Practice Owner Lower The Expense Factor — The Quick Read: Yes, a practice owner can often lower the expense factor a lender applies to business bank statements. The usual tool is a signed letter from a CPA or tax preparer stating the practice’s real, documented expense ratio. Underwriters still check that letter against the account’s actual deposit and withdrawal pattern before they accept it, so a letter alone doesn’t guarantee anything — but it’s the legitimate path.
Yes, a practice owner can move their expense factor lower than the default, but only with paperwork that holds up. The default exists because underwriters can’t see line-item expenses on a bank statement, so they assume a chunk of every deposit goes to overhead. A CPA letter or profit-and-loss statement replaces that assumption with a documented number. If the number doesn’t match how money actually moves through the account, an underwriter will reject it and fall back to the default — sometimes after the fact, which can be a bigger problem than starting with the default in the first place.
What Is An Expense Factor, Exactly?
An expense factor is the percentage of business deposits an underwriter assumes goes to overhead before counting the rest as qualifying income. If a practice deposits a given amount monthly and the file uses a 50% factor, only half that amount counts toward the borrower’s income for qualification purposes. Drop that factor and the qualifying income rises — which can change how large a loan the practice owner personally qualifies for.
This matters because bank statement loans exist for exactly the kind of borrower whose traditional personal-income documentation understate what they actually bring in. A practice owner writing off equipment, staff benefits, and retained earnings often shows modest taxable income even in a thriving practice. Bank statement underwriting sidesteps the tax return and looks at deposits instead — but it still needs a way to estimate real cash flow, and the expense factor is that estimate.
Why Does 50% Show Up So Often?
Fifty percent is the usual default number for a business account. This isn’t random. It’s what shows up in real loan files reviewed for securitization. A due-diligence exception from a 2025 loan-level review of a residential mortgage-backed deal proves this. The SEC EDGAR — COLT securitization due diligence exception filing says “the underwriting expense ratio used was 50% per the income worksheet.” It also says an alternate ratio is acceptable “as long as the underwriter can see from the bank statements and/or line of business that an alternate expense ratio is accurate.”
That last phrase is the whole ballgame. The underwriter isn’t required to accept a lower number just because someone asks. The account activity has to back it up.
The CPA Letter Path
A signed letter from the practice’s CPA or tax preparer, stating the actual documented expense ratio, is the standard mechanism for moving off the default. The letter has to specify a percentage and cover the same period as the bank statements being used, and the underwriter compares it against the account’s real cash movement before applying it.
Across the wholesale programs Lendmire’s network works with, fixed ratios commonly run 20% for a service business with no employees, 40% for a business with one to five employees, and 50% for a business with six or more employees or any product-based business — or an accountant-provided ratio can be used instead of the fixed tiers, subject to underwriting review. A profit-and-loss method, capped at 80%, is also an option on some files. None of these swap in automatically. Each still gets checked against the deposits.
What actually goes wrong here is instructive. A separate 2025 due-diligence exception involving a different securitization shows a lender’s guide requiring a fixed 50% ratio for a service business with one to five employees “unless a letter is received from a CPA/Tax Preparer reflecting a lower expense ratio.” In that file, income had been calculated using a 40% ratio with no supporting letter on file. Once flagged, the file had to be recalculated at the required 50%, which pushed the debt-to-income ratio “which exceeds the max of 50% DTI.” That’s a real closed-loan consequence, not a hypothetical: skip the documentation, and the lower ratio can get pulled back out from under the file later, sometimes after the loan has already funded.
Does It Work The Same Way For A Medical Or Dental Practice?
Not necessarily — and this is the part most generic explainers skip. A staffed medical or dental practice typically runs much higher overhead than a lean solo-service business. That limits how far a CPA letter can realistically move the needle. According to MGMA — Medical Practice Operating Costs Are Still Rising in 2025, support staff salaries and benefits alone typically eat up roughly a quarter of total practice revenue. Once you count physician or advanced-practice-provider pay, total labor commonly runs 50% to 60% or more of all operating spend.
That means a solo consultant with no staff has a real shot at a documented ratio near the 20% floor. A staffed family practice or general dentistry office, with hygienists, front-desk staff, and clinical support on payroll, is far more likely to land a documented ratio close to or above the 50% default than dramatically below it. A CPA letter for that kind of practice isn’t a magic discount — it’s a confirmation that the standard assumption was roughly right all along. That doesn’t make the letter worthless, since it can still support the file and prevent an underwriter from defaulting to an even higher ratio, but it resets expectations about how big a swing to expect.
Practices most likely to see a real benefit from documentation are lean, low-overhead specialties. Think of a solo consulting practice, a single-provider telehealth operation, or a service business with little to no support staff. A group practice with a full clinical and administrative team should expect the CPA conversation to land closer to the default number than to any advertised floor.
Does This Apply To Personal Statements Too?
Yes, but personal accounts get treated differently, and lenders don’t apply the same starting assumption to both. Some programs use a different factor for personal accounts than for business accounts. Which one ends up higher depends on the specific wholesale program. Things get more complicated when a practice owner runs personal expenses through the same account used for business deposits. That’s a documentation problem, and a CPA letter can’t fix it alone — underwriting generally wants a clean, identifiable revenue stream, not commingled personal and business activity.
