally only offered by specialist lenders, and you will still be required to provide some proof of your business’s viability. You may be required to:
- Self-declare your income to give lenders an idea of your earnings
- Show recent bank statements to demonstrate business activity
- Provide business registration details and valid identification
- Outline assets and liabilities if requested, especially for larger loans
- Offer collateral if the loan is secured, with proof of ownership or an appraisal
Since these loans carry higher risk for lenders, they often come with higher interest rates, shorter repayment terms, and lower borrowing limits.
The pros and cons of low doc business loans
How do I compare different low doc business loans?
Interest rates and fees
Probably the first difference people look at is the fees and interest rates, which most directly affect what a low doc loan will cost your business. A comparison rate is always crucial to look above a basic interest rate, as it accounts for many of the fees and gives you a better snapshot of the overall cost.
Remember, though, that low doc loans have higher interest than full doc loans, so it’s not always productive to directly compare the two.
Loan amounts
Different lenders can offer different amounts. One lender might be technically able to offer unsecured loans from $10,000 to $200,000, but might only offer you a maximum of $90,000 (based on the specifics of your business such as its cashflow and period in operation). If you need more (or less) than those amounts, you might need to look elsewhere.
Another might offer between $5,000 and $120,000, making them potentially a better choice. You should be careful, though – you won’t know the lender’s final maximum offer until you’ve applied and it’s bad for your credit to apply for lots of loans in a short time.
Required documentation
As mentioned, required documentation varies between lenders. If your business has only had an active ABN for 18 months and isn’t registered for GST, that might take certain lenders off the table, but keep others in the frame.
Repayment flexibility
Lenders vary in the flexibility they offer for loan terms and repayment schedules. Some lenders might have the choice of weekly, fortnightly, or monthly payments. You’ll likely have the option to repay your loan over a term of around one to three years if they’re unsecured or up to ten if secured.
Having a lender who can adjust the length of your loan and the frequency of repayments to work with your business’ finances can be a big advantage.
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More of your questions about low doc business loans
This is an official legal document you use to declare your business’ income when you don’t have the paperwork to demonstrate it. It’s a little like signing an affidavit – you're officially, formally and legally stating what your business has earned in a given period, rather than providing evidence.
It’s no worse than any other loan – the application requires a hard credit check which causes a slight dip in your credit score, but this is the same with any loan application. The fact it’s a low doc loan makes no difference to your business’ credit.
Not really – modern business loans have a lot of flexibility in terms of what the money can be used for, so a low doc loan could be used for property maintenance, equipment upgrades, set-up for special events or conferences, wages in a period of temporary shortfall or buying a business vehicle.
As long as you’re declaring the purpose of the loan in your application, and it’s specifically for business purposes, it’s your choice what you do with the money.
Yes – although you can’t simply switch a low doc loan over to full doc, most commercial loans can be refinanced if your situation changes, and low-doc loans are no different. You’ll want to check the specifics of this with your lender though, as some lenders charge high fees for this – which can lessen the benefit of switching.
Yes – some commercial lenders offer low doc loans to businesses with bad credit. They’ll come with higher fees than a standard low doc loan, so you should bear that in mind when assessing your options.
A personal loan can be a viable alternative for business financing if you’re struggling to meet the documentation requirements of a standard business loan. Personal loans generally focus on your individual financial standing, so factors like your personal credit score, income and existing debts will play a larger role in your application.
These loans typically offer smaller amounts than some business loans, but they still provide a practical option for funding business needs without extensive business financials. However, it’s important to compare terms and see if the loan structure aligns with your business goals.
