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in Lincoln, CA
Lincoln's self-employed borrowers face a documentation choice. Bank statement loans pull income straight from your deposits. P&L loans rely on a CPA's financial summary.
Both routes bypass tax returns. Your business structure and how you handle deposits determine which works. Most borrowers favor one over the other within five minutes of review.
Bank statement loans analyze 12 or 24 months of business or personal deposits. Lenders calculate average monthly income from total deposits minus obvious transfers. No CPA needed—just clean statements.
This works when you run cash through your accounts consistently. Deposits should show steady business revenue, not erratic patterns or constant transfers between accounts. Lenders look for income they can verify month to month.
You'll typically qualify for more with 24-month statements versus 12. Longer history smooths out seasonal dips. Credit requirements start around 620, though stronger scores unlock better pricing.
P&L statement loans require a CPA-prepared profit and loss report covering 12 or 24 months. The CPA signs off verifying your business income and expenses. That signature carries weight lenders accept instead of tax returns.
This route makes sense when bank deposits don't tell the full story. Maybe you take owner draws sporadically. Perhaps you keep cash reserves that don't move through accounts. A P&L captures business profit regardless of deposit timing.
Your CPA must be licensed and in good standing. The statement needs standard formatting with clear revenue and expense categories. Expect similar credit requirements to bank statement loans—around 620 minimum.
Bank statement loans cost less upfront. You gather statements yourself and hand them over. P&L loans require paying a CPA for preparation—budget $500 to $2,000 depending on complexity.
Income calculation differs sharply. Bank statement lenders apply percentage factors to deposits—often 50% to 100% depending on business type. P&L lenders use net profit from your statement. This creates vastly different qualifying amounts for the same borrower.
Documentation timelines favor bank statements. Most borrowers already have statements on hand. P&L preparation takes weeks if your CPA isn't already tracking monthly figures. Rate and fee structures run similar across both options once approved.
Choose bank statement loans when deposits flow predictably. If business revenue hits your account monthly with minimal transfers, this path closes faster and costs less. Lincoln contractors and consultants with steady client payments fit this profile.
Go with P&L loans when cash flow looks messy on statements. Business owners who reinvest heavily, take irregular draws, or manage multiple entities benefit here. The CPA synthesizes everything into clean profit figures lenders accept.
Some borrowers qualify differently under each method. Run both calculations before committing. A contractor depositing $20,000 monthly might show $120,000 annual income on bank statements but $180,000 net profit on a P&L after deducting materials separately.
No—lenders require one income verification method per file. Mixing both creates conflicting income figures that underwriters won't accept.
Rates run nearly identical. Both are non-QM products with similar risk profiles, so pricing aligns closely between the two options.
Most programs accept 12 or 24 months. Using 24 months typically qualifies you for more income and may improve your rate slightly.
No—the preparer must be a licensed CPA in good standing. Bookkeepers and unlicensed accountants won't satisfy lender requirements.
Lenders back out obvious transfers to avoid double-counting. Clean statements with clear business deposits process faster than messy ones.
Not for income verification. Some lenders request returns to verify you filed, but they won't use them to calculate qualifying income.