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in Portola, CA
Self-employed borrowers in Portola face a choice: prove income with bank statements or CPA-prepared profit and loss documents. Both bypass traditional tax return requirements, but they work differently.
Your decision comes down to how you run your books and what documentation you already have. One path uses raw deposits, the other uses prepared financials.
Bank statement loans calculate income from 12 to 24 months of business or personal bank deposits. Lenders apply a percentage to your average monthly deposits to determine qualifying income.
You need consistent deposits and clean bank statements with minimal NSFs or overdrafts. This works best for contractors, consultants, and business owners with steady cash flow but aggressive write-offs.
Profit and loss statement loans use a CPA-prepared P&L covering 12-24 months to verify income. The CPA must be licensed and unrelated to you, and they typically need to review your business tax returns.
This path suits borrowers who maintain clean books and work with a CPA year-round. Your income calculation matches what the P&L shows, not what you actually deposited.
Bank statement loans focus on cash flow while P&L loans focus on profitability. A contractor depositing $20,000 monthly might qualify for more with bank statements than their P&L shows after expenses.
The CPA requirement creates the biggest split. Bank statement loans need no professional preparation, just your existing statements. P&L loans require paying a CPA to prepare documents specifically for the mortgage application.
Choose bank statement loans if you don't work with a CPA regularly or if your deposits are strong but your net profit looks thin on paper. This path shows lenders your actual cash management.
Go with P&L loans if you already maintain CPA-prepared financials and your books show healthy profit margins. This works especially well for established businesses with clean accounting systems already in place.
Most lenders require one method or the other, not both. Pick whichever shows your income more favorably based on how you structure your business expenses.
The loan rates are similar between both programs. Your extra cost is paying the CPA to prepare the P&L statement, typically $500-2000 depending on complexity.
It depends on your specific financials. Bank statements work better if deposits are high but net profit is low after write-offs.
Bank statement loans typically move faster since you just provide existing statements. P&L loans add time for CPA preparation, usually 2-4 extra weeks.
No. Lenders accept personal bank statements if your business income flows through personal accounts, common with sole proprietors and freelancers.