The Quick Read: A franchise owner qualifies by showing 12 or 24 consecutive months of personal or business bank deposits, which the lender converts into income after an expense ratio, and then pairing that income with credit of 660 or higher, adequate reserves, and a property the program accepts, through select wholesale programs and subject to full underwriting. Traditional personal-income documentation can understate a franchise’s real cash flow, so the deposits tell the fuller story. This page covers mortgages, not SBA or franchisor financing.
- Statements: 12 or 24 consecutive months, personal or business, full pages only.
- Income: eligible deposits divided by the statement months, after an expense ratio on business accounts.
- Credit and debt: a 660 floor on the portfolio program, with debt-to-income up to 50%.
- Reserves: typically 3, 6 or 9 months depending on loan size.
- Alternative: if the