Ever hear how banks only lend to those who don't need it?
Not quite that, maybe, but we do have this strange little policy of only lending money to those who can afford to pay the monthly payment.
With this in mind, sometimes we ask to verify the income you claim to make when you apply for a loan. When we do, it is kinda important that the reality be... well, pretty much what you stated it as.
Now, you say you make $2000 a month and it turns out you make $1920... we'll probably be able to work with that.
You say you make $2000 and month and give me two bi-weekly paystubs showing $200 every other week... that is an issue.
Money that you used to make 6 months ago before they cut your hours doesn't help you right now.
The job you just interviewed for and hope to get doesn't help either. Give me a signed offer letter with a set salary, and we'll talk. Otherwise, you need two paystubs.
The worse, though, the absolute worse, are the business owners.
Okay, I really do understand. I do. You don't want to pay taxes. Thus you will claim everything from "business meals" to car repairs as expenses if your tax advisor tells you it's legal to do so (at least I hope it's legal...).
But here's the thing. For a lender, to give you a loan, we gotta see that you can afford the monthly payment. If you give me tax returns that say you had $40,000 in sales and $41,000 in expenses... you made NOTHING. I have NO income. Zip. Zero. Nil.
Okay, okay, there are a few items I can add back in. I can add back in depreciation because it's a taxable write-off but not necessarily actual cash spent that year. I can add back in expense wrote off for using some of your own home for the business. I can add back in interest to loans (since we're already counting the loans against you as monthly obligations). Fine. You made $3500. For the YEAR. That's still not enough to afford a loan.
But you made $40,000 in sales!
Yes, and you just told the IRS that it cost you $41,000 to make those sales. Guess what. You tell the IRS that's the cost for you to run your business, we have to believe you.
But you just didn't want to pay more in taxes than you had to?
Were those or were those not costs associated with the business? Because if they weren't, you might want to be watch out for audits. Not that it matters to me, because the point stands: what you tell the IRS, I have to believe. THAT is your income. ...and maybe that income is rather accurate, since it appears you need this loan for debt consolidation. How'd those credit cards get run up like that anyway? Maybe someone isn't making ends meet with that $40,000 in sales.... hmmm...? Maybe giving you this loan would put you into an even deeper hole than you're in already?
We don't do start up business loans. We do loans based on you having the reasonable capability of paying our monthly payments. YOU do not meet that requirement.
Thanks for playing.
Denied.
Not quite that, maybe, but we do have this strange little policy of only lending money to those who can afford to pay the monthly payment.
With this in mind, sometimes we ask to verify the income you claim to make when you apply for a loan. When we do, it is kinda important that the reality be... well, pretty much what you stated it as.
Now, you say you make $2000 a month and it turns out you make $1920... we'll probably be able to work with that.
You say you make $2000 and month and give me two bi-weekly paystubs showing $200 every other week... that is an issue.
Money that you used to make 6 months ago before they cut your hours doesn't help you right now.
The job you just interviewed for and hope to get doesn't help either. Give me a signed offer letter with a set salary, and we'll talk. Otherwise, you need two paystubs.
The worse, though, the absolute worse, are the business owners.
Okay, I really do understand. I do. You don't want to pay taxes. Thus you will claim everything from "business meals" to car repairs as expenses if your tax advisor tells you it's legal to do so (at least I hope it's legal...).
But here's the thing. For a lender, to give you a loan, we gotta see that you can afford the monthly payment. If you give me tax returns that say you had $40,000 in sales and $41,000 in expenses... you made NOTHING. I have NO income. Zip. Zero. Nil.
Okay, okay, there are a few items I can add back in. I can add back in depreciation because it's a taxable write-off but not necessarily actual cash spent that year. I can add back in expense wrote off for using some of your own home for the business. I can add back in interest to loans (since we're already counting the loans against you as monthly obligations). Fine. You made $3500. For the YEAR. That's still not enough to afford a loan.
But you made $40,000 in sales!
Yes, and you just told the IRS that it cost you $41,000 to make those sales. Guess what. You tell the IRS that's the cost for you to run your business, we have to believe you.
But you just didn't want to pay more in taxes than you had to?
Were those or were those not costs associated with the business? Because if they weren't, you might want to be watch out for audits. Not that it matters to me, because the point stands: what you tell the IRS, I have to believe. THAT is your income. ...and maybe that income is rather accurate, since it appears you need this loan for debt consolidation. How'd those credit cards get run up like that anyway? Maybe someone isn't making ends meet with that $40,000 in sales.... hmmm...? Maybe giving you this loan would put you into an even deeper hole than you're in already?
We don't do start up business loans. We do loans based on you having the reasonable capability of paying our monthly payments. YOU do not meet that requirement.
Thanks for playing.
Denied.
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