The Guidelines of Stated Income Commercial Loans
Stated Income Commercial Loans are a great alternative to conventional commercial loans for borrowers who are looking to purchase or refinance real estate property. In general, stated income commercial loans are more concerned about the value of the property rather than the income and credit history of the individual. The property income value must be capable of servicing the mortgage, taxes, and insurance for a state income commercial loan to be approved. The main advantage of a stated income commercial loan over a traditional commercial real estate loan is that the process for approval is much quicker because there are fewer documents involved in order for the borrower to be approved.
*To be considered for Certified Development Company(CDC)/504 loan, applicants must meet these eligibility requirements:
- Operate as a for-profit company
- Do business (or propose to) in the United States or its possessions
- Has a tangible net worth less than $15 million and an average net income less than $5.0 million after taxes for the preceding two years.
- Loans cannot be made to businesses engaged in speculation or investment in rental real estate.
- Be an eligible type of business. While the vast majority of businesses are eligible for financial assistance from the SBA, some are not.
- Under the 504 Program, Plan to use proceeds for an approved purpose. CDC/504 loan proceeds may be used for the financing of fixed assets like real estate or equipment. This list explains Eligible and Ineligible Use of Proceeds.
- Not have funds available from other sources. SBA does not extend financial assistance to businesses when the financial strength of the individual owners or the company itself is sufficient to provide all or part of the financing. Both business and personal financial resources are reviewed as part of the eligibility criteria. If these resources are found to be excessive, the business will be required to use those resources in lieu of part or all of the requested loan proceeds.
- Ability to repay the loan on time from the projected operating cash flow of the business
- Good character. SBA obtains a “Statement of Personal History” from the principals of each applicant firm to determine if they have historically shown the willingness and ability to pay their debts and whether they have abided by the laws of their community
- Relevant management expertise
- Feasible business plan
*The US Small Business Administration
For further information regarding stated income commercial loans, contact the specialists at HML Investments today!