mortgages for the self-employed, less than 1 year

You’ve done your research.  You’re thinking about a bank statement loan.  You have no idea what comes next.  

This is a common scenario for a lot of entrepreneurs and small business owners.  I hear about it regularly here at A Nightmare on Loan Street Blog.  What you don’t want to do is dive in head first and round up a million documents or come unprepared and live dangerously like Austin Powers at a blackjack table. 

The key for this is being prepared.  I’m going to review 3 common scenarios.  Why 3?  If you’re like me and grew up with School House Rocks, then you know that 3 is the magic number.  Not related, but Blind Melon did a great job on that song, so you’re welcome for the recommendation. 

But this can be less painful than going to the DMV.  You know how no matter what documents you bring, they’re always like “sorry, we need your dental records from your 12 year old check-up”.  This is way easier.  Let me show you…

A Single Bank Account

Let’s say you do all of your banking in one account.  That’s cool - lenders can take some steps to separate the business transactions.  Here’s what they’ll need:

• Bank statements -  12 months for sure, maybe 24 months
• P&L prepared by a CPA or tax preparer

The P&L will be the primary document - the Batman in this case.  The hero of this scenario will help the lender review profits you report and use it to find an average income with your bank statements.

Every superhero has a sidekick, and Robin is of course your bank statements.  They are there to support your P&L.  And remind Batman how awesome he is.  

Separate Accounts: Personal

Let’s say you have both personal and business accounts.  The good news is that this is kind of like those Choose Your Own Adventure books.  In this path, you decide to go with the personal account.  You will likely need to round up:

• Personal bank statements - 12 months, maybe more
• Business bank statements - 3 months, maybe more
• Optional: P&L

That doesn’t sound so bad does it?  Your personal bank statements will qualify you for the loan, while the others help support it.  A P&L is optional, and a few months’ worth of your business bank statements may be needed to make sure you are still actually using it.  

Separate Accounts: Business

Now for the other aspect of the two account business owner: using the business account for the bank statement loan.  You know how in the movies the bad guys are always like “this isn’t personal, it’s just business” before doing something awesome?  Well, that’s all you need to say when they ask if you take this route: “I’d like a loan, and this isn’t personal, it’s just business.”  Boom.  Mic drop.

Ok, I’m totally kidding.  This is actually really similar to the single account scenario we reviewed above where you’ll need to provide bank statements (12-24 months’ worth) and have a P&L from a CPA or tax preparer.  

The P&L is the main document used, and your personal bank statements will still be needed so that it’s clear about deposits based on profits on the P&L.  

See!  No reason to be intimidated at all.  You just need a few documents (bank statements and P&L depending on the scenario), and you’re all set!  No dental records required - but don’t forget them when you renew your license.