Business bank statement loans: how your deposits count

If you’re self-employed, your business bank statements may give a mortgage lender another way to assess your income. The lender looks for deposits it can count as business earnings, then estimates how much remains after the cost of running the business. It won’t treat every dollar entering the account as your personal income.

That estimate depends in part on the expense factor, the allowance the lender subtracts for business costs. Ask which deposits count, what factor the lender would use, and whether your records could support a lower one. The answers can make a real difference in how much income you qualify with.

What are business bank statement loans?

Business bank statement loans are mortgages that use your business account deposits to help document the income available to pay your home loan. They are one type of bank statement mortgage for self-employed borrowers. Depending on the program, they may be used to buy or refinance a home without using tax returns to calculate your self-employment income.

The name can be confusing. Your business is not borrowing the money. You are applying for a mortgage, and the lender is looking at the business bank account to understand what you earn. It will still review the rest of your application, including the property and your ability to make the monthly payment.

Business bank statement loans may help if you earn steady income but business deductions leave you with too little qualifying income on your tax returns for the home you want. Instead, the lender reviews your business deposits and subtracts an allowance for expenses to calculate what you earn.

How do lenders calculate income from business statements?

Your business bank statements show money coming in, but they don’t show how much you personally earn. To estimate your income for a mortgage, a lender first identifies deposits it can count as business revenue. It then sets aside a portion for the cost of running the business.

Here’s the basic calculation:

1. Add up the business deposits the lender accepts over the statement period.
2. Divide by the number of months reviewed to find your average monthly eligible deposits.
3. Subtract an allowance for business expenses, called the expense factor. What remains is your estimated monthly qualifying income, before any adjustment for your share of ownership.

Average monthly eligible deposits × (1 − expense factor) = estimated monthly qualifying income

Suppose your business averages $30,000 a month in eligible deposits. Here’s how different illustrative expense factors change the result:

At a 50% factor, the lender sets aside $15,000 for estimated business costs and counts the remaining $15,000 as monthly income. A lower factor means the lender counts more of the deposits. That income figure is not your monthly mortgage budget: the lender also considers your existing debts and the payment on the loan you want.

Try our bank statement loan calculator to explore a potential monthly mortgage payment. A lender can then tell you which deposits and expense factor it would use for your application.

What determines the expense factor?

The expense factor depends on the lender’s program and what it can verify about your business. A consultant working alone may have fewer costs than a business with employees and inventory, but your industry alone does not determine the factor. Some lenders will consider records showing what your business actually spends.

Here’s what that can look like with different lenders. Angel Oak Mortgage Solutions describes a standard 50% factor and says some industries may require 70%. It asks for a letter from an eligible third party to support a lower factor. Griffin Funding also describes a standard 50% business factor, with a CPA-verified option that can go as low as 10% in eligible cases. FundLoans advertises a variable factor as low as 20% without a CPA letter through its Apex program. That could appeal to borrowers who can’t document lower expenses, though Apex starts at a $300,000 loan amount and a 660 credit score.

Can you use your actual expenses instead of the standard factor?

Sometimes. If the standard factor assumes higher costs than your business really has, ask whether the lender accepts a letter from a CPA or tax preparer documenting your expense ratio. Confirm who may prepare it, what period it must cover, and what financial records the preparer will need before paying for a letter. Some lenders offer a separate profit-and-loss (P&L) qualification method; do not assume a P&L automatically replaces the letter under a bank statement program.

In the $30,000-a-month example from above, a 50% expense factor leaves $15,000 in monthly qualifying income. If the lender accepts records supporting a 30% factor, it would count $21,000 instead. That higher figure could help you qualify if income is holding back your application. It does not mean your business is bringing in an extra $6,000 a month or that the lender will approve a larger loan.

Check the payment against your real finances, too. If your business spends more than the lender’s factor assumes, you may have less cash available than the qualifying income figure suggests. Make sure the full monthly housing payment, including taxes and insurance, fits what you regularly have left after business expenses.

Which deposits will a lender leave out?

Deposits must represent income the lender can reasonably connect to your work. A payment from a client may count, while moving $10,000 between two accounts you own does not necessarily create $10,000 in new revenue. Lenders may exclude transfers, refunds, loan proceeds, or amounts that cannot be identified as ongoing business income.

Keep records for deposits that might raise questions:

• Large or unusual client payments: An invoice, contract, or payment record can show what the money was for.
• Transfers between your accounts: Statements from both accounts can show that the money was already counted elsewhere.
• One-time receipts: Explain whether they came from ordinary work, a business asset sale, a loan, or another source.
• Refunds or returned payments: Identify them so the lender does not mistake them for new sales.

Do not remove a genuine seasonal payment from your estimate just because it is large. Show the lender where it came from and ask whether it can be included. Our bank statement loan document checklist can help you collect the statements and supporting records.

Does your ownership percentage change the income calculation?

It can. If several people own the business, a lender may count only the share of its income attributable to the borrower or borrowers on the mortgage. For instance, Acra Lending’s published bank statement calculation applies its 50% business expense deduction and then adjusts the remaining deposits for the borrower’s ownership percentage.

