Global Cash Flow (GCF): The lender's analysis of a sponsor's complete financial position—all real estate holdings, personal income, liabilities, and contingent obligations. SBL underwriting is 90% asset-based, but the remaining 10% is a pass/fail gate on sponsor quality.
Why Does the Lender Care About My Personal Finances?
The property underwrites to 1.25x DSCR. The loan is "non-recourse." You passed eligibility. So why is your lender asking for personal tax returns and a list of every property you own?
Because Freddie Mac needs to know: Can you weather a storm?
A vacancy spike. A surprise capital expense. A tenant bankruptcy. If the property hits a rough patch, do you have the personal resources to carry it—or will you hand the keys back?
What Is the Asset-Based vs. Sponsor-Based Split?
| Factor | Weight | What It Means |
|---|---|---|
| Property Quality | ~90% | NOI, occupancy, location, condition |
| Sponsor Quality | ~10% | Liquidity, net worth, experience, credit |
The Pass/Fail Gate: That 10% is binary. A property with perfect fundamentals can still get declined if the sponsor fails liquidity or has undisclosed liabilities. You can't offset bad sponsor metrics with a better property.
What Is Form 1115?
Form 1115 (Borrower Certificate of Financial Condition) is the confession form. Every asset, every liability, every property you own—disclosed in writing and certified under penalty of fraud.
Form 1115 Disclosures
- Personal Assets: Bank accounts, investment accounts, retirement funds
- Personal Liabilities: Mortgages, auto loans, credit cards, student debt
- Real Estate Owned: Every property with address, debt, NOI, and equity
- Contingent Liabilities: Guarantees, co-signed loans, pending lawsuits
- Income Sources: Salary, business income, rental income, other
- Living Expenses: Monthly personal expenses (deducted from cash flow)
The Credit Report Cross-Check: Lenders pull your credit report and compare it to Form 1115. If you disclosed $50,000 in liabilities but your credit report shows $150,000, you've triggered a fraud alert. The form must match—completely.
What Are the Liquidity Requirements?
Liquidity = cash and liquid assets available after closing. This is your "rainy day fund" in the lender's eyes.
| Requirement | Standard SBL | Notes |
|---|---|---|
| Post-Closing Liquidity | 9 months P&I | Principal + Interest payments |
| What Counts | Cash, stocks, bonds, retirement* | *Retirement often discounted 30-50% |
| What Doesn't Count | Real estate equity, business value | Illiquid = doesn't count |
The Liquidity Math
| Loan Amount | Monthly P&I (at 6.5%) | Required Liquidity |
|---|---|---|
| $1,000,000 | ~$6,300 | ~$57,000 |
| $1,500,000 | ~$9,500 | ~$85,000 |
| $2,000,000 | ~$12,600 | ~$114,000 |
| $3,000,000 | ~$19,000 | ~$171,000 |
Post-Closing Means Post-Closing: You need this liquidity after paying your down payment, closing costs, and any repair escrows. Don't count money you're about to spend.
What Is the REO Schedule Trap?
REO (Real Estate Owned) is your portfolio. Every property you own gets listed with its debt, income, and cash flow.
| Property | Debt | Monthly P&I | Monthly NOI | Net Cash Flow |
|---|---|---|---|---|
| Subject Property | $1,800,000 | $11,400 | $14,000 | +$2,600 |
| 123 Main Street | $500,000 | $3,200 | $4,500 | +$1,300 |
| 456 Oak Avenue | $900,000 | $5,700 | $4,000 | -$1,700 |
| 789 Elm Court | $1,200,000 | $7,600 | $6,500 | -$1,100 |
| Total Net Cash Flow | +$1,100 | |||
The "Dog Property" Drag: Those two properties with negative cash flow? They're bleeding $2,800/month. That $2,800 gets deducted from your global cash position. Your portfolio's weakest properties can disqualify you from new loans—even if the subject property is a star performer.
What If I Have Negative Cash Flow Properties?
| Approach | How It Works |
|---|---|
| Show Reserves | Prove you have cash to cover the shortfall for 12+ months |
| Explain the Situation | Is it temporary (renovation, lease-up)? Document it. |
| Sell or Refinance | Get the dog off your books before applying |
| Add a Guarantor | Bring in a partner with stronger liquidity |
What Are Contingent Liabilities?
Contingent liabilities are debts that might become your problem—guarantees you've signed, co-signed loans, pending litigation. Lenders count these against you unless you prove otherwise.
| Type | Example | Lender Treatment |
|---|---|---|
| Loan Guarantee | You guaranteed your LLC's construction loan | 100% of payment counted against you |
| Co-Signed Debt | You co-signed your child's mortgage | 100% of payment counted against you |
| Partnership Debt | You're a GP on a property with recourse debt | Pro-rata share counted |
| Pending Litigation | You're a defendant in a lawsuit | Potential judgment reserved |
The Brother's Construction Loan: You co-signed a $2M construction loan for your brother's project. The lender counts 100% of that monthly payment—$12,000+—against your liquidity. Unless you can prove your brother's project cash flows to cover its own debt, that guarantee wipes out your cushion.
How Do I Get Contingent Liabilities Excluded?
| Prove Self-Support | Show the underlying asset generates enough NOI to cover its debt |
| Provide 12-Month History | Bank statements showing the asset has paid its own way |
| Get a Release | If the debt has seasoned, request a guarantee release from the lender |
| Document Indemnification | Written agreement that the primary borrower holds you harmless |
What Is the Net Worth Requirement?
Beyond liquidity, Freddie Mac wants to see overall financial strength.
| Standard Requirement | Net Worth ≥ Loan Amount |
| How It's Calculated | Total Assets - Total Liabilities |
| What Counts | Real estate equity (at appraised value), investments, business interests |
Real Estate Equity Counts Here: Unlike liquidity (where RE equity doesn't count), net worth includes your real estate equity. A $2M property with a $1M mortgage = $1M of net worth.
What About Experience Requirements?
Freddie Mac SBL is more forgiving on experience than conventional Freddie Mac, but first-time borrowers face additional scrutiny.
| Sponsor Type | Requirements |
|---|---|
| Experienced (Freddie history) | Standard liquidity and net worth |
| First-Time Freddie | Higher DSCR (1.25x), sponsor interview, property management review |
| First-Time Owner | Third-party property management often required |
The Sponsor Interview: First-time Freddie Mac borrowers may be required to attend a "Sponsor Meeting"—an interview where you explain your experience, discuss your operating plan, and demonstrate you can manage the asset. Preparation matters.
How Do I Prepare for Global Cash Flow Review?
Pre-Application Sponsor Prep
- Pull Your Credit Report: Know what the lender will see before they see it
- Complete Form 1115 Draft: List every asset, liability, and property accurately
- Calculate Post-Closing Liquidity: Cash after down payment, closing costs, escrows
- Build REO Schedule: Know the NOI and cash flow of every property you own
- Document Contingent Liabilities: List every guarantee; gather proof of self-support
- Address Problem Properties: Sell, refinance, or document improvement plans for dogs
- Calculate Net Worth: Assets minus liabilities; should exceed loan amount
The Bottom Line: SBL is asset-first, but sponsor-last isn't sponsor-never. Your personal balance sheet is the final gate. Clean up your REO, document your contingent liabilities, and ensure your liquidity survives the closing. A great property can still get declined on sponsor—don't let that be you.