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Im a new developer working on my 2nd deal instead of going to private money i want to try the bank they need 2 years taxes and im told its because they want to check Debt Service Ration now i have an all cash business and stupidly didn't keep good records and now i have to do my taxes can someone figure out how much i have to say i made on my taxes to get approved for loan based on the terms below
Loan Amount = 250,000.00
Amortization = interest only for 36months
Loan type =revolving construction line of credit
Term= 36months
Interest Rate= 6.50% (Prime of 3.75% plus 2.75% floating)
Points = 2 points
Im a new developer working on my 2nd deal
instead of going to private money i want to try the bank
they need 2 years taxes
i have an all cash business and stupidly didn't keep good records
and now i have to do my taxes ...
Bad time of year to do it... but hire a good CPA to go through your files and forms
and create the sort of presentation documents the bank will want to see.
otoh... if your statement really means that you didn't report fully on your 1040's...
or can't substantiate what you reported to the IRS...
Quote:
...can someone figure out how much i have to say i made on my taxes
to get approved for loan based on the terms below
Hello , it is an all cash business so i just have to tell the IRS the amount i made but my dilemma is i don't want to tell them to much so im not forced to pay back more then i should and i don't want to tell the them to little because then the bank will not lend to me.
The standard way that a Bank will look at Debt Service Coverage Ratio will be:
From your Business financial statements (tax return or higher level):
------------------------------------------
Net income + interest expense + Depreciation + Tax Expense (also known as EBITDA), less cash paid for taxes, less any non-recurring items such as one-time capital gains.
divided by
the annual amount of principal and interest payments due annually on all business debts.
-------------------------------------------
However, financing for developers is a bit more unique, because you don't generate operating revenue like a traditional business -- instead, you buy and build a house, then sell it and repay the loan, covering interest during the interim.
Also, your business expenses may flow through your personal tax returns on the Schedule E section. I would recommend getting at least compiled level statements from a CPA, however, with a loan request of only $250k, that will not matter.
What will matter more are things like: Documented experience. Have you successfully developed and sold property in the past? If so, get documents supporting this to show the bank. Documents of costs (acquisition and development) and documents of sale, timeframe, etc. Before and after pictures wouldn't hurt either.
Also, they will consider your cash reserves, so do take the time, or hire a CPA, to prepare a personal financial statement for yourself (essentially a personal balance sheet, showing all assets and liabilities, and in particular your cash or liquid investments). As a developer, they will look at your interest carry ability. Let's say you get the $250k loan at 5%. That is annual interest of $16,250 annually. If you showed $25,000 in personal cash, they would determine that you have enough to carry interest for 1.54 years. Obviously the more you have, the more comfortable they would be, and if you were willing to deposit say 6 or 12 months of that cash into an account to hold for interest payments, even better. This interest carry is important, because they know you will repay principal when the property sells, but in the meantime, the risk is how you pay the interest payments. If you have any other sources of income (other job, etc) this will be considered too.
Other things - obviously they want to see detailed plans and a budget that includes a contingency. They will possibly require inspections throughout the process to verify work is completed along the way.
Also, opt for a fixed rate if possible. That 6.50% will probably be 7.0% by the end of the year if you leave it adjustable. Will it really take 3 years to complete and sell the property? Could you hire help and complete it faster? Every year will cost you $16k.
Can anyone just please help me based on these terms how much would i have to make in order to afford this loan:
Loan Amount = 250,000.00
Amortization = interest only for 36months
Loan type =revolving construction line of credit
Term= 36months
Interest Rate= 6.50% (Prime of 3.75% plus 2.75% floating)
Points = 2 points
Hello , it is an all cash business so i just have to tell the IRS the amount i made but my dilemma is i don't want to tell them to much so im not forced to pay back more then i should and i don't want to tell the them to little because then the bank will not lend to me.
Perhaps you should tell them the truth instead of trying to make up a number that you think works.
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