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DSCR Rental Loan Highlights
- Qualification based mainly on property cash flow (DSCR).
- No personal income docs required for many programs.
- Financing for 1–8 unit rentals, portfolios, and many STR/Airbnb deals.
- Up to 80% LTV on purchases and 75% LTV on cash-out (program-dependent).
- 30-year fixed and interest-only options available.
DSCR Loans in Tennessee: Helping Businesses Thrive in the Volunteer State
Running a business in Tennessee can come with its own set of challenges. As a business owner, you may have experienced firsthand the difficulties of obtaining financing, especially if you have a less than perfect credit score. This is where Debt Service Coverage Ratio (DSCR) loans come in. In this blog post, we will explore what DSCR loans are, who needs them, and how Tennessee businesses can benefit from them.
- DSCR Loans in Tennessee: Helping Businesses Thrive in the Volunteer State
- The Story of a Tennessee Business Owner
- What are DSCR Loans?
- Who Needs DSCR Loans?
- Why Do Tennessee Businesses Benefit from DSCR Loans?
- Credit Score Requirements for DSCR Loans
- How Long Does Approval Take?
- 3 Common Mistakes Tennessee Business Owners Make with DSCR Loans
- FAQs: Answers to 5 Common Questions Tennessee Business Owners Ask
- Your Partner for DSCR Loans in Tennessee: GHC Funding
The Story of a Tennessee Business Owner
Let’s start with a real Tennessee business owner story that many can relate to. Meet John, the owner of a small manufacturing company in Nashville. John has been in business for five years and has seen steady growth in his business. However, in order to expand his operations and take on new clients, John needs to purchase new equipment. He has approached several banks for a loan, but has been turned down due to a low credit score. Frustrated and unsure of what to do, John turns to GHC Funding for help.
What are DSCR Loans?
In simple terms, DSCR loans are a type of financing that takes into account a business’s cash flow rather than just their credit score. DSCR is a ratio that compares a company’s annual net operating income to its annual debt service. This ratio is used by lenders to determine the company’s ability to repay its debt. DSCR loans are specifically designed for businesses that may not qualify for traditional loans due to low credit scores.
Need capital? GHC Funding offers flexible funding solutions to support your business growth or real estate projects. Discover fast, reliable financing options today!
⚡ Key Flexible Funding Options:
GHC Funding everages financing types that prioritize asset value and cash flow over lengthy financial history checks:
DSCR Rental Loan
- No tax returns required
- Qualify using rental income (DSCR-based)
- Fast closings ~3–4 weeks
SBA 7(a) Loan
- Lower down payments vs banks
- Long amortization improves cash flow
- Good if your business occupies 51%+
Bridge Loan
- Close quickly — move on opportunities
- Flexible underwriting
- Great for value-add or transitional assets
SBA 504 Loan
- Low fixed rates through CDC portion
- Great for construction, expansion, fixed assets
- Often lower down payment than bank loans
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For details on GHC Funding's specific products and to start an application, please visit our homepage:
DSCR loans are calculated by dividing the net operating income by the annual debt service. Lenders typically look for a DSCR of at least 1.25, meaning that the business’s net operating income is 1.25 times higher than its annual debt service. The higher the DSCR, the better a business’s chances of getting approved for a loan.
Who Needs DSCR Loans?
DSCR loans can be beneficial for a variety of businesses, particularly those in Tennessee that may be struggling to obtain financing due to lower credit scores. Startups, small businesses, and businesses that have experienced a recent decline in revenue can benefit from DSCR loans. These loans can also be helpful for businesses that may have a high debt-to-income ratio or have a history of bankruptcy.
Real Market Conditions in Tennessee
Tennessee is a state that is full of opportunities for businesses, but it also has its own unique set of challenges. According to the U.S. Small Business Administration, there are over 597,000 small businesses in Tennessee, which make up 99.5% of all businesses in the state. However, only about 28% of these businesses are able to secure financing through traditional loans, leaving many business owners searching for alternative options.
In addition, according to a report by the Tennessee Department of Economic and Community Development, the state’s unemployment rate was at 3.5% in 2020, lower than the national average. This means that the job market is competitive, making it challenging for businesses to attract and retain top talent.
