When the banks say, “No,” business owners still have options; namely stated income and Arizona commercial private loans. Each serves people in a unique way, so it’s important to know the differences and how they work before getting on board with one.
1. Stated income options don’t require tax returns. Although most other forms of lending require at least a couple years of tax returns to prove income, stated income options do not. However, it is worth noting that lenders usually request other forms of income stream verification as well as proof of assets and liabilities. Because of this, they tend to be more popular with those who have a ton of business write-offs on taxes, which can sometimes make it look like they aren’t earning. Unfortunately, the consumer market was previously leveraging them, and they weren’t actually earning, which contributed to the economic collapse. Ergo, stated income options are only available to business owners now.
2. The length of the loans is usually different. Arizona commercial private loans, also referred to as hard money, usually have terms somewhere between 3-60 months. Most do not have pre-payment penalties, though there are exceptions to this. Stated income options generally range from 3-10 years and are often paired with hefty pre-payment penalties.
3. Your credit score matters for stated income. Although some with fair credit may be approved, good or better may be required for this option. With a hard money loan, you can have rotten credit and still be approved. Lenders care more about the value of your project, your plans, and your capabilities, than they do about your credit.
Beware of Hidden Costs and Additional Hassles with Stated Income
It’s important to remember that the terms are longer for stated income, so even if the interest rate on a loan is lower with this option than a hard money option, you’re probably going to wind up paying more to borrow overall. If you hope to pay off early, chances are you will be hit with a large penalty fee with a stated income option, which may eliminate any benefit to early payoff anyway. In addition to this, stated income lenders usually require additional documentation, and it generally takes six weeks or more to close. With Arizona commercial private loans, you can measure closing in days, not weeks.
Speak with a broker if you’re not sure which one is right for you.
Despite the benefits of Arizona commercial private loans over stated income options, they’re not right in every situation. For example, if you’re planning to do a fix-and-hold real estate project, stated income may be better. Again, though, that’s not always the case. You’ll need to crunch the numbers to see what you’ll pay over the lifetime of each loan to determine which the most economical choice in your situation is. If the decision isn’t obvious based on your situation, the qualifications for approval, and the overall cost, speak with a broker who can help find you the best deal for your needs.
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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