Transfers from the practice’s own business account into the owner’s personal account get better treatment than most other deposit types. Lenders typically count these transfers in full. They don’t get discounted by an expense factor, because that expense assumption was already applied once on the business side.
Timing Matters More Than People Expect
Documentation submitted before underwriting first reviews the file carries more weight than documentation submitted after a denial or a counteroffer. Once a file has already been calculated at the default ratio, reversing that after the fact is a much harder conversation than getting the CPA letter in front of the underwriter from the start.
The practical sequence: gather 12 or 24 consecutive months of business bank statements first, since a partial or non-consecutive set of transaction histories won’t substitute. Then have the CPA or tax preparer review that same period and put a specific expense percentage in writing, matched to the practice’s actual structure and headcount. Bring both pieces to underwriting together, rather than statements first and a letter later.
Where This Fits Against A DSCR Rental Loan
None of this expense-factor math applies if the practice owner is financing a rental property through a DSCR loan rather than qualifying on personal or business income. DSCR underwriting looks at the rental property’s own income relative to its payment, not the borrower’s practice deposits or traditional personal-income documentation — so a practice owner whose personal statements show a discounted qualifying income because of a high expense factor may still qualify for a rental purchase entirely on the strength of the property’s own cash flow. Lendmire’s complete DSCR loans guide covers how that qualification path works in more detail.
That difference matters for a practice owner juggling both types of financing. A personal residence loan, or a full-doc-alternative purchase, uses the expense-factor math described above. A rental property purchase works differently. It qualifies mainly on whether the property’s rental income covers the payment, subject to lender guidelines. The practice’s bank statements generally don’t factor into that calculation at all.
For sizing context: Lendmire’s wholesale network places bank statement files from $300,000 up to $30,000,000 across two programs — a portfolio non-QM program running to $6,000,000, and a bank portfolio program that carries twelve-month-statement files to $30,000,000 on its own ladder, with maximum leverage stepping down as loan size increases, and interest-only options capped relative to that same ladder. On a primary residence, leverage likewise steps down as loan size climbs, tightening through the mid-tiers before reaching its most conservative point once a file crosses $4,000,000, with everything above that size reviewed case by case before submission. Second homes and investment properties typically run somewhat lower leverage than primary residences at every size tier. Credit requirements generally start at a 660 floor, moving higher above the super-jumbo size threshold, with reserve requirements commonly running lighter on smaller files and heavier on larger ones. These are the same wholesale-network parameters discussed in Lendmire’s coverage of using a CPA letter to lower the expense factor and how a super-jumbo bank statement loan applies the CPA method.
DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage.
Key Terms Defined
Expense factor: the percentage of business bank deposits an underwriter subtracts before counting the rest as qualifying income, used to estimate real overhead a lender can’t see on a statement.
CPA letter (expense letter): a signed statement from a practice’s accountant or tax preparer specifying the practice’s actual, documented expense percentage for a given period, used to override a lender’s default ratio.
Profit-and-loss (P&L) method: an income calculation based on a business’s profit-and-loss statement rather than a fixed expense ratio, generally capped well below full deposit value.
Qualifying income: the income figure an underwriter uses to calculate debt-to-income ratio, calculated by dividing eligible deposits (after the expense factor) by the number of statement months.
Frequently Asked Questions
Can moving money between accounts lower my expense factor? No. Underwriters strip out internal transfers, loan proceeds, and other non-income deposits before averaging, so shuffling money between accounts doesn’t change the underlying calculation — it can actually raise scrutiny if the pattern looks inconsistent with the claimed ratio.
Does my practice’s actual profitability matter if I don’t have a CPA letter? Generally not directly. Without documentation, most files default to the standard tiered ratio for the business type and headcount, regardless of how profitable the practice actually is on paper.
Can I negotiate the expense factor after a loan offer is made? Rarely, and not favorably. The ratio is typically set early in underwriting based on the documentation provided at that point; introducing new documentation after an offer usually means resubmitting the file rather than adjusting the existing one.
Does a lower expense factor help with a rental property purchase too? Not directly. A DSCR loan is reviewed primarily on the rental property’s own income covering its payment, subject to lender guidelines, so the practice’s bank statement expense factor generally isn’t part of that calculation.
What happens if my CPA letter doesn’t match my account activity? The underwriter can reject it and default to the standard ratio, or route the file to a different program entirely if withdrawal patterns look inconsistent with the claimed expense percentage.
Tax treatment can depend on how funds are used and how a property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
If you’re weighing a personal bank statement loan against financing a rental purchase through property-level cash flow, Lendmire can help compare options based on documentation, leverage, credit profile, and investor goals. Reach Lendmire’s team at 828-256-2183 or request a quote through the mortgage quote form.
For current guidelines and terms, see Lendmire’s super jumbo bank statement loan programs page.
Self-employed borrowers can compare both super jumbo programs on Lendmire’s self-employed mortgages page.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 40 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR loans are evaluated by the lender on rental income rather than personal income, subject to lender guidelines — a fit for LLC-owned portfolios, self-employed investors, and operators scaling beyond conventional loan caps. Recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
Lendmire’s Top Mortgage Workplace recognition is documented by Scotsman Guide 2025 Top Mortgage Workplace and Scotsman Guide 2026 Top Mortgage Workplace.
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References
1. SEC EDGAR — COLT securitization due diligence exception filing
2. MGMA — Medical Practice Operating Costs Are Still Rising in 2025
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.