Why Do Tennessee Businesses Benefit from DSCR Loans?
Tennessee businesses can benefit from DSCR loans in several ways. First and foremost, as mentioned earlier, these loans take into account a business’s cash flow rather than just their credit score. This means that businesses with lower credit scores can still have a chance at obtaining financing. Additionally, DSCR loans typically have a faster approval process compared to traditional loans, which can take several weeks or even months.
Another benefit of DSCR loans is that they can be used for a variety of purposes. Whether a business needs to purchase equipment, finance an expansion, or cover working capital, DSCR loans can provide the necessary funds.
Real Case Study: Tennessee Business in Nashville
Let’s take a closer look at how a Tennessee business in Nashville was able to benefit from a DSCR loan. ABC Manufacturing, a small business that specializes in custom woodworking, was struggling to secure a traditional loan due to a recent decline in revenue. The company needed funds to purchase new equipment and take on new clients, but their credit score was preventing them from obtaining a loan.
After approaching GHC Funding, they were able to secure a DSCR loan with a 1.5 DSCR ratio. The loan allowed them to purchase new equipment and expand their operations, leading to an increase in revenue. With their improved cash flow, ABC Manufacturing was able to pay off their loan within two years, and their business continues to thrive.
Credit Score Requirements for DSCR Loans
While DSCR loans are more flexible when it comes to credit scores, there are still some requirements that lenders look for. Typically, most lenders will require a minimum credit score of 600 for approval. However, the higher the credit score, the better the chances of getting approved and potentially getting a lower interest rate.
How Long Does Approval Take?
One of the biggest advantages of DSCR loans is the faster approval process. In most cases, businesses can receive approval within a week or two, compared to traditional loans that can take several weeks or even months. This is because DSCR loans focus on a business’s cash flow, which can be evaluated quickly, rather than other factors that may take longer to assess, such as collateral or business plans.
3 Common Mistakes Tennessee Business Owners Make with DSCR Loans
- Not having a clear understanding of their DSCR ratio: Many business owners may not be aware of their DSCR ratio or how it is calculated. It is essential to have a good understanding of this ratio before applying for a DSCR loan.
- Not keeping track of cash flow: DSCR loans are based on a business’s cash flow, so it is crucial to keep track of income and expenses to ensure a favorable DSCR ratio.
- Not exploring other financing options: While DSCR loans can be a great option for many businesses, it is always advisable to explore other financing options as well to find the best fit for your business’s needs.
FAQs: Answers to 5 Common Questions Tennessee Business Owners Ask
- Q: What is the interest rate for DSCR loans?
A: The interest rate for DSCR loans can vary depending on the lender, but it is typically higher than traditional loans due to the higher risk associated with them. - Q: Can I use a DSCR loan to refinance my existing debt?
A: Yes, DSCR loans can be used for debt consolidation or refinancing existing debt. - Q: Is collateral required for DSCR loans?
A: Collateral may be required for DSCR loans, but it is not always a deciding factor for approval. Lenders primarily look at a business’s cash flow when evaluating DSCR loan applications. - Q: Can I get a DSCR loan if I have a low credit score?
A: Yes, DSCR loans are designed for businesses with lower credit scores to still be able to obtain financing. However, having a higher credit score can increase your chances of approval and potentially lead to a lower interest rate. - Q: Is there a limit to how much I can borrow with a DSCR loan?
A: The amount that can be borrowed with a DSCR loan varies depending on the lender and the business’s cash flow. Generally, the loan amount can range from $50,000 to $500,000.
Your Partner for DSCR Loans in Tennessee: GHC Funding
GHC Funding has been helping businesses in Tennessee thrive for over 20 years. We understand the unique challenges that businesses face in the Volunteer State and are dedicated to finding the best financing solutions for our clients. Our team has extensive experience working with DSCR loans and can guide you through the process to help you secure the funding your business needs.
Don’t let a low credit score hold you back from growing your business. Contact GHC Funding today to learn more about how DSCR loans can benefit your Tennessee business. Let us be your partner in success.
CTA: Contact GHC Funding today to see if a DSCR loan is right for your Tennessee business!
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