Low doc business loans: how they work and who they suit

What 'low doc' actually means

Low doc is short for low documentation. Instead of the full set of financials a standard application needs, you show that you can afford the repayments using alternative documents.

It's most often used to fund business assets such as equipment, machinery, vehicles, technology and fit-outs, where the asset itself usually forms the lender's security.

How it differs from a full doc loan

A full doc application typically relies on recent tax returns and financial statements. That's straightforward if your accounts are current, but hard if they're behind or your income swings from month to month.

A low doc application swaps some of that for other evidence. What's accepted varies from lender to lender, but lenders commonly look for:

• An active ABN with some trading history behind it
• GST registration, depending on the lender and loan size
• Recent business bank statements or BAS showing your business activity
• An income declaration, sometimes signed by your accountant
• A statement of your assets and liabilities
• In some cases, a deposit or property ownership to strengthen the application

Lenders still check you can repay

Low doc doesn't mean no checks. The lender still assesses whether the repayments are affordable for your business, and looks at your credit history and the asset you're buying. Approval is never automatic, and each lender applies its own criteria.

Think of it as a different way of showing the same thing, rather than a shortcut around the assessment.

Who low doc loans typically suit

Low doc finance is generally designed for self-employed people and ABN holders, such as:

• Sole traders and contractors whose latest tax returns haven't been lodged yet
• Business owners whose formal financials aren't current
• Seasonal businesses or those with uneven cash flow that doesn't show well on paper
• Growing businesses that need an asset now to keep up with work

What about the cost?

Because the lender has less formal information to work with, pricing on a low doc loan can be higher than on an equivalent full doc loan. That isn't always the case. Your credit history, the asset, the deposit and the lender all play a part.

Compare the total cost of the finance, including fees, rather than the headline rate alone. It's also worth asking whether lodging your returns first would open up a full doc option, and whether the timing of the purchase makes waiting worthwhile.

Getting your application ready

The smoothest low doc applications have their paperwork lined up before the supplier quote arrives. Have recent bank statements, your ABN details and a clear description of the asset ready, and talk to your accountant about any income declaration the lender may need.

General information only

This article is general information only. It does not take your personal circumstances into account and is not personal credit, tax, legal or financial advice. Low doc criteria, pricing and documentation requirements vary between lenders, and all finance is subject to lender assessment and approval. Talk to your accountant about the tax side of any purchase.

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