No doc, business lines of credit

Many business owners are overwhelmed by the amount of financial terms that are constantly being thrown at them in the world of business finance.One of these terms is no doc business line of credit.No doc generally means a stated income or no documentation needed when applying for a business line of credit. In other words no income or asset documentation is required to establish the business line of credit. Income and assets are only stated. Business owners should keep in mind however that other incidental documentation may be required, like a Certificate of Good Standing or your last 2-years 1040's with income that has been "blacked out". This documentation is generally required by the lender to simply substantiate the fact that you have legitimate business that is in good standing.

It is important to note that currently many lenders' credit guidelines are in the process of tightening. Many lenders who have allowed true "no doc" financing in the past are now beginning to require "low" documentation such as a 4506-T and an un-audited financial statement that will support your "stated income."The risky credit market has forced lenders to become much picky about who they are extending business lines of credit to. Savvy business owners will understand this shift and be prepared to meet it with the necessary information.

There are also some general qualifications that will have to be met in order to establish a no doc business line of credit. Most lenders will require a credit score of 700+ (there are a few lenders that will allow a credit score to go down as low as 680) and 2 years in business.It is important to keep in mind that there are a few special programs for start up businesses as well. In addition business owners should understand that there are several business industries that are nearly impossible to get approved for a no doc business line of credit. Those industries include (but are not limited to): loan brokering, real estate investing and adult businesses.

The process of applying for a no doc business line of credit is fairly straightforward and most lenders can typically have your credit established within 10 to 21 days from the time your credit application is submitted to lenders for approval.This is assuming of course that you are attentive to your responsibilities in the process. Businesses who are successful in establishing this type of credit can usually qualify for $25,000 to $500,000 or more, depending on the strength of the credit application, credit scores, time in business, business type, length and depth of credit history, the documentation that is provided and money in the bank. It is also important to understand that stronger applications (with higher credit scores) will qualify for more.

There are tips that every business owner should consider when managing any business line of credit.Some of these are:

• Every business owner should beware of carrying "evergreen" balances on their credit lines. In order to keep the credit in place and your lender happy, you will need to periodically pay down the debt.


• You should keep in mind that while you only pay interest on the portion of a credit line you use, there may be an initial setup fee and possibly an annual fee to keep it open.


• The key factor that will be considered when obtaining a credit line will be your business cash flow.


• Keep in mind that if your business cannot quality for long-term credit, you should ask for an "asset-based" line.


• You should remember that the best time to set up a credit line is before you actually need it.