Why Pre-Qualify?

Sellers of Bed and Breakfast/Inn Properties want to know that a potential buyer has been Pre-Qualified or Pre-Approved by a lender prior to divulging financial information. Sellers naturally want to avoid wasting time with un-qualified shoppers who lack sufficient assets or credit to consummate a transaction.

Aspiring Innkeepers and their advisors need to evaluate the inn’s financials and tax returns to determine how much they can afford to pay for the property. They will also need to determine that the income from the inn will be sufficient to service the loan, pay all expenses and produce an acceptable bottom line profit. The Pre-Qualification/Pre-Approval Process has two parts:

Step 1

Pre-Qualify

Step one evaluates the borrower’s credit, income, assets, and resumé/s. A Pre-Qualification Letter may be issued within 48 hours of receipt of the following:

1. Borrower’s Application
2. Verifiable Assets to be applied to down payment and reserves i.e. - Checking, Savings and Investment Statements, 401k/IRA Statements
3. Two years borrower’s personal tax returns
4. Resumes for all principals
5. Borrowers Financial Statement’s
6. Borrowers Credit Report’s

Step 2

Pre-Approval

Step two merges the data from the borrower’s pre-qualification with the financial records of the business being acquired.

1. Two years of business tax returns
2. Year to Date Balance Sheet/P&L
3. A detailed list of capital improvements made within the last five years
4. A list of “One Time” non-re-occurring expenses
5. Photos of the property or Web Address

The financial records on the business/property being acquired will be analyzed to determine that the Debt Service Coverage Ratio (DSCR) will comply with our underwriting guidelines after items such as depreciation, officer’s salaries, mortgage interest and certain non-re-occurring expenses are added back to the net profit/loss.

Conditional Loan Pre-Approvals are issued within 48 to 72 hours of receiving the information on the borrower’s and the property. The Pre-Approval will specify the rate and terms and will also lists certain due-diligence items still needed before our loan file is ready for final underwriting and closing.

For more information, phone Rick Newman at (877) 595-2120.
He's always ready to help you and your business grow!

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