A little background on my business: I have been in business for about 4 years and generate $190K in annual profits. The one thing holding my small business back from growth is lack of capital. Been wondering if I should take out a loan to fund my small business' growth.
I have tried to contact a few lenders and the process seems riddled with paperwork. It seems extremely time consuming -- and time is the one asset I'd rather use completely in my business instead of running around for a loan.
Is there a way to get a low doc or no doc small business loan? If so, what is the process of getting such funding? Any help would be appreciated -- especially if you yourself have taken out a low doc loan in the past and can share your personal experience!
I've gotten several rounds of funding so hopefully I can provide you some insight...
First of all, you need to ask yourself a few questions before you get started with finding a lender:
1. What is the business goal you are trying to achieve with a loan? You mentioned it's for growth capital. I would go ahead and break it down on paper on what items in growth you'll use the money for. For example, digital marketing campaigns, hire a sales staff, etc.
2. What TYPE of loan are you looking to take out? There are quite a few different ones. There's obviously the standard small business loan. But then there's also line of credit, factoring, equipment financing, SBA loans, etc. Knowing the difference between them is important so you know exactly what you're getting into.
You also mentioned that you'd rather not spend too much time doing the paperwork for this (hence the low doc loan).
Based on your goals and time constraints, I would highly recommend that you speak to a full service lender like Clarify Capital, Headway, or Small Business Lending. That will save you both time and money. These kind of full service lenders walk you through the entire process to find the option that's best for you -- vs you contacting 50 different lenders on your own and sending paperwork to all of them to get approved.
The one I ended up going with was Clarify due to how hands-on they are (and thus freeing up your time to run your business).
Agree with @Rocco on first you need to understand what type of loan you want to get.
Assuming these are your requirements:
Your choices boil down to two key types of funding options:
That being said, you might still need the following (some loan companies will require less than this):
With regards to not spending too much time doing this, go with a good loan broker who do all this for you. Maybe someone else can chime in with recommendations for you.
Best of luck!
I wrote a piece a while back on how to get low doc small business loans. Here is the gist of how to get financing:
1. Understand who lends money and actually funds the low doc transactions.
There's commercial banks, fintech companies, and brokers who help you close the funding. They pretty much all have low doc options for a small business.
2. Understand the different types of loans that are available to you.
Low doc just means there are fewer document requirements. Many different types of loans fall into that category. There's SBA loans, equipment financing, short-term loans (I think this is what you are asking about here), personal loans for business use.
3. Before you apply for a loan, get your finances in order.
Can't place enough emphasis on this. Even if you think your financial related stuff is in order, revisit everything prior to applying. If that is too much work, a loan broker like Clarify Capital is another option since those type of fintech companies do all the legwork for you.
Long story short, the fact is that 50% of businesses fail in the first few years in business due to financing related issues. So small business loans make a great safety net upon you can rely on to grow your company. Not only is it just for the "crap we need money NOW or we'll go out of business situations". They're also good for focusing on growth for profitable small businesses.
Getting a small business loan is actually not as time consuming as you think it is. You can get money based on your time in business and monthly revenue within 1-2 days! So don't worry too much about the time aspect.
But definitely don't go and starting hitting up every bank or lender you can find. That will be a waste of valuable time. Go with a trusted broker instead who will do all that for you.
There is more info on what the process looks on the companies Schmidt recommended: small business loan process
I think the previous experts already provided good insights. I'll try answer some other common questions that come up for low document loans.
A) Do you need to put up collateral to get a low doc small business loan?
The traditional banks would indeed require collateral. But, the newer fintech options and brokers, like Jeff pointed out, can easily fund a small business without needing collateral.
B) Does your business need to be incorporated? Or can a sole proprietor also apply for funding?
You don't need to be incorporated (an LLC, S-corp, or C-corp). If you do have a corporation already filed, when you apply for a small business loan you use your EIN number. Otherwise you use your personal SSN number instead.
C) What if I have filed for bankruptcy? Can I still apply for a loan?
You could -- but is much more tougher to get a loan if you are bankrupt. That is red flag to lenders that you might not able to pay back their loan to your business in the future. Expect to have a high interest rate if this is the case.
D) What if I have bad credit?
Similar to the above, you can indeed get a loan with bad credit. It is much easier than if you were bankrupt. Some lenders might turn you away, but a vast majority of funding companies will lend you money.
E) Is a business plan a requirement to get funded?
Not at all. The only institutions that will ask for one are traditional banks. Which you want to stay away from anyway since the paperwork to get a loan from them is insane.
F) Does time in business matter?
Yes it does. Most lenders will want you to be at least 1 year in business to qualify or apply for a low doc small business loan.
G) Can I apply online or is it done in person?
Welcome to 2018 :) You can do it all online without having to go visit someone in person. I could recommend you call a few lenders and loan brokers in your neighborhood to speak to first.