No doc commercial loans are provided by lenders when businesses need to make a proactive move.
From gaining working capital to investing in commercial property, there are guidelines that stipulate how companies can tap into this lending practice.
The very notion of the “no doc loan” though causes a great deal of angst and skepticism amongst owners and managers alike, and they have grounds to be cautious about the merits of this practice.
Here we will walk through some behaviours, attitudes and interpretations of this loan option that corporate-minded individuals should utilise in this industry.
Craft a Comprehensive Business Strategy
The idea of accessing no doc commercial loans is to leverage the value of property to utilise capital in the short-term. What must be established before any further step is taken is the need to understand exactly what that capital will be used for. Is it to build an extension, to develop a product, to bring aboard a new employee with a specialist skill or something else entirely? A comprehensive business strategy must be put in place to give clarity and purpose to this venture so the funds are used wisely and not frivolously.
Provide Income Details (If Possible)
The major facet that is evident with no doc commercial loans is that these deals can be offered without the need to delve into the financial merit of the individual or the organisation. Whilst this is a benefit and an avenue that bypasses the usual rules and regulations, it is still advantageous for clients to be as transparent as possible.
Should you be in a position to give clarity as to how you will be making the repayments based on a respectable or even sizeable income status, then the interest rate will likely drop. There might not be uniformity in this respect between lenders, but the common sense practice in these scenarios will see clients offered a more competitive rate if they can stump up the financial information relating to their income status.
Short-Term No Doc Loans Only
Given the unique status that derives from no doc commercial loans, it is imperative upon the recipient that they are not tied down to a long-term agreement. It is rare for these types of loans to venture far beyond the 12-month range, but some do span up to 5 years and as long as 25 in some rare circumstances.
However, the longer the loan is in play, the more reapproval procedures could be introduced, a situation that can see terms change and fees rise at a significant rate. To avoid this unwanted scenario, it is strongly advised that clients only welcome short-term deals in this regard.
Consider Alternative Loan Models
Loans are part and parcel of most business enterprises that need to access short-term capital to gain momentum. Yet the industry that sees no doc commercial loans offered to clientele continues to be a risky endeavour, an option that does not need to be embraced in a majority of circumstances. There are alternative models that will be open to clients by lenders, from a letter of credit to a collateral free loan, a bank guarantee, lease finance, term loan or others that are specified to an asset outside of property.
Review Business Management Practices
If a business finds itself in a position of legitimately considering no doc commercial loans, that could be the result of poor practice on the part of management. Being in a position where financial information cannot be provided where interest rates are high is not a scenario that speaks to long-term viable health of a brand. Review positions and assess the decision making process of the company before proceeding forth with this potential loan.
Conclusion
The lack of regulation and failure of oversight from institutions who issue no doc commercial loans makes this practice a hazard for business entities. Although it does not need to be viewed as a last resort, it should be one of the last options on the table when other avenues have been exhausted.
