No Doc, Full Doc, Lease Doc, Low Doc — Explaining the terms for a commercial property loan

Photo by Cytonn Photography on Unsplash

Many people find it surprising that there is less legislation that governs commercial property loans than consumer lending. I won’t go into that any further here but it is an interesting statement on society.

The short of it is that the banks and other lenders have more freedom with their lending policies for commercial clients and generally this is why you won’t see comparatively many non-bank lenders in the personal finance space. One of the areas of less regulation is around proof of income.

Yes, exactly! Commercial lenders are not required by law to prove that a borrower can afford a loan. This has given rise to various verification options around income and debt serviceability. Here are the most common terms explained briefly.

Full Doc
A standard loan application for which you provide full financial statements of the business.

Lease Doc
Simply put, you are obliged to prove that any income from the lease will be more than the interest repayments required by the lender.

Low Doc
You’ll provide partial evidence of income. For example an accountant’s letter, your business bank statement or BAS statements that you lodge with the ATO.

No Doc
As crazy as it seems, this one requires no evidence that you can afford the debt.

You’ll provide a profit and loss forecast that shows how the loan will allow your business to earn additional income and that together with this additional income you establish sufficient means to service the debt and cover the repayments.

It seems like common sense and not simply good practice to lend only to people and entities that can afford to repay a commercial property loan. Don’t you think?! Ultimately, if your loan application represents a high risk, don’t expect the banks to approve your loan application and don’t be surprised if you are knocked back by other lenders as well. If you are not knocked back, you probably won’t like the total cost of the facility anyway.

About Greg Huxley
You can find out more about the author Greg Huxley at the Huxley Corporate website

This article does not provide any financial, legal, tax, investment or any other form of advice, professional or otherwise upon which you should or can rely. Seek your own professional advice for personal and business matters.



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Greg Huxley

Greg Huxley

Greg Huxley has extensive experience in property, finance, business law, insolvency, & management, with a strong, disciplined finance & accounting perspective.