Low Doc Business Loans: Are They a Good Idea for Entrepreneurs?
If you are self-employed and want a home loan, then a low doc business loans application is what you are looking for. These types of loans are also known as alt doc loans or lite doc loans. Unlike other loans that are made for buying a home or improving it, you don’t have to present a lot of documents for this one.
So, if you own a business and you don’t have all the necessary documents for a standard loan, then check this article about the low doc business loans application. You might find something that might interest you in the long run.
What Is a Low Doc Business Loans Application?
If you request a home loan, you will need to provide the lender with a lot of documents, from personal info to financial history. That’s right; you have to present the financial history of your company from the past couple of months (last six months or more).
If you just started your company or you are self-employed and don’t have these documents, a standard loan may be out of your reach. However, you can make a low doc business loans application. These loans do not require pay slips, but you need to provide a self-signed income declaration form.
Is a Low Doc Business Loans Application Good for Me?
These loans are useful for contractors, freelancers, and people who don’t work regular jobs. They are specially designed for these kinds of individuals, who have a regular income and cannot prove it through financial statements, tax returns or pay slips.
You may also have to provide the lender with an accountant’s letter and bank statements, so always be up to date with the requirements. We recommend that you contact the lender first and ask about the necessary documents, then come back to make the request.
How Does the Lender Know that I Can Pay the Loan Back?
All you need to do is use a self-verification system and state in a document how much you make. While this method is more approachable than other methods of providing financial proof, it can be modified in a way that can benefit you. In the declaration document, you can state that you make a lot more than you really do. By doing so, you can get a lot more benefits from your loan, as long as you can pay them back.
For example: by stating that you earn more than you really do, you can get a bigger loan. But, if you cannot pay it back, you may end up doing yourself more harm in the long run. Not only will you be bankrupt, but you will also lose your house and other properties. It is a “bite off more than one can chew” thing and we highly recommend avoiding such actions.
What About My Credit Score?
The low doc business loans application requires a credit check-up. The lender will check your credit score so that he/she knows whether you can pay for your loan or not. He/she will use this information along with the self-signed income statement you provided to establish the best loan for you. The lender will also decide if you are actually eligible for a loan or not.
The Difference Between this Loan and the Standard Ones
With a low doc business loans application, you will get a lower maximum LVR, which means that you can borrow up to eighty percent or maybe even ninety percent of the whole value. The interest rates can be a bit higher than other loans like this one, but nothing outstanding. It is a bit higher for the lender to compensate for the increased risk that low doc loans present.
And the best thing about low doc business loans is that your company doesn’t have to produce financial reports or tax returns. Instead, you will need to provide an income declaration that confirms that you can afford the loan and you can pay it back.
What Documents Should I Present?
When you meet the lender, you should submit the Business Activity Statements, registered company name, and ABN, a self-verified income declaration, a letter from your accountant and previous bank statements. Of course, you might need to provide more or less than what we presented here, depending on the lender.
What We Think about Low Doc Business Loans Application
A low doc business loans application may be the best option you can find if you want to invest in a new home or renovate an old one. If you are self-employed and don’t have most of the documents that standard home loans require, then go for it. Also, check the market for the best deals before making the decision.
If you want to learn more about submitting a low doc business loans application and making the best out of it, please talk to a financial specialist. They will help you with valuable advice and examples for every type of financial service.