Have you been considering options for expanding or improving your business without tapping into your cash reserves or draining your cash flow?
What is a Business Purpose Loan?
Business Purpose Loans are mortgage loans that can be taken out on your primary residence, owner-occupied or not, and used for business purposes. Some specific guidelines must be followed and requirements that differ from conventional loans.
We answer some of the most commonly asked questions about business-purpose loans right here.
How Does a Business Purpose Loan Differ from a Consumer Loan?
Based on the truth in Lending Act, the actual test of whether or not a loan is subject to consumer or business loan requirements is the purpose of the loan.
Because the compliance requirements differ between consumer and business loans, it is crucial to determine your loan type. If the borrower plans to use the loan’s proceeds for anything that might generate income, it is probably a business-purpose loan. If the money is used for personal use, it would likely qualify as a consumer loan.
What is a Business Purpose Loan Intended For?
Proceeds from a business purpose loan are intended to improve, start or expand a business. Anything that enhances the economics of a business is a great way to use funds from a business-purpose loan. Leaders must document the use of the funds with the loan documents. Borrowers may be asked to outline how the funds will be used and what business growth is expected.
What Are Some Good Reasons to Get Business Purpose Loans?
Why might someone be interested in a business-purpose loan? Reach out to one of our qualified mortgage experts to see if your plan for funds qualifies for a business purpose!
- Expand business
- Purchase Inventory
- Buy Equipment
- Invest In Rental Property
Do all Owners of the Property Need to Apply?
Yes. Any property owner named and used as collateral must apply for the loan. If one of the borrowers does not wish to be on the loan application, the parties can utilize a quitclaim. A quitclaim would remove that party from the title. This would need to be completed before the close of escrow, but not necessarily before the application.
What Are the Guidelines for Approval Based On?
Guideline Highlights
- Cash-Out Refinance. Funds must be wired directly to the borrower’s business bank account.
- $10,000,000 loan max
- LTV: 85% max
- 640 mid-credit score
Self Employment Types
- C Corporation
- S Corporation
- LLC
- 1099
Property Types
- Single Family Residence
- 2 Units
- 4 Units
Occupancy Types
- Owner-Occupied / Primary Residence
- Non-Owner Occupied. A rental survey usually is required for investment properties
Is a Business Purpose Loan Right For You?
If you need funds for your business and own property — it’s probably worth looking into! Being an unconventional loan, you’ll want to work with an expert.
Contact one of our mortgage experts today to start a conversation about your business loan.
