A Brief Guide To Traditional & No-doc Business Loans

If you are a small business owner, you might have faced situations where obtaining funds to keep your operations rolling became necessary. There are two popular funding options available - traditional business loans and no-doc business loans. However, before applying for any of them, it is crucial to have a sound understanding of both - the pros and cons, the major differences between them, and other nitty-gritty details. 

Here's a detailed analysis to help you make a well-informed decision and choose the most suitable business loans in Brisbane for your business:

Traditional Business Loans: What Are They?

If you want to apply for a traditional business loan, you must have a good credit history, in addition to all the necessary documents - 

• financial statements
• an elaborate business plan
• tax returns
• collateral against which you'll get the loan

One of the major advantages of traditional business loans in Perth is that they offer relatively low interest rates, and you can easily avail a high amount if needed. Plus, they can also help you further solidify your credit history.

No-Doc Business Loans: What Are They?

Popularly referred to as stated income loans as well, no-doc business loans do not require a lot of documents for processing, hence the name. Compared to their traditional counterparts, they take less time to be granted, and the procedure is also quite simple.

However, no-doc business loans have two major drawbacks - 

• You cannot apply for a high amount
• The interest rates are very high compared to traditional loans

Besides that, some lenders even ask for a collateral or down payment in exchange for the loan amount. 

How to Decide Between The Two?

As a small business owner, choosing between traditional business loans and no-doc loans can be a difficult task. While the former requires multiple documents and other essentials, it has comparatively lower interest rates than the latter and can even help improve your credit history. The choice you make would ultimately boil down to your requisites, including the amount you want to borrow, the urgency for it, and how much interest you're willing to pay for it.

Therefore, weigh the pros and cons of each loan type, consider the financial needs of your business, consult with a finance expert and review your ability to pay the loan back, before making a final decision.