Stated Income Commercial Loans
Stated income commercial loans have for years been a decent option for people who don’t have enough income on their tax returns to qualify for bank loans. Stated income loans allow the borrower to ‘state’ the amount of income that they and their businesses make.
Depending on the amount that the borrower ‘states’, the lender calculates the amount that they can lend. Also, the lender calculates the interest that the borrower needs to pay.
Lenders vary: some will not require much documentation while others will require a good number of documents. For example, some of the lenders will require rent rolls, leases, personal financial statements, year to date financials among many other documents.
Although, some of the lenders will require documents, none of them will ask you for tax return forms.
Who Should Go For Stated Income Commercial Loans
In addition to people with inadequate income on their tax returns, stated income commercial loans, are also ideal for businesses with a cash component. Such businesses include: car repair shops and restaurants. Many car repair shops are small businesses. Also, the repair shops deal with body-repair and painting tasks that pollute the environment. Most traditional lenders shy away from funding car repair businesses. This is because lenders view them as high risk (due to their small nature) and problematic (due to their negative impact on the environment). In rare cases, banks finance car repair shops only after filling expensive and time consuming environmental reports. In contrast to traditional lenders, stated income loan lenders will lend loans to car repair shops, and with minimal restrictions. The borrower fills an environmental questionnaire, the lenders review the questionnaire and if it pleases them, the borrower is awarded the loan. Other than car repair shops, traditional lenders are also less likely to offer loans to restaurants. This is because lenders site that restaurants have high failure rates thus high risk to finance. In rare cases, banks finance restaurants: but they give short term loans (with repayment periods of three to five years). In contrast, most stated income loan lenders will lender restaurants longer repayment loans (usually lasting up to15-30 years).
Advantages Of Stated Income Commercial Loans
Slated income loans have amortization schedules of up to 30 years, compared to the typical bank loans that have five years schedule. As a borrower, slated income gives you a longer repayment period. This ensures that you have enough money with you (the money is not spent on repaying the loan). Due to this, you can easily expand your business. Stated income commercial loans don’t require you to report after the loan closes. Most banks will require that you present them with monthly or quarterly statements on how your business is doing. If banks see a negative trend in your business, most likely they will change the terms of the deal. Fortunately, this does not happen with stated income loans.
Commercial RE Stated Income Conclusion
As much as stated income commercial loans are effective in helping you get financing where banks would repudiate, always research and settle for a lender offering the highest loan amount at least interest rate.