Is a No Doc Business Line of Credit Real?
If it sounds too good to be true, it probably is. That quote is especially true when it comes to lenders offering no doc business lines of credit. I have 25 years of experience as a small business owner building 6 companies and I’ve acquired first-hand experience dealing with banks, factors, brokers, and alternative lenders. In this article, I will explain what you need to know about business credit so you are better informed to make the best decision for you and your business.
What is a No Doc Business Line of Credit?
If a company says that they will provide you with a business loan or a business line of credit, no documents required, it is a sham. Even if it was true, and it isn’t, you will incur astronomical fees and high-interest rates from these lenders, making it difficult to ever pay off the loan. There are, however, good lenders out that are willing to give you an offer without seeing any business documents.
Alternative Lenders Offering Unsecured Business Line of Credit No Docs
Alternative lenders, unlike commercial banks, are private companies that are not lending using depositor or government funds. Therefore, alternative lenders can provide business loans to more businesses in an expeditious manner
There are a number of legitimate alternative business lenders that will provide you an OFFER LETTER without you having to send in any documentation. However, after you have filled out an online loan application, all of these lenders will want to verify your cash flow by reviewing bank statements, bank account transactions, tax returns, and other financial statements. In addition, all business financing companies will run a credit report to determine your personal credit score.
A commercial bank line of credit may prove to be a better option if you can wait at least 90 or more business days to be approved, and you have collateral, a personal guarantee, and a FICO credit score 680 or higher.
If a small business is unable to meet the criteria of a commercial bank, they are often forced to solicit the services of a cash advance alternative lender. It isn’t necessarily a bad alternative as long as you carefully review your contract and have an understanding of its terms.
There are two types of alternative lenders. One provides cash advances which are a set amount of money with a guaranteed payment schedule. This type of lender can be costly. The second provides business lines of credit which allows you to use the funds for working capital when needed, and pay the balance off when you are ready.
Financing Solutions No Doc Small Business Line of Credit Application Process
Financing Solutions is a reputable alternative lender that has been in business since 2012. We come from Main Street, not Wall Street, so we actually understand the requirements of operating a small business. We are rated 5 stars and A+ by the Better Business Bureau and we offer an unsecured business line of credit. We approve clients, up to a $100,000 credit limit, with the approval amount based on cash flow and gross profit margin.
Our online application only takes two minutes to complete. There is no documentation required to receive an offer letter. Our approval decision is based on the answers from your application. A credit check is run only if you decide to move forward by signing the no-obligation offer letter.
In order to be approved for our business credit line program, your personal FICO credit score needs to be 650 or higher, and your business needs to have revenue of at least $400,000 per year.
Our no doc unsecured business lines of credit do not require collateral or personal guarantees. Our decision to approve you is based on us being able to determine that your business has the ability to pay back the credit line if used.
Our Credit line program costs nothing to set up, nothing when not being used, and is inexpensive when needed.
What Will A Bank Look For to Approve Business Funding?
Local and commercial banks are the hardest approval to receive for any type of small business loans because they require any business loan to be secure. Most new businesses have a misconception that if you go to the bank and present the bank officer with a well-executed business plan that they will offer your business financing. Even existing business owners that have never applied to a bank for funding, believe that if they are generating good cash flow that a bank will approve a business loan. Unfortunately, those loans are nonexistent.
Banks are the most risk-averse lenders and they typically only approve 20% of their applications. All banks require collateral. Collateral is sellable assets that you own such as real estate, stocks, bonds, etc. that the bank can take possession of in the event of default.
Banks will of course look at your personal and business credit history. Depending on how the economy is doing will dictate how high a credit score a bank will want. At a minimum in a normal economy, you can expect a bank to want a FICO credit score of 680 or higher.
Banks will also want you to move all your business checking and saving accounts to their bank. In order to pay back the loan or line of credit, there will be a monthly payment that will be drawn directly from your checking account.
SBA Loans for Small Businesses
The SBA (Small Business Administration) is a government-funded program where the government works with approved banks for business funding to make a loan easier for businesses to obtain. The government will guarantee a portion of the bank’s debt if the event of default.
On average, the most important SBA loan requirements are that you have the ability to demonstrate excellent personal credit, strong financials, and provide some collateral. Because there is still a risk for the bank that you are working with, they normally add their own criteria to the approval process.
The SBA loan process is notoriously long and tedious regardless of whether it is for a short-term loan or a capital loan. If you can deal with the hassles then the rates and conditions the SBA offers will be worthwhile to help you build your business.
Is Invoice Factoring an Option for Your Business
Factoring is a very old form of secure business financing. A Factoring company will contract with your business to advance funds – up to 90% of the face value of your invoices. It will allow your business to have access to capital easily.
The pros of Factoring are that they do not require personal collateral and their credit approval standards might be lower than a bank.
The cons are that your clients are going to be contacted by the Factor, and your payments will now go directly to the Factor. In addition, not all of your invoices will be approved for Factoring since the Factor will actually be running a credit report on each of your clients. Lastly, Factoring can be very expensive. Once everything is added up, the APR interest rate can be as high as 30%. It is also very hard to move away from using a Factor due to state filings called UCC’s which place the Factor in a priority position until all invoices are collected.
Funding Your Business Through Credit Card Cash Advances
In the past, it was easier for a company to have a number of business credit cards. Many movies have portrayed business owners in possession of several credit cards. In a tight situation, he/she would go to the bank and get a cash advance against all of them. Nowadays the approved credit line on a credit card for a cash advance is very small.
Credit card companies are now well aware of that method, so when you apply for more than one credit card, they will notify all the credit bureaus about your application.
Your personal credit score is very important to your business in so many ways. Keep in mind that when you apply to several credit card companies at once, your personal credit score will go down.
Unless your company has $10 million in yearly revenue, it will not be possible to obtain a credit card without a personal guarantee.
Does Your Business Really Need That Business Loan?
Entrepreneurs are notoriously optimistic. It is why you have the wherewithal to make the impossible, possible. Prior to getting new financing, you should ask yourself and your trusted advisors “do I really need this loan”? An important first step is to check and see if the loan will improve your business model, and assist in increasing your cash flow.
If you believe that you already have the right business model and that the added capital will help you become stronger to reach another level, then a business loan or business line of credit can be the right decision. In fact, it is very hard to find a business that has not used some type of financing to get to the next level.
25 years ago I started my first business with $40,000 of my own money. I had no other collateral. As the company grew I had to move to a Factor to finance my business. (There were no alternative lenders back then or I would have used them). As my business continued to grow, and I had more personal and business collateral, I was able to obtain a bank loan and a business line of credit.
I learned the hard way that having a business line of credit as backup plan is always a smart plan. Financing Solutions Business Line of Credit Program costs nothing until used making it a no brainer at least set that up for your business, just in case.
As your business grows, you’ll find that you will use a variety of business financing and each one will assist you in reaching a new level.