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in Larkspur, CA
Larkspur's self-employed professionals face a choice: verify income with bank statements or CPA-prepared P&Ls. Both skip tax returns, but they work differently for qualifying.
Bank statement loans calculate income from deposits. P&L loans use your accountant's financials. The right choice depends on how you manage your business finances.
Bank statement loans use 12 to 24 months of business or personal bank statements to prove income. Lenders analyze deposits, subtract business expenses by a standard percentage, and calculate your qualifying income.
This works well if your accounts show consistent deposits but your tax returns minimize income. Most lenders use a 50% expense ratio for personal accounts, 25% for business accounts.
P&L statement loans use a CPA-prepared profit and loss statement to verify income. Your accountant creates a financial snapshot showing revenue minus expenses over 12 to 24 months.
This option suits borrowers with clean books and an established CPA relationship. Lenders trust the professional preparation but often require the CPA to be licensed and have a history with your business.
Bank statement loans are more forgiving on documentation. You just need consistent deposits. P&L loans require an existing CPA relationship and formal financial statements.
Qualifying income differs significantly. Bank statements use fixed expense ratios regardless of actual costs. P&L loans use your real expenses, which helps if you run lean but hurts if overhead is high.
Approval speed matters in Larkspur's competitive market. Bank statements get underwritten faster since analysis is standardized. P&L loans take longer while lenders verify the CPA's credentials and review detailed financials.
Choose bank statement loans if you have messy books, no regular CPA, or business expenses that exceed the standard ratios. They work for newer businesses and borrowers who write off aggressively.
Go with P&L loans if your CPA already prepares detailed financials and your actual expenses are lower than standard ratios. This route shines for established businesses with clean accounting.
In Larkspur, many consultants and creatives prefer bank statements for simplicity. Professional service firms with formal accounting often qualify better with P&L documentation.
Yes, but lenders apply different expense ratios. Personal accounts typically get 50% expenses deducted, business accounts get 25%.
Your CPA must be licensed and typically needs at least 12 months of history preparing your business financials. Some lenders verify the CPA's license directly.
It depends on your actual expenses. If real costs are under 25-50%, P&L wins. If you have low overhead, bank statements with fixed ratios may show more income.
Rates are similar since both are non-QM products. Your credit score and down payment affect pricing more than documentation type.
Both require current documentation. Bank statements must cover the most recent 12-24 months. P&L statements should be prepared within 90 days of application.