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There are a number of different kinds of loans available on the market, ranging from revolving credit to amortized, fixed rates to floating, and documentation to no doc. Getting a business loan with no documentation is a common avenue for the self-employed, as the lack of conventional documentation typically makes conventional loans difficult and annoying propositions.
No-doc mortgages allow you to pay extra for privacy. The borrower’s credit is checked, but no documentation of assets or income is required. Because the lender is taking on a greater risk in lending to someone without knowledge of their income or finances, a business loan with no documentation is usually 1 to 1.5 points higher than a conventional mortgage. Most no-document loans require as little as 5% down on an owner-occupied property and 20% for a commercial property.
Getting a business loan with no documentation was extremely popular during the middle of the past decade, when the real estate boom was being fueled by heaps of dubious loans. Many of these loans were not made prudently, and offered the same, very low interest rates to individuals that should have been paying more in either interest or collateral to finance the real estate they were buying. Because of the recent economic turmoil, the same business loans come with either very high down payments or interest rates and greater regulations.
Another option is a No Ratio loan, which allow the borrower some degree of privacy while giving him or her a lower interest rate than would normally be permissible with a business loan with no documentation. With No Ratio, employment and assets must be verified, but no statements of income or assets are required. This is often a good option for people with unsteady or largely commission-based incomes, such as people in the food service industry.
While a salaried position is, of course, the easiest way to get a conventional loan, there are thankfully still plenty of options for the rest of us who don’t want to be completely fettered by the system!
