So What Documents Do I (Absolutely) Need if I’m Self-Employed?
One of the most frustrating situations to find yourself in as a potential borrower is having to go back and forth with your broker to provide more and more paperwork. At times, the requests piling up seem disproportionately ridiculous, causing you to ask the question: what’s next? A blood sample, the shirt off of my back, and my first born?
So why does this happen? Often times I think it comes down to the broker explaining the qualification process for the self-employed and setting mutual expectations.
Early in my career as a lender I tended to ask for as little as possible, fearing that the client would get upset with me or that I would be inconveniencing them. But as time went on I learned that being self-employed is a different beast altogether, and no one knows that better than entrepreneurs themselves, so when working with your broker it’s best to provide ALL of the information.
All of what, you may ask?
Literally all of the things.
One simple solution is to give your accountant permission to speak with your broker directly, since the accountant should be able to provide the bulk of the information and documentation needed.
But what if that’s not an option? Then bare minimum generally needed is:
-2 years FULL T1s and NOAs (think of NOAs and T1s as socks that only work as a pair) and keep in mind that the FULL T1s with all of the pages are needed
-Your Notice to Reader Financial Statements, if incorporated your accountant likely prepared these and lenders ask for them as they provide a 2 year comparison to better understand income trends, expenses, and profitability OR
-2 Years T2s (corporate tax returns) if the above is not available
-Current Year Income Statement, sounds fancy right? This could literally be an excel sheet or a printout from Quickbooks showing your year-to-date earnings, but it will be particularly important if it’s already deep into a calendar year (like November or December) or if it’s been an atypical sales year for your business (hello Covid).
Lastly, there are some situations where the broker may ask for 6 months’ bank statements and supporting invoices when leveraging a special program like stated income, so it can’t hurt to provide these up front if you have them readily available.
While gathering the above may sound exhausting, the more information your broker has the better, especially if you consider that your broker’s goal is to understand the full picture so that they can leave no stone unturned and find you the most competitive solution possible. Remember, your broker needs to have all of the details in front of them to know what levers to pull, so even if it means a little digging through the filing cabinets for last years’ folders it could mean the difference between an optimal approval or a dismal decline.
Questions? Let’s talk.