Bank statement loans for business owners are a type of mortgage designed specifically for self-employed individuals who may not have traditional income documentation like W-2s or tax returns. These loans use business or personal bank statements to verify income, making them a great option for business owners with fluctuating or tax-deducted income.
How Bank Statement Loans for Business Owners Work
- Income Verification:
Lenders analyze deposits in the borrower’s business or personal bank accounts over 12 to 24 months. Instead of using net income after tax deductions, they focus on gross deposits or adjusted income based on a percentage of those deposits. - Adjustment for Business Expenses:
When using business bank statements, lenders often apply an expense factor (e.g., 50–70%) to estimate the borrower’s actual income after business expenses. Personal bank statements may not require this adjustment. - Loan Terms:
These loans are available for various property types, including primary residences, second homes, and investment properties. They typically have higher down payment requirements and interest rates than traditional loans. - Documentation Required:
- 12-24 months of bank statements (business and/or personal).
- Proof of business ownership, such as a business license or articles of incorporation.
- Letters from a CPA to verify income or expense ratios (in some cases).
Benefits for Business Owners
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