Choosing low doc loans can be hugely important for several reasons. When you don’t have the financial documents to back your application, a traditional loan can be out of reach. It’s frustrating because you have the means (and ability) to repay the loan, but lenders just aren’t willing to take the risk. The reality is that you have to search for alternatives, like low documentation loans. These are great options to consider and while some might have higher interest rates, they are fixed. It’s a great option. So, what factors could prevent you from getting a small business loan?
You Have Bad Credit History
Whether you’re looking for a low doc loan or a standard bank loan, poor credit will spoil everything. Let’s say five years ago you took out three loans and defaulted on each on them. This will count against you because it’s there on your credit report. This is the number one way to get your loan application rejected. So, if you do have bad credit, you need to take steps to repair it (by paying off old debts). Click here to read more about How to Get a Low Doc Loan for Your Property?
Applying for Several Loans at Once
When you’re looking for a small business loan, you can be tempted to apply for several loans at once in hopes of one of them working out. Unfortunately, lenders do not want to see this because it screams of desperation. Every time you take out a loan application (even if it’s rejected), it goes down on your credit report. It’s a red flag and something lenders don’t want to see. Even with low doc loans, it can play a part in rejection. So, stick to one loan application at a time.
No Business Plan
Small business loans can play a crucial part in your company, unfortunately, lenders will reject your application without a solid business plan. Having no or a poor business plan can be a disaster because it sends a red flag to the lender. That is why more people look to a low doc loan to solve the problem. Of course, a lack of a business plan is just one reason why your application can be rejected.
Cash Flow Is a Problem
Businesses can be hugely successful, but that doesn’t guarantee an unlimited supply of cash. When cash flow is limited, that can be a red flag for many lenders. Some might believe you can’t repay the loan and will reject the application. That’s why low doc loans have become hugely popular today. With low documentation loans, you don’t have to prove income and that’s great when cash flow is limited.
Disorganisation Can Lead to Rejection
When you’re looking for a small business loan, there are several factors that lenders take into consideration. One of the biggest concerns is you are disorganised. This might not seem to be such an issue to you; however, lenders can be wary. Good organisation can reduce rejected applications. While you don’t need a lot of documentation for a low doc loan, you still need to be clear-minded. Visit https://treasury.gov.au/coronavirus/sme-recovery-loan-scheme to read about SME Recovery Loan Scheme.
No Viable Way to Repay the Loan
Let’s say your business has a monthly revenue of $2,500. After other expenses, you are left with $1,750. You pay your two employees with that money and are left with less than $250. It can be a red flag for many lenders right away because there seems to be a lack of funds available. Lenders will fear you can’t pay the loan back and will reject the application. Fortunately, with low doc loans, you get smaller monthly payment options. This makes it more viable for you to borrow money.
Lies on the Loan Application
While you probably wouldn’t lie on a loan application, it does happen on occasion. This, however, is the one number way to get your loan application rejected. Lenders conduct thorough checks on borrowers and if they find something suspicious, it could lead to rejection. So, you must ensure you are truthful on the application. It doesn’t matter if you want a low doc loan, car loan, or any other type of loan, you must be truthful on the application.
Asking for More than You Can Afford
A lot of people need business loans to upgrade equipment or help with cash flow, among others. Unfortunately, you can be tempted to go above what you need. Sometimes, you just aren’t sure how much you need to borrow. You might also think if you’re borrowing money, why not take out a little extra? This is the wrong stance to take because if you borrow more than you can logically afford to repay, the application will be rejected. Even with low doc loans, borrowing more money than you need is crazy.
Get the Best Small Business Low Doc Loan
Small business loans are necessary and while you might not want to borrow money, it’s the only viable solution. Fortunately, there are more loan options available than ever before. The tricky part, however, is getting your application approved. You must be careful of how you approach the application process and what you’re asking to borrow, otherwise, rejection is likely. Find the best small business low doc loans for you today.