Operating evidence and financing
What this package helps you examine
Owner-occupied financing depends on the operating business as well as the building. Intercompany rent can make the property statement look stronger while reducing the business statement by the same amount. Prepare both entity views and a combined cash-flow reconciliation so the proposed debt is supported by cash generated outside the ownership group.
Eliminate internal transfers once
Identify the property owner, operating company and any related service or holding entities. Reconcile actual rent paid and received, then eliminate the same transfer when evaluating combined cash generation. Do not add rent back to business income while also counting it as separate property income. Preserve external occupancy costs, taxes, insurance and other property expenses so consolidation does not remove a real cash obligation.
Distinguish earnings from cash available
Bridge reported business earnings to the proposed repayment source, including working-capital needs, equipment debt, taxes and distributions as applicable to the lender's analysis. Identify discretionary or nonrecurring adjustments with evidence. A successful operating business can still face a cash trough while inventory, receivables or a new location absorbs funds. The OCC owner-occupied and global cash-flow discussion is supervisory context, not a universal loan formula.
Fund the move and operating transition
For an expansion or relocation, schedule build-out, equipment, installation, staff training, old-site rent and the new property's debt payments. Do not assume the old location stops costing money when the new building closes. Separate the project's eligible financing costs from the complete economic budget and obtain a specific determination for any SBA or other program classification.
Use the workbook
- Use Assumptions!D5 for Base (1) or Downside (2), and the labeled scenario input rows. Enter source data in Entity Cash!D10:K21; preserve formula cells and an untouched workbook copy.
- Combined cash starts with business cash before rent, eliminates related rent and deducts property operating costs; it is not gross business revenue. Global cash then deducts listed business debt service and maintenance capital. Do not deduct them again or add the same business cash to separate property income.
- Reconcile Operations to Summary. Apply the entered lender adjustment separately to the modeled cash flow. Sizing uses amortizing debt service, while first-year payments reflect the entered interest-only period.
- In Assumptions, replace illustrative value, LTV, DSCR, debt yield, rate, amortization and requested ceiling with the intended scenario. Review capacities in Debt and Funding. The smallest modeled capacity does not establish eligibility or approval.
- Closing equity includes the entered opening cash and restricted reserves. Additional operating cash need is measured after that opening cash, so do not add it twice. Inspect monthly cash and remaining principal at maturity.
- Read Review for model conventions and limitations. Save each scenario with its supporting evidence and date; actual lender definitions, legal rights and professional findings control the transaction.
Questions to prepare for a lender
Which entity generates the cash that repays the loan?
Entity-level statements and a combined bridge eliminating intercompany transfers.
Is the proposed rent affordable to the operating business?
Actual business cash flow, external obligations and a documented related-party lease.
What cash is tied up in working capital?
Receivables, inventory, payables and seasonal borrowing schedules.
What overlaps during relocation?
Old and new occupancy obligations, shutdown schedule and operating ramp budget.
Which business or property costs are eligible for the chosen execution?
Lender cost classification and program-specific review using the actual transaction.
What support remains after closing?
Verified unrestricted sponsor funds net of business and property commitments.
03 / Prepare
Build the evidence file
Use this as a preparation checklist. The lender determines the documents, definitions and review conditions for the actual transaction.
Cash flow and operations
- Business financial statements, tax returns and interim results requested by the lender.
- Property income and expenses separated from the operating company.
- Related-party lease and intercompany rent reconciliation.
- Receivables, inventory, payables and working-capital borrowing detail.
- Business, equipment and property debt schedules with payment terms.
- Adjustment log supporting owner compensation and other proposed normalization.
Property and collateral
- Purchase contract, title, survey and current permitted-use evidence.
- Building condition and environmental reports for the actual business use.
- Build-out, relocation and equipment scope with ownership identified.
- Utility capacity, access, loading and other operational requirements.
- Evidence of approvals needed for the intended occupancy and work.
- Old-location lease obligations, restoration requirements and exit costs.
Sponsor and execution
- Ownership chart connecting property, operating company and guarantors.
- Management experience and succession or key-person dependencies.
- Personal and entity liquidity evidence with restricted amounts identified.
- Other guaranties, business commitments and contingent obligations.
- Equity source and authority for both real-estate and business spending.
- Operating transition responsibilities and contingency staffing plan.
Closing and funding
- Lender-approved sources and uses covering both eligible and excluded costs.
- Written property and business occupancy/program determinations where applicable.
- Equipment lien, collateral and intercreditor requirements identified by counsel.
- Draw, reimbursement and interim-funding conditions for improvements.
- Insurance, payoff and closing-cost documentation.
- Post-closing working-capital floor and monitoring responsibility.
Watch for these assumptions
- A higher intercompany rent does not create additional consolidated cash.
- Working-capital funding and a real-estate down payment compete for the same unrestricted dollars.
- A business-purpose loan does not automatically make every property or cost eligible under a government program.
- A successful relocation budget must include the period of double occupancy and delayed revenue.
Before you rely on the result
- Reconcile entity-level and combined cash flow before choosing a rent assumption.
- Fund working capital independently of the real-estate closing wire.
- Verify actual program eligibility and collateral treatment before committing excluded costs.
Scope and limitations
- Educational analysis; not a financing offer, appraisal, legal opinion or program eligibility determination.
- Workbook figures and thresholds are illustrative editable assumptions, not current lender quotes or universal underwriting standards.
- Document requests depend on the lender, transaction, jurisdiction and property; address unresolved issues with the relevant qualified professional.
Sources and applicability
These references support the stated asset and risk context. The questions and document lists are preparation tools, not a statement that every lender requires or accepts the same package. Actual contracts, applicable rules and the chosen lender determine the transaction requirements.
- OCC Commercial Real Estate LendingAppendix D, Loans Secured by Owner-Occupied Properties, printed page 131; global cash-flow discussion printed page 30 · Checked 2026-10-21Source-specific context; numerical examples and decision workflow are original hypothetical analysis.