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in Sutter Creek, CA
Self-employed borrowers in Sutter Creek face a common problem: tax returns show minimal income after deductions. Both bank statement and P&L loans solve this, but they use different methods to prove what you actually earn.
The right choice depends on how your business handles cash flow and whether you have a CPA relationship. Most Amador County self-employed buyers qualify for one but not both.
Bank statement loans calculate income from 12 or 24 months of business deposits. Lenders average your monthly deposits, subtract an expense factor (typically 25-50%), and use that as qualifying income.
This works best for service businesses with steady deposit patterns. Real estate agents, consultants, and contractors in Sutter Creek use these when they don't maintain formal books. You need personal or business bank statements showing consistent deposits.
Credit minimums start at 600-620. Most programs require 10-20% down depending on credit strength and debt ratios.
P&L loans use a CPA-prepared profit and loss statement covering 12-24 months. Your accountant signs off on the numbers, and lenders use the net profit as qualifying income without arbitrary expense deductions.
This typically qualifies you for more because you're not losing 25-50% to expense ratios. But you need a real CPA relationship and proper books. Most P&L programs also require a business license and may ask for a year-to-date P&L.
Credit minimums match bank statement loans at 600-620. Down payment requirements are similar, but higher qualifying income often means better loan amounts.
The income calculation drives the biggest difference. Bank statement lenders deduct 25-50% for expenses whether you actually spend that much or not. P&L loans use your CPA's numbers, so if your profit margin is 60%, you qualify based on 60%.
Documentation separates them too. Bank statements are simple: pull 12-24 months from your account. P&L loans need a signed CPA letter, business license, and formally prepared financials. If you're not already working with an accountant, bank statements cost less to obtain.
Rates and terms are comparable since both are non-QM products. Expect rates 1-2% above conventional. The program you can actually document should drive your choice, not rate differences.
Choose bank statements if you don't have a CPA or formal books. Most Sutter Creek service businesses under $500K revenue fall here. It's faster to document and your bank already has the records.
Go with P&L if you have high profit margins and a CPA relationship. Tech consultants, specialized contractors, and established businesses with 50%+ margins qualify for more using actual financials. The extra documentation effort pays off in buying power.
Run both scenarios with actual numbers. A business banking $20K monthly qualifies differently at 50% expenses (bank statement) versus 65% net profit (P&L). We calculate both to find your strongest approval path.
Yes, if business income flows through personal accounts. Many self-employed borrowers in Sutter Creek use personal statements showing client deposits.
No, just prepared and signed. An audited statement costs $5K+, but a CPA-prepared P&L runs $500-1500 and meets lender requirements.
Rates are similar since both are non-QM. Your credit score and down payment affect pricing more than choosing between bank statement or P&L documentation.
Yes, if you can produce the documentation. We often run both calculations upfront to lock in the stronger approval before starting underwriting.
Most lenders accept 12 months. Using 24 months can help if recent months show stronger deposits or if you need to smooth seasonal income variations.