Low-doc business loans: what lenders actually ask for
By Outpace Finance · Published
Plenty of sound businesses cannot produce a recent set of financial statements on demand. The accountant lodges once a year, the last return reflects a quieter year than the one you are having, or the business has grown faster than the paperwork. Low-doc lending exists for exactly this. The name undersells what it is: lenders still verify income, they just accept different evidence of it.
What 'low-doc' means in business lending
A full-doc application proves income with two years of financial statements and tax returns. A low-doc application proves it with something more current: bank statements, BAS, or a signed declaration from your accountant.
Credit for business purposes generally sits outside the consumer credit rules that govern home loans and personal loans. That gives lenders more room to decide what evidence they will accept, and is why a range of low-doc options exists for businesses that would not exist for a household. It also means the business-purpose declaration you sign is a real document. The funds must genuinely be for the business.
'No-doc' lending, where nothing at all is verified, has all but disappeared. Treat anyone offering it with suspicion.
Bank-statement lending, for smaller amounts
For an unsecured business loan under roughly $150,000, many lenders make the decision from your business bank statements and nothing else. They are reading the same things an accountant would look for in a profit and loss statement, straight from the source:
- Average monthly deposits, and whether they are steady, growing or seasonal
- Dishonours and days spent overdrawn
- Existing loan repayments already coming out of the account
- Regular large outgoings, such as ATO instalments or payments to other lenders
- Whether business takings are kept separate from personal spending
Low-doc loans secured by property
For larger amounts, a low-doc secured business loan against residential or commercial property is the usual route. Instead of tax returns, the lender typically asks for some combination of recent BAS, business bank statements and a declaration from your accountant confirming the business's income.
The trade-off is the loan-to-value ratio. Because the lender has less information, it lends a smaller share of the property's value than it would on a full-doc loan, and the exact cap varies between lenders and property types. If you have plenty of equity that rarely matters. If you are close to the limit, it can decide the deal.
Asset finance often needs very little
When the thing you are buying secures the loan, many lenders ask for remarkably little paperwork, particularly for established businesses buying mainstream assets. Equipment and asset finance and business car loans are frequently approved on an ABN and GST history, a tax invoice and a short application, without any financials at all, up to amounts that vary by lender and by how long you have been trading.
What lenders usually want to see
Requirements differ, but a typical low-doc application asks for some of the following. Having them ready before you apply is the quickest way to an answer.
- An ABN, usually held for at least 12 months, and GST registration
- Six to twelve months of business bank statements
- Your most recent BAS, often the last two to four quarters
- An accountant's letter or declaration of income, for secured loans
- Details of any existing business debt and its repayments
- An ATO statement, if you are carrying tax debt or on a payment plan
What it costs, and when full-doc is worth the wait
Low-doc loans are priced above full-doc loans. The lender is taking on more uncertainty, and the rate and fees reflect it. That premium is often worth paying when speed matters, or when your last tax return understates what the business now earns.
It is worth waiting when the amount is large, the term is long and your financials are only weeks away. A small difference in rate over five years can add up to more than the cost of getting the accounts finished. A broker can show you both and let you choose with real numbers.
Mistakes that sink low-doc applications
Most declined low-doc applications fail on something that was visible in the bank statements before anyone applied:
- Running business takings through a personal account, so the lender cannot see them
- Recent dishonours or a run of days overdrawn
- Several short-term loans already being repaid from the same account
- Income declared to the lender that does not line up with what was declared on the BAS
The short version
If your financials are not ready, you can still borrow. Bring clean bank statements, current BAS and your ABN details, and expect to pay a little more for the convenience. To see which low-doc options fit your business, start an application. It takes minutes and needs no documents to begin.
General information only. It does not take your circumstances into account and is not financial, credit or tax advice. Lender policies and ATO rules change; talk to your accountant about the tax position of your business.