You’ll need to supply the most recent 12 or 24 months of business bank statements. Multiple accounts may be used, but it’s essential to apply the same calculation method consistently across all provided accounts. To use business bank statements, the Applicant(s) must collectively own 25% or more of the business.
Method 1 | Uniform Expense Ratio:
Calculate by multiplying all deposits by a 50% expense ratio, then multiply the result by the Applicant’s ownership percentage, and finally, divide by the number of statements provided. If this expense ratio aligns with the Applicant’s work and they qualify, no further information is needed. However, any unusual deposits will require sourcing and documentation.
Method 2 | Profit and Loss Statement:
Provide a profit and loss statement prepared by a CPA, EA, or licensed tax preparer, covering the same period as the bank statements. Use the net income from the P&L statement for qualification if business statements support eligible deposits of at least 75% of the gross receipts listed on the P&L. Any irregular deposits must be sourced and documented. The income used for qualification must be reasonable based on the Applicant’s line of work.
Method 3 | CPA Letter for Expense Ratio:
Include a letter from the Applicant’s CPA, EA, or licensed tax preparer, stating the business’ expense ratio based on the most recent year’s tax return. The letter should not contain any exculpatory language. Calculate the expense ratio by multiplying it by the business’s total deposits over the period indicated on the bank statements. Deduct that figure from the total deposits, and then multiply the net deposits by the Applicant’s pro-rata ownership percentage, and divide by the number of statements provided. The income used for qualification should be reasonable based on the Applicant’s line of work. The minimum expense factor is 10%.
Maximum Loan-to-Value (LTV) = 90%.
