Editorial note: A Heter Iska agreement reframes lending as a profit-sharing partnership under Jewish law (Halacha). Availability, documentation, and terms vary by lender and state. This page is independent editorial content and not legal advice or a lender offer.
You’ll learn: what lenders typically ask for, how Iska requirements differ from conventional loans, the timeline, document packs, and common mistakes to avoid.
First, confirm your state/product on our banks list.
Table of Contents
At a glance — What lenders evaluate
Even though Iska replaces fixed interest with profit-based returns, banks still underwrite for ability to repay and transaction clarity. Expect focus on:
- Identity & compliance: KYC/AML checks, government ID, address.
- Income & capacity: pay stubs / W-2s / tax returns; or business financials.
- Purpose of funds: home purchase/REFI, equipment, working capital, etc.
- Iska agreement: lender template spelling out profit definition, reporting, audit rights, and loss treatment.
- Credit review: policy-dependent; lenders still review credit risk.
- Collateral (if applicable): mortgages or secured business facilities may require liens/valuations.
- State & product fit: not every product or state is supported.
Requirements checklist (copy, print, and tick)
| Category | Item | Notes |
|---|---|---|
| Identity | Government ID (DL/passport) | Name must match application |
| Address | Utility bill / bank statement | Last 60–90 days |
| Contact | Mobile & email | For verification and e-docs |
| Income (personal) | Recent pay stubs (2–3), W-2/1099, last 2 years tax returns | Self-employed: add Schedule C/K-1 |
| Income (business) | Last 2–3 years business returns, YTD P&L and balance sheet | CPA letter helpful |
| Purpose of funds | Purchase contract / invoice / business use plan | Be specific, attach quotes where possible |
| Credit | Authorization for credit review | Terms vary by lender |
| Iska agreement | Lender’s template for signature | Review profit definition, reporting/audit, loss rules |
| Collateral (if any) | Appraisal/valuation, title, UCC, hazard insurance | Product-specific |
| Banking | Last 3–6 months statements | Cash-flow view |
Tip: Send clean PDFs, labeled clearly (e.g.,
2023-TaxReturn.pdf,YTD-PnL-2025-08.pdf). It cuts days off underwriting.With documents ready, apply under Iska using this step-by-step.
Conventional vs Iska — What’s actually different?
| Aspect | Conventional Loan | Heter Iska Facility |
|---|---|---|
| Return structure | Fixed/variable interest | Profit-share per contract (no fixed interest) |
| Core document | Promissory note + interest schedule | Iska agreement (profit definition, reporting, audit, loss handling) |
| Risk alignment | Lender return due regardless | Lender return tied to profits (may be reduced/zero in loss/breakeven years per agreement) |
| Documentation flavor | Standard underwriting | Plus reporting obligations (financials, proof of profit) |
| Religious compliance | Not applicable | Halacha-compliant structure |
Who typically qualifies? (scenarios)
Business borrowers (most common):
- Use cases: equipment, inventory, working capital, owner-occupied real estate.
- What helps: 2+ years operating history, positive cash flow, CPA-prepared financials, clear profit tracking.
Mortgages / real estate (select lenders):
- Use cases: purchase or refinance, sometimes owner-occupied commercial.
- What helps: stable income, appraisal, clean title, insurance in place.
Personal/consumer (limited):
- Possible case-by-case. Expect more scrutiny because “profit” is harder to define outside a business context.
Reality check: Non-business use is rarer. If you’re outside the typical profiles, ask early whether the lender supports your case type.
Timeline — What to expect
| Week | Milestone | What you do |
|---|---|---|
| 1 | Discovery call | Confirm lender supports Iska in your state/product. Ask for document list. |
| 1–2 | Document collection | Send ID, income docs, bank statements, purpose-of-funds. |
| 2 | Preliminary review | Answer clarifications quickly; provide missing items. |
| 2–3 | Draft Iska agreement | Read profit, reporting, audit, loss sections carefully. |
| 3–4 | Final approvals & closing | E-sign docs; arrange collateral items; funding timeline agreed. |
Complex files (new businesses, multi-property deals) can take longer. Rapid responses shorten cycles.
The document packs (what to upload)
Personal (W-2/1099)
- Government ID, SSN/ITIN as applicable
- 2–3 recent pay stubs or 3–6 months income proofs
- W-2/1099; last two years of tax returns
- 3–6 months bank statements
- Purpose-of-funds documents (purchase contract, invoice, tuition, etc.)
