Stated Income Loan Program For Business Occupied

Stated Income For Investment Real Estate

The Stated Income Loan Program is geared towards borrowers who might not qualify for traditional financing based on their tax returns or who have been turned by a bank, the SBA, or other similar lender. Because underwriting is based on a non-income verification structure, the lender does not review tax returns. Instead, underwriting is based on a combination of the business operating statements and bank statements, as well as the guarantor’s credit score. It’s a great loan program for smaller loans (under $1 Million) or for small businesses that need to close fast. Unlike traditional bank financing, the loan is has up to a 30-year term with no balloon. Due to the low documentation and increased risk, lenders may require a minimum credit score of 650, though some lenders will provide exceptions for credit scores below this threshold. Underwriting requirements may also require the business to have certain cash reserves (e.g., 6-months of loan payments). Rates and lender fees and costs are nominal compared to hard money lenders and unlike bank loans which can take several months to close, these loans can typically be underwritten, approved, and closed in a few weeks.

Program Overview

Loan Amount: $250,000 - $5,000,000
Term Length: Up to 30 years
Max LTV: Up to 75% (80% for Multifamily)
Amortization: Up to 30 Years
Interest Rate: Starting at 6.50%
Closing Time: 3 - 6 weeks
Use Type: Business Occupied
Recourse: Full Recourse

Pros And Cons Of Fannie Mae
Small Balance Loans

Pros

  • Low Rates & Costs
  • High Leverage (80% LTV)
  • Long Amortizations (30-yrs)
  • Cash Out Available
  • Variety of fixed rate products
  • Non-recourse
  • Limited Personal Financial
  • Flexible Prepayment Options
  • Assumable & Streamlined

Cons

  • Conservative Underwriting
  • Sponsor Liquidity
  • Requirement
  • Longer Closing Process
  • Property Must be Stabilized
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Pros and Cons

Pros

  • No tax returns
  • No balloon
  • Unlimited cash out
  • Quick approval
  • Fast closing time
  • Wide variety of property types

Cons

  • Need fair credit score (650+)
  • Higher interest rates vs. banks
  • Prepayment penalty
  • No construction

What Do I Need To Qualify

  • Minimum Credit Score > 650
  • 1.2x DSCR
  • 2 years in business

Disclaimer: These are general qualifications. Other information might be considered during your application

Eligible Properties

office

Office

Retail

Retail

Industrial

Industrial

Hotel / Motel

Hotel / Motel

Restaurant

Restaurant

Other eligible properties include: Day care, free standing buildings

Common uses include: Purchase, refinance, refinance + cash out

Required Documents

Property Documents

  • Current Rent Roll
  • Last 3-Years of Operating Statements (P&L)
  • Trailing 12-month Operating Statements

Personal Documents

  • Personal Financial Statement
  • Real Estate Owned Schedule
  • Bio / Resume
  • Proof of Liquidity (Bank Statements 3 Months)

Business Documents

  • Operating Statements (2-Years)
  • Current Rent Roll
  • Trailing 12-Months Operating Statements
  • Articles of Formation
  • Bylaws / Operating Agreement

Required Documents For Business Occupied

Personal Documents

  • Loan Application
  • Credit Report

Business Documents

  • Profit & Loss Statement
  • Bank Statements

Is Stated Income Right For Me?

Small businesses tend to have a lot of write-offs and other deductions that may result in minimal net income or a loss. This can result an immediate decline by a bank or SBA financing. Similarly, many banks want to underwrite the loan based on global debt service, meaning a combination of the business’s income and liabilities and the owner’s income and liabilities, which may show insufficient net income or a loss.

With a stated income loan (also known as a no-income verification loan) the lender will focus purely on the business’s actual cash flows to support the debt. For businesses tat have been turned down by a bank or SBA lender, stated income program may be a perfect solution and is generally much better than a high cost hard money loan.

Turned Down By The Bank?

A private lender may be right for you.

Scenarios Meant For Stated Income

  • Negative net income on tax return
  • Bank or SBA turn downs
  • Cash out equity in your property
  • Consolidate high cost business or trade debt
  • Need to close fast

Stated Income Case Study

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Read the full case study

Fees and Costs

  • Application Fee: Typically $1,500 - $2,500, depending on the lender
  • Origination Fee: 1% - 2% of the loan amount

Prepayment Penalties

  • Varies among lenders and programs
  • Typically eliminated after 3-5 years

Borrower Entity

The borrower entity is the operating business. The business generally must have been in existence for at least 2-years. The ultimate property owner may be a holding entity owned by the business or the business owner and it will be a co-borrower and the mortgagor.

Recourse

Generally, all individuals with at least a 20% or more ownership interest in the borrower entity must provide a personal guaranty.

Third Party Reports

Property related reports, such as an appraisal and environmental report are required. These reports are ordered by the lender.

Approval Process

1. Create loan request here.
2. Supply preliminary documents.
3. Select a loan program and product.
4. Receive preliminary approval.
5. Review and accept term sheet; remit application fee.
6. Lender completes underwriting and orders appraisal.
7. Loan approved. Final terms reviewed and accepted.
8. Loan closed and funded.