Down payment documentation has become a hot button of focus for the SBA and subsequently banks. The SBA requires that the bank collect at minimum 3 months most recent bank/brokerage statements from all accounts that will be the source of down payment for the loan PRIOR to approval. The SBA’s main concern is that the funds are the buyer’s and are not borrowed funds. Therefore, it is assumed that if the funds are indeed yours that they would have already been in your account for quite some time. Specifically, the last 3 months PRIOR to approval is the required proof. It is most critical for buyer’s to understand that these bank statements are required PRIOR to approval. The approval usually occurs about a week or so after a buyer enters into a purchase contract. For example, if a buyer enters into a purchase agreement on 4/1 then we will be seeking copies of the bank statements for January, February and March from all accounts that will be the source of down payment towards the purchase. The bank and SBA state that the only funds that are eligible to be used as injection towards the purchase without any further documentation are the total amount of funds shown on the opening balance on the January bank statement. These funds are considered “seasoned” and no more additional documentation will be required from the buyer’s. However, if any large deposits came into the buyer’s accounts in month of January, February or March then we must go get evidence of where those funds came from in the form of 3 months bank statements from the bank account that was the source of the large deposit into the buyer’s account.

For example, many clients are not aware that even if you are receiving gifted funds from a family member or friend that the giftor (Uncle, Aunt, Cousin or whomever) must also provide the bank with 3 months of bank statements from their personal bank account to show the bank evidence of the source of those funds. Many relatives do not feel comfortable giving the buyer or us copies of their personal bank statements, especially when it is a gift that they are giving to help out the buyer. This seems excessive but this is a hard rule by the SBA that the source of ALL funds to be used as a down payment must be verified of their origin. The SBA is working with the Department of Homeland Security to safeguard against foreign entities illegally funding projects in the U.S. Also, the SBA is working with the FDIC to ensure and protect against money laundering. Neither of these two above concerns are ever problems with any of our clients nor do we ever expect to have these problems, however, for the common man attempting to buy a hotel it creates a lot of hassle in terms of injection documentation that must be met head on.

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