When the announcement was made in early May by the RBA Governor Philip Lowe that the central bank had decided to lift the official cash rate, many business operators planning investments in new equipment with finance were highly likely disappointed to say the least. Possibly purchase decisions were postponed due to the business climate or due to delivery delays. Issues which prevented business taking advantage of the highly accommodative lending conditions over the past going on 2 years. But most disappointed and possibly with concerns may be those planning to start a new business and requiring Low Docs No Docs Equipment Loans.
Planning for the start-up including budgeting and business plans may have been based on securing finance and the resultant loan repayments at the pre-rise interest rates. With the RBA rise and lenders across many markets following with their own rises, those repayments may now be higher than originally anticipated. A factor which may throw plans for the business into disarray or at least a rethink phase.
Achieving low docs and no docs loans for small and new business can often be a frustrating process. Without all the financial documentation and records, aka docs, that are required to complete a standard business finance application, new businesses can face obstacles and rejections.
With interest rates tipped to rise further with future RBA moves on the cash rate, what are the prospects for those needing low docs no docs equipment loans?
There will be those looking to go out on their own as sole trader contractors with say their own back-hoe, diggers and other earthmoving equipment. Individuals branching out to set-up a new online business which is totally dependent on computer and IT equipment. Just a few examples of the types of operations that typically require no docs equipment finance to get their business underway.
To ease the doubts and concerns some may have, we provide this general overview of Low Docs and No Docs Equipment Finance with hints and tips on how businesses can still achieve affordable loans in a rising rate market.
Who is eligible for low docs and no docs equipment loans?
The terms low docs and no docs refer to the quantity of documentation in regard to financials and trading history that a business has for inclusion in the finance application. Businesses with no documents means no docs while some but not all docs to meet the application requirements can be classified as low docs.
Low docs and no docs loan applicants are different from bad credit loan applicants. Bad credit is a totally separate classification of loan applicant. However, having a good credit profile for the business entity and/or the directors and owners would be beneficial to achieving a better finance outcome.
The types of businesses that need to source low docs and no docs equipment finance can be extensive but primarily include businesses which are just starting up or have only been trading for a short period. Minimum trading periods are often a criteria for business loans from banks and some lenders and as such, businesses that do not meet that criteria may consider a low docs loan. Must at minimum have a current ABN and ID.
The quality and quantity of docs provided may affect the outcome. Business owners are encouraged to produce as much information as possible to provide a stronger application. That may include business plans, projections based on strong evidence and/or simple accounts figures prepared by themselves.
The criteria for eligibility for this type of finance would not in general terms be affected by interest rate increases. Lenders may however, implement their own guidelines in regard to the total amount of finance approved and other aspects of the loan.
Finance Product Selection
Low docs and no docs are classifications of loan applications and do not describe specific loan products. Applicants can select which finance product best suits their requirements from the general range available:-
- Low Docs Chattel Mortgage
- No Docs Low Docs Leasing
- Hire Purchase for Equipment and Machinery
- Low Docs No Docs Rent to Buy
From Bank to Broker - Lender Choice
While the banks are the major source of business finance, for those requiring no docs and low doc loans, they may not be suitable. Banks operate to strict guidelines and it is easy to see from the business finance eligibility notes that some display online, that many new and start-up business would not qualify for bank finance.
In addition, banks and not as flexible in all circumstances as many non-bank lenders. Businesses requiring low docs loans can benefit greatly from engaging a specialist equipment finance broker such as Jade Equipment Finance to source their loan requirements.
Just because you’re starting up or you’re small, does not mean you are not welcome to utilise the professional services offered by a finance broker. All are welcome and we handle a wide range of different plant, machinery and equipment finance.
Interest Rates on Low Docs Equipment Finance
As mentioned above, low docs does not mean bad credit. But the risk assessment of some low docs applicants may still be considered as high and that may impact the interest rate applied to the finance offer. However, low docs and no docs finance does not in general terms, attract a higher interest rate.
All applications are considered, sourced and negotiated by our consultants on an individual basis. It is possible for low docs finance to be offered at better interest rates. Business owners are encouraged to ensure they maintain a good individual credit profile and provide as much financial information about the enterprise to present a strong application.
In order to attract a better interest rate, applicants may be required to provide additional guarantee or security for the finance. Additional lender conditions may also apply.
If wanting to get rough estimates of what repayments may be on low docs equipment finance, refer to our Interest Rate Chart or our Equipment Finance Calculator.
The basic requirements and guidelines for Low Docs and No Docs Equipment Finance would not change as a result of any rises in interest rates as a result of RBA decisions. However, as rates move away from the record lows enjoyed lately, all businesses should be covering all bases to ensure they achieve the cheapest rates and the most workable, cost-effective finance possible.
To discuss low docs and no docs equipment finance speak with a Jade Equipment Finance consultant on 1300 000 003
DISCLAIMER: IF MISINTERPRETATIONS, MISREPRESENTATION OR ERRORS EXIST IN THIS ARTICLE, NO LIABILITY IS ACCEPTED. THE INFORMATION IS PROVIDED ONLY FOR GENERAL PURPOSES AND NOT IN ANY MANNER INTENDED AS THE ONLY SOURCE FOR MAKING FINANCIAL DECISIONS. THOSE THAT CONSIDER THEY REQUIRE ADDITIONAL GUIDANCE OR ADVICE SHOULD REFER TO AN INDEPENDENT FINANCIAL ADVISOR.