What Is a DSCR Business Purpose Loan?

A DSCR — debt service coverage ratio — business purpose loan is a type of Non-QM loan designed for real estate investors, entrepreneurs, and business owners. The debt service coverage ratio is a financial metric that compares the cash flow of the property — its performance — to the overall mortgage obligation. 

With these loans, lenders focus on the DSCR rather than the borrower’s personal income when reviewing the loan application. A DSCR of greater than 1 indicates that the property or business earns enough to cover its debt obligations. 

DSCR commercial loans in Missouri are popular among real estate investors and business owners who don’t qualify for traditional financing due to personal income, even though their investment properties generate strong cash flow. This alternative approach to financing allows DSCR lenders in Missouri to gauge the health of the business based on the income it produces rather than the personal financial situation of the borrower.

Benefits of DSCR Loans in Missouri

DSCR loans in Missouri offer several unique benefits to real estate investors. The main benefit of these loans is that they focus on the property’s cash flow rather than the personal income of the borrower, making them popular among investors with strong property revenues but fluctuating or low personal incomes. 

With DSCR loans, investors can access properties with strong revenue streams they may not qualify for with a traditional loan, leading to a potential for higher ROI in the Missouri real estate market. 

Other benefits of DSCR loans in Missouri include the following: 

  • No income or job history verification required
  • Loan amounts up to $5,000,000
  • No limit on the number of properties
  • As little as 20% down 
  • Credit scores as low as 620 accepted
  • DSCRs as low as .75 accepted
  • Suited for long- and short-term rentals (including Airbnb rentals)
  • No reserves are required on cash-out loans; 6 months are required on all other loans

Requirements for DSCR Business Purpose Loans in Missouri

With DSCR loans in Missouri, borrowers don’t have to provide proof of personal income since the primary qualifier for the loan is the DSCR of the investment property. However, Missouri DSCR lenders will consider factors like credit score, down payment, and the type of property. The main requirements for DSCR business loans in Missouri are:

  • DSCR of at least .75
  • A credit score of 620 or above
  • Down payment of at least 20%
  • Minimum loan amount of $100,000

Lenders will ask for specific documentation about the property to determine its net operating income (NOI) or cash flow. In addition, they’ll perform an appraisal to assess the property’s current market value to ensure it aligns with the loan amount before approving your application. 

If you’re taking out a DSCR loan as an LLC, lenders will ask for Articles of organization, Operating agreement, EIN letter from the IRS, and a certificate of good standing to determine the business’s viability. Every lender is different, so requirements vary. For instance, many lenders prefer a DSCR of at least 1.25, while Griffin Funding allows for DSCRs as low as .75. 

Apply for a DSCR Business Purpose Loan in Missouri

With a DSCR business loan in Missouri, you can take your investments to new heights and tap into flexible financing tailored to your needs. Designed to focus on the property’s cash flow rather than your personal income, DSCR loans open doors for both seasoned and novice investors. 

As a leading DSCR lender in Missouri, Griffin Funding understands your unique investing needs. Benefit from our flexible financing, tailored programs, and expert insights to help you find the right mortgage for you. Apply for a DSCR business loan online today. 

Frequently Asked Questions: Missouri DSCR Business Purpose Loans

How do I calculate my debt service coverage ratio (DSCR)?

The DSCR measures the cash flow of the property available to pay the mortgage, providing lenders and business owners with insight into the financial health of a property. To calculate your DSCR, you can divide the property’s gross rental income by the total debt service, including principal, interest, taxes, and insurance.

To simplify the process, you can use our DSCR calculator to find your DSCR and determine if you may qualify for a DSCR loan. 

What is the minimum DSCR needed to get a DSCR loan in Missouri?

What qualifies as a good DSCR varies by lender. In general, lenders typically like to see a DSCR above 1, which indicates the property generates more than enough income to repay the debt obligations. A DSCR lower than 1 means the property doesn’t generate enough income to repay the loan, indicating negative cash flow. 

The DSCR affects a borrower’s ability to qualify for a loan. Some lenders may not be willing to work with you if your DSCR is below 1.25. On the other hand, lenders like Griffin Funding allow for DSCRs as low as .75. Keep in mind that a low DSCR may affect your loan terms, including how much you qualify for. 

Can I get a DSCR commercial loan in Missouri as a first-time investor?

Yes, first-time investors can qualify for a DSCR loan in Missouri because the loan is based on the property’s income rather than the borrower’s personal income. Griffin Funding recognizes the potential in new investors, and we are proud to offer opportunities to support their ventures. 

However, first-time investors should understand the pros and cons of DSCR loans to help them determine if this is the right option for them. By contacting Griffin Funding and discussing your unique needs, we can guide you through the intricacies of these loans to help you make the right decision for you.