- Iska agreement acknowledgment (later stage)
Business (LLC/Corp/Sole prop)
- Formation docs (Articles/Bylaws/Operating Agreement)
- EIN letter, ownership table
- Last two years business tax returns
- YTD P&L and balance sheet (CPA preferred)
- AR/AP aging (if financing working capital)
- Business bank statements (3–6 months)
- Purpose-of-funds detail (quotes, invoices, use plan)
- Iska agreement acknowledgment (later stage)
Collateral extras (if applicable): appraisals, title report, insurance binder, UCC filings.
The Iska agreement bits you must understand
1) Profit definition:
- Is “profit” EBITDA, operating profit, or net after certain adjustments?
- Are certain expenses excluded/normalized? Who decides?
2) Reporting & evidence:
- How often will you deliver financials? Quarterly? Annually?
- Is a CPA compilation/review required? In what format?
3) Audit rights & costs:
- Can the lender verify your numbers? Who pays for audits?
4) Loss & breakeven years:
- Is the lender’s return reduced or zero in such years?
- Any carry-forward or reconciliation rules?
5) Early payoff & fees:
- Can you prepay? Are there documentation/exit fees?
If any clause is unclear, ask the lender for a one-page plain-English summary before you sign.
Common mistakes (and easy fixes)
- Mistake: Treating Iska as “no-docs.”
Fix: Prepare a complete file like any serious loan. - Mistake: Vague use of funds.
Fix: Attach invoices/quotes and timelines; be specific. - Mistake: Ignoring reporting duties.
Fix: Put the reporting schedule on your calendar; assign a responsible person. - Mistake: Over-optimistic profit assumptions.
Fix: Model breakeven and downside scenarios; confirm how the contract treats them. - Mistake: Not looping in your CPA.
Fix: Have your CPA skim the Iska draft—especially the profit definition and evidence rules.
Example outcomes (illustrative, not offers)
| Facility | Business Result | Conventional Loan (illustrative) | Iska Facility (illustrative) |
|---|---|---|---|
| $100,000 | $25,000 profit | Interest due regardless (e.g., 8% = $8,000) | Lender share of profit (e.g., 20% = $5,000) |
| $100,000 | $0 profit | Interest still due | Return may be $0 per contract |
| $100,000 | $10,000 loss | Interest still due | Return $0; loss handling per agreement |
Takeaway: Iska aligns payments with actual outcomes, but requires evidence of those outcomes.
Questions to ask your lender (save this)
- Which products and states are currently supported under Iska?
- How exactly do you define profit? What documents prove it?
- What reporting schedule is required? Any CPA standards?
- What happens if I am breakeven or in loss? Any carry-forward?
- What fees apply (documentation, late, audit)?
- Can I prepay early? Any conditions?
- Typical timeline from application to funding?
- Contact for post-closing questions on reporting?
Heter Iska Loan Requirements & Eligibility (2025)
1) Do lenders still run a credit check under Iska?
Often yes. Credit review is common for risk assessment, but exact policy and impact vary by lender and product.
2) Do I need CPA-prepared financials to qualify?
Not always, yet CPA statements (P&L, balance sheet, tax returns) strengthen business files and speed underwriting.
3) What counts as acceptable proof of “profit” for Iska?
Financial statements that match the agreement’s profit definition (e.g., operating profit after agreed adjustments), plus bank evidence if requested.
4) Is collateral required for Iska facilities?
Depends on the product. Mortgages/secured business loans may need appraisals, liens, and insurance; unsecured lines may not.
5) Can self-employed or new businesses qualify without two years of returns?
Possible case-by-case. Expect tighter documentation (bank statements, interim financials) and potentially smaller limits.
6) Will I need a personal guarantee (PG)?
Some lenders ask owners for a PG on business facilities, especially for small or younger firms. Confirm this early.
7) What ongoing reporting is expected after funding?
Agreements often require periodic financials (quarterly/annual), and lenders may reserve audit/verification rights per the contract.
Conclusion
A Heter Iska facility asks for everything a serious loan requires—plus clarity on how profit is defined, proven, and reported. If you prepare clean documents, confirm the lender’s state/product availability, and understand the Iska clauses (profit, reporting, audit rights, loss/breakeven, fees, early payoff), the process is straightforward and avoids surprises. For some borrowers, Iska’s risk-sharing fits both faith requirements and cash-flow reality; for others, a conventional loan may still be cheaper—so compare both before you decide. Loop in your CPA (and legal reviewer if needed), keep timelines realistic, and only borrow what you can comfortably service.
Next steps (quick checklist):
- Assemble your file: ID, income/business financials, bank statements, purpose-of-funds.
- Shortlist lenders that support Iska in your state (see our Banks page).
- Ask verification questions (profit definition, reporting cadence, audits, fees, early payoff).
- Request a sample agreement or term summary in writing.
- After funding, calendar reporting deadlines to stay compliant.
For differences vs conventional loans, see Iska basics.
