Commercial loans are a critical strategy to avoid several commercial mortgage loan problems. For example, many borrowers will simply not qualify for a commercial real estate loan if tax returns are used due to high business expenses. Sometimes they may require bad credit loans for that. This article will describe what differentiates a Stated Income business loan from a conventional or traditional business loan.
Traditional Bank Ask Tex Returns:
Very few traditional banks use Stated Income for a commercial real estate loan. Many/most commercial lenders will perform thorough income verification as part of their underwriting process. Most non-traditional commercial lenders do not require tax returns or any income verification for a Stated Income commercial loan. Traditional bank commercial loan underwriting conditions will typically include copies of tax returns. Some lenders require this form in addition to current tax returns. The more devious use of this form is when lenders make a point of not requiring tax returns but separately ask the commercial borrower to sign this form. The most common explanation in asking for this form will involve the words “routine request”. This will usually occur just before the final closing and be further characterized as “one final small detail”.
Verify Income Data:
The value of using Stated Income does not end when the commercial loan closes. Many/most traditional banks require income verification/audits even after the commercial real estate loan closes. Most commercial borrowers won’t believe this until it happens, but many traditional commercial loans will have covenants stipulating that the lender must receive financial data even after the loan closing and that the loan can be recalled, if the audit of this data is not satisfactory to the lender. Most non-traditional commercial lenders do not verify income either before or after the Stated Income commercial loan closes.
Reasons of Decline or Approved Loans:
There are some reasons that banks decline business loan applications and some strategies for converting a declined loan into an approved loan. One of those reasons is that loan underwriters find something on a tax return that disqualifies a borrower under the bank’s lending guidelines. This “something” will frequently be insufficient net income, but when loan underwriters look at tax returns, there are many other possibilities which produce a similar result. If the commercial borrower is applying for a Stated Income business loan, this situation will not occur because tax returns will not be included in the commercial loan underwriting process. Many commercial borrowers should be interested in strategies for preventing a lender from obtaining their tax returns directly from the IRS or preventing a lender from forcing a long-term loan to be repaid early. Stated Income commercial real estate loans provide a viable commercial financing strategy to alleviate concerns about these issues. Stated Income business loans are no longer just a strategy to help a commercial borrower that could not obtain a commercial loan any other way. Stated Income commercial loans are now increasing day by day.