With $30,000 in average monthly eligible deposits and a 50% expense factor, that example starts at $15,000. If the applicant owns 50% of the business and Acra’s approach applies, the resulting figure is $7,500 a month, before other underwriting decisions. A different lender may ask for more information about distributions or the business structure. Have your ownership documents ready, and ask how each lender calculates your share.

How many months of business statements do you need?

Many programs ask for 12 or 24 consecutive months of statements. You will generally need every page, including months when the business earned less. The lender uses the full period it accepts, not just your strongest months.

If the business has grown recently, a 12-month average may be higher than a 24-month average. A longer period may be helpful for a seasonal business, but lenders also review whether income is declining. For example, Acra’s published worksheet says its 24-month program uses the lower of the latest 12-month average and the 24-month average when addressing declining income.

Ask which period is available for your file, what income each calculation produces, and whether the choice changes the loan’s rate or other terms. Your loan officer can tell you whether a recent change in deposits needs further explanation.

Would personal bank statements work better?

Possibly. Some lenders also let self-employed borrowers qualify using eligible deposits into a personal account. Under certain programs, those deposits may be counted without the business expense factor. That can help if you regularly transfer a substantial share of your earnings to yourself. If you leave most earnings in the business, the business statements may show more qualifying income.

Ask the lender to calculate both methods if you have both types of statements. It will need to confirm which transfers represent earnings, and it cannot count the same income twice. Our personal bank statement mortgage guide explains how lenders calculate personal bank statements.

What else does the lender review?

Showing enough income from your business deposits is only one part of qualifying. The lender will also review your credit and monthly debts, verify your self-employment, check the property’s value, and confirm you have enough money for the down payment and closing costs. Some programs also require savings left over after closing, called cash reserves.

The lender also estimates what the new home will cost you each month and considers that amount alongside your other debts. The estimate should account for principal and interest, property taxes, homeowners insurance, and any applicable mortgage insurance or HOA dues. Even if the lender counts more of your business income, your down payment or another program limit may still restrict how much you can borrow.

If a conventional mortgage might work for you, ask a lender to calculate your income using your tax returns as well. The lender may be able to make permitted adjustments for self-employment income. If you qualify for both options, compare how much you can borrow, the monthly payment, interest rate, and closing costs. Our bank statement loan requirements guide covers the other factors lenders review.

How should you compare lenders and offers?

Start with the calculation each lender would use for your business, rather than a published minimum score or maximum loan amount. Ask these questions:

1. Which deposits will you count, and over how many months?
2. What expense factor will you apply? Can I document a lower actual ratio, and what would that require?
3. How will my ownership share affect the income figure?
4. Would my personal statements or a conventional mortgage produce a better option?
5. For the same desired loan amount, what are the rate, fees, full monthly payment, and cash needed at closing?

The same business deposits may produce different qualifying income from one lender to the next. Angel Oak uses a 50% expense factor by default, but says some industries are underwritten at 70%. That would leave less income to qualify with, so ask which factor would apply to your business. Griffin Funding’s standard and CPA-verified paths give a borrower with lower documented costs a reason to ask for both calculations. If your business spends less than Griffin Funding’s standard 50% allowance assumes, its CPA-verified option may let the lender count more of your deposits as income. Check availability and request a calculation using your records before comparing prices.

If you are financing a personal residence, compare Loan Estimates for the same loan amount and type. Look beyond the rate to the monthly payment, closing costs, and what you expect to pay over the time you plan to keep the loan. A higher income calculation is valuable only if the resulting mortgage fits your budget and goals.

Next step:

• Gather complete consecutive business statements and identify transfers, refunds, and unusually large payments.
• Estimate your eligible monthly deposits and ask a lender which expense factor it would apply. If you also have a personal account, ask for both calculations.
• Use our bank statement income calculator to estimate your qualifying income and the monthly payment it may support. Then request a loan quote using the income the lender can actually document.

See what your business deposits show

Frequently Asked Questions

Are business bank statement loans business loans?

No. Business bank statement loans are mortgages for borrowers that use deposits into a business account to help document income. The property secures the mortgage; the business is not receiving a loan to fund its operations.

Does a lender count all my business deposits as personal income?

Usually not. It first removes deposits it cannot use as business revenue, then commonly applies an expense factor to estimate what remains after business costs. It may also adjust the result for your ownership share.

Is the business expense factor always 50%?

No. Some lenders use 50% as a standard starting point, but program rules and acceptable evidence of actual expenses can produce another factor. Ask what applies to your business rather than assuming an industry-wide rate.

Can a CPA letter help me qualify for a larger mortgage?

It may help if the lender accepts the letter, your documented expense ratio is lower than its standard factor, and income is limiting your application. The lender still reviews your debts, credit, funds, property, and overall loan terms.

Can I use statements from more than one business account?

That depends on the lender. If revenue enters several accounts, disclose them and ask which statements it needs. The lender will look for transfers between accounts so it does not count the same revenue twice.

Can I use my business statements without providing tax returns?

Bank statement mortgage programs generally use statements instead of tax returns to calculate self-employment income. You will still need other documents for the mortgage and your business. Ask the lender for the complete list for your particular program.