The Quick Read: A flip loan is sized from the deal, not from your income: the lender tests a cost-based limit and an after-repair-value limit, then lends the smaller of the two, so owning a business helps only indirectly through liquidity, track record, and guarantor strength.
- Two yardsticks set the loan: loan-to-cost (tiered by completed projects) and a cap tied to the finished value.
- Typical leverage runs 85%, 90%, or 93% of project cost, and every tier is capped at 75% of after-repair value, varying by lender, property, and experience.
- Whatever the lender will not fund is your cash in the deal, and fees, interest, and reserves come on top.
- Business income does not size the loan. Your business shows up as liquidity, experience, and entity paperwork.
A business owner who walks into a hard money conversation usually expects the loan to track their company’s income. It does not. Think of the lender as pricing a project instead of a person. The lender asks what the house will be worth, what it costs to get there, and whether you can finish and exit. This article walks through that sizing math step by step, shows where owning a business matters, and covers the edge cases where the general rule bends.
What this loan actually costs to carry.
Hard money is sized against the project and priced by time. Enter the deal and see how much the program will lend, the cash required at closing, the carry while you hold it, and what is left at the exit.
Leverage tiers on the current program: 85% with fewer than 2, 90% with 2 or more, 93% with 5 or more completed projects — every tier capped at 75% of after-repair value. Loan amounts up to $5,000,000, larger by exception; terms of 6 to 18 months, interest-only, no prepayment penalty. The rehab portion funds in draws against completed work, not at closing.
Program parameters shown update from Lendmire’s centralized guideline source. Rate, points, and months are editable assumptions, not quoted terms.
Cost cap sets the loan · positive spread
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. Rate, points, and months are editable assumptions. Hard money is business-purpose financing for real estate investors, not a consumer mortgage. Leverage on the current program tops out at 93% of project cost for investors with a documented track record, capped at 75% of after-repair value, with rehab funding up to 100% of the documented budget released in draws; actual terms vary by lender, borrower experience, property, and exit. Lendmire is a mortgage broker, not a lender.
Key Terms Defined
After-repair value (ARV): what the property should be worth once the work is finished, based on comparable sales.
Loan-to-cost (LTC): the loan divided by purchase price plus rehab budget. Cost-based figures always mean a percentage of project cost, not of value.
Loan-to-ARV: the loan divided by the finished value. This is the cap that most often limits a thin deal.
As-is value: what the property is worth today, before any work.
Draw: a release of rehab money after the lender confirms a stage of work is complete.
Skin in the game: your own cash in the deal, which lenders want to see before they fund the rest.
How a Lender Sizes a Flip Loan, Step by Step
The lender runs every limit that applies and lends the smallest result. That is the entire logic. A headline number such as “up to 93%” describes one limit on one tier, not what you will actually receive on a specific deal.
Here is the sequence a lender follows:
1. Confirm the collateral. Flip loans are for non-owner-occupied residential property, typically one to four units, held for business purposes.
2. Value the property. The lender establishes as-is value and ARV, usually through an appraisal or broker price opinion. Reputable lenders verify ARV independently and do not simply accept your estimate.
3. Compute the cost-based limit. Take purchase price plus rehab budget, then apply the percentage for your experience tier.
4. Compute the ARV limit. Apply the ARV cap to the lender’s value, which on our network’s typical program is 75% of after-repair value.
5. Take the smaller number. That is your loan. The gap between total project cost and the loan is the cash you bring.
6. Add the extras. Fees, prepaid interest, and the liquidity to start the work sit on top of that gap.
Across the wholesale network Lendmire places these files through, the experience tiers are the clearest dividing line. Fix-and-flip leverage typically runs 93% of project cost at five or more completed projects, 90% at two or more, and 85% with fewer than two. First-time investors qualify at the lower tiers. Every tier is capped at 75% of ARV. Rehab money is released in draws against completed work, and up to 100% of the rehab budget can fund that way. That is a rehab-budget figure and never a purchase leverage figure. All of this varies by lender, property, and experience, and nothing here is a commitment to lend.
One point surprises people. There is no true 100% purchase program. When you hear “100% financing” in this space, it usually means the loan covers the full rehab budget through draws. You still bring cash for the purchase side, plus fees and reserves.
A Worked Example With the Limits Side by Side
A cleaner way to see this is to express everything as a share of ARV. These are modeled assumptions, not market data. Say a property’s ARV is 100 units, and the purchase plus rehab budget totals 70 units, which is 70% of ARV. A borrower with fewer than two completed projects sits at the 85% tier.
| Limit | Calculation | Result |
|---|---|---|
| Cost-based (85% of cost) | 85% × 70 | 59.5% of ARV |
| ARV cap (75%) | 75% × 100 | 75% of ARV |
| Loan (smaller) | Cost limit binds | 59.5% of ARV |
| Cash gap | 70 − 59.5 | 10.5% of ARV |
The cost limit binds here, because the deal has a healthy margin. The ARV cap never comes into play. Your cash in the deal is about 10.5% of ARV before fees, interest, and reserves.
Now run a thinner deal. Purchase plus rehab equals 85% of ARV, and the borrower has two completed projects, so the tier is 90%.
| Limit | Calculation | Result |
|---|---|---|
| Cost-based (90% of cost) | 90% × 85 | 76.5% of ARV |
| ARV cap (75%) | 75% × 100 | 75% of ARV |
| Loan (smaller) | ARV cap binds | 75% of ARV |
| Cash gap | 85 − 75 | 10% of ARV |
Here the ARV cap binds, and the experience tier stopped mattering. Even at the 93% tier, this deal still tops out at 75% of ARV. Experience raises the cost percentage. It does not lift the cap.
The Stress Case: The Appraisal Comes in Low
Take that second deal and suppose the lender’s valuation lands 10% below your estimate, so ARV is 90 units instead of 100. The cap becomes 75% × 90, or 67.5 units. Project cost is unchanged at 85. The loan shrinks from 75 to 67.5, and your cash gap grows from 10 to 17.5 units, measured against your original ARV estimate. That is a 75% bigger cash need, and it appears after you are already under contract.
This is why an aggressive ARV is the most expensive mistake a flipper makes. It does not fail loudly. It simply reduces the loan late in the process. Underwrite your own deal at a conservative ARV first, then see whether the numbers still work.
What Actually Moves the Number
Some factors raise the ceiling, some shift the tier, and some only change how comfortable the lender feels. Keeping those straight prevents wasted effort.
| Factor | What it changes | What to document |
|---|---|---|
| The deal itself | Both limits | Contract, scope, budget, comps |
| Completed projects | Cost tier (85/90/93%) | Prior closings, sale records |
| Credit score | Eligibility and conditions | Credit report from the guarantor |
| Liquidity | Lender comfort, cash to close | Statements showing seasoned funds |
| Entity and guarantor | File structure | Operating agreement, EIN, good standing |
On credit, a 620 minimum score is the floor on our network’s program, with additional conditions below 660. Underwriting stays asset-based, meaning property, plan, and exit are the center of the file. Lenders review credit as one input, not as the sizing engine.
Loan size runs up to $5,000,000, with larger amounts by exception and smaller balances varying by lender. Terms run 6 to 18 months, interest-only, with no prepayment penalty. There are no multi-year options on the current program, so a project that needs longer runway usually refinances into long-term rental financing instead.
What Owning a Business Does and Doesn’t Change
Owning a business does not raise the deal-based ceiling. The 75% ARV cap and the cost tiers are the same for a restaurant owner, a dentist, and a W-2 employee. Where a business owner differs is in four supporting areas. These are broker observations about how files tend to look, and each lender applies its own guidelines.
Liquidity. Business owners often hold more cash than their personal returns suggest. Lenders want to see enough liquidity for fees, prepaid interest, closing costs, and the start of the rehab. Cash sitting in a business account is not always treated like personal cash, so lenders may ask how you can access it. Funds should also be seasoned, which means they have sat in the account for a while. A large transfer right before closing raises questions, and a clean paper trail answers them.
Experience credit. Many business owners have real renovation experience without a long flip history. A contractor or remodeler background can strengthen the file, but the cost tier usually counts documented completed projects. If you have built or rehabbed properties through your company, gather the closing records and sale records. Those are what move you up a tier.
Guarantor and entity. Most flip loans go to an LLC, subject to lender program eligibility, with the owner signing a personal guaranty and a credit pull applying. For a business owner, the cleanest file separates the flip entity from the operating company. Be ready to explain who owns the borrowing entity, who signs the guaranty, and where the money came from.
Where business debt and trapped cash hurt. Because flip sizing is asset-based, your other business debt matters less than it would on a debt-to-income loan. It can still matter indirectly if it drains the liquidity the lender expects to see. Cash tied up in inventory, receivables, or equipment does not count as liquid in most reviews. How a specific lender treats operating-company financials varies, so ask before you assume.
Irregular or messy business income is a non-issue at flip sizing, since income is not what sizes the loan. It becomes relevant at the exit refinance, where rental income and value decide the next loan.
This is also where a practical piece of regulatory context belongs. Flip loans are business-purpose investor loans, so they are reviewed differently from a standard owner-occupied mortgage. Per the FDIC examination manual, credit extended primarily for a business purpose is exempt from Regulation Z, and the OCC handbook adds an exemption for credit to non-natural persons. That is why the loan can be sized on the asset. A Hunton legal note cautions that business purpose does not mean compliance-free, so keep the loan’s purpose documented.
Total Cash You Need, Not Just the Down Payment
Most flippers calculate the gap between cost and loan, then stop. The real cash requirement is larger, and liquidity is often what decides whether a deal closes.
Plan for these pieces on top of the gap:
- Lender fees and closing costs, which vary by lender.
- Prepaid or accrued interest, since the loan is interest-only.
- The front end of the rehab, because draws reimburse completed work and you may need to fund the first stage.
- A contingency for overruns, which are common on older houses.
A forum rule of thumb says that even when a deal’s total cost sits comfortably under the lender’s ARV limit, you can still need meaningful cash at closing for the items above. Treat that as a heuristic, not a guideline. The point holds, though: the gap is rarely the whole bill.
If the Number Comes Up Short
When the math leaves you with less loan than you expected, you have a few levers.
- Bring more equity. The simplest fix, and the one that never depends on the lender.
- Renegotiate the price. A lower purchase price lowers cost and widens the margin under the ARV cap.
- Trim the scope. A smaller rehab budget reduces cost, though it can also lower ARV. Check both sides.
- Re-check your comps. If your ARV estimate is sound and the lender’s is low, share stronger comparable sales with the underwriter.
- Choose a lower-leverage structure. A bridge purchase without rehab, for example, runs up to 80% of purchase price.
Do not treat ARV as a workaround. A loan based only on after-repair value does not replace a down payment, liquidity, or experience, and lenders do not size that way.
Documents to Have Ready
A well-organized file makes a conservative lender more comfortable. Start with the deal documents: purchase contract, scope of work, contractor bids or a line-item budget, a timeline, comparable sales supporting ARV, and your exit plan. Then add the borrower documents: entity papers, guarantor ID and credit authorization, and bank statements.
Business owners should add a few extras. Include the operating agreement showing ownership of the flip entity, an EIN letter, a certificate of good standing, and a clear explanation for any large deposits or transfers. If you are relying on construction experience, add closing statements from prior projects.
Where the General Rule Breaks
A few situations bend the sizing logic.
Owner-occupied property. Hard money flip loans are for non-owner-occupied property. A loan on a home you will live in is a consumer-purpose loan, and it follows different rules. Lenders look at the purpose of the loan, not just the collateral, as this Compliance Alliance summary of the Regulation Z commentary explains.
Property type. The program covers one to four units, and ground-up construction can go to ten units. Commercial, industrial, land, and hospitality properties are not offered.
Refinancing instead of flipping. A cash-out or rate-and-term refinance on a hard money program runs up to 65% of value, a very different formula from the flip tiers.
Lender variation. Some lenders size off as-is value instead of purchase price, tier leverage on a different experience window, or charge fees per draw. Comparing lenders means comparing the effective loan on your specific deal, not the headline percentage.
Tax questions. Tax treatment varies; consult a qualified professional.
Planning the Exit Before You Size the Loan
A flip loan is bridge financing, and the exit decides whether the project works. If you plan to sell, the sale price must clear the loan, the carry, and your costs. If you plan to hold, many investors refinance out of hard money into long-term rental financing once the property is stabilized. Lendmire brokers that path into DSCR loans, where rent coverage and value decide the loan. The complete DSCR loans guide explains how those programs work.
If you are buying, rehabbing or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals. The program covers 41 markets, including Washington, D.C., and an illustrative calculator on the site can help you test a deal before you talk to anyone.
Frequently Asked Questions
Does owning a business get me a bigger flip loan?
Not directly. The ceiling comes from the deal: the cost tier and the 75% ARV cap. A business can help through liquidity, documented renovation experience, and a strong guarantor, but those affect eligibility and comfort more than the cap. Terms vary by lender, property, and experience.
Do I need to show business or personal income to qualify?
Flip loans are underwritten on the asset, the plan, and the exit, not on income or debt-to-income. Lenders still review credit, with a 620 minimum score and additional conditions below 660. Income becomes important later, at the refinance that replaces the flip loan.
Which limit usually controls the loan, cost or ARV?
On deals with healthy margins, the cost-based limit controls. On thin deals, the ARV cap controls, and it caps every experience tier at 75% of after-repair value. Run both limits on your own numbers and use the smaller result.
Can my business bank balance count as liquidity?
Often yes, but lenders may ask how you can access the funds and may prefer seasoned balances. Cash locked in inventory or receivables generally does not count. A clear paper trail for large deposits helps.
What happens if the appraisal comes in below my ARV?
The loan shrinks, because the ARV cap applies to the lender’s value, not yours. Your cash need rises by the difference. Stress-test your deal at a conservative ARV before you sign a contract.
About Lendmire
Lendmire is a DSCR-focused mortgage brokerage, NMLS# 2371349, placing investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed by the lender around a property’s rental income rather than personal income documentation, which fits LLC-held rentals, self-employed investors, and portfolios scaling past conventional financed-property limits. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
The exit plan matters as much as the purchase price on short-term financing – see the hard money loan overview.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. FDIC Consumer Compliance Examination Manual – Truth in Lending Act
2. OCC Comptroller’s Handbook – Truth in Lending Act
3. Hunton – Beware of “Business Purpose”
4. Compliance Alliance – Regulation Z and Investment Properties
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Hard Money Maximum Loan Amount Requirements for a Flip · How a Hard Money Lender Counts Days to Close a Fix and Flip Loan · How to Meet Hard Money Requirements on Your First Fix-and-Flip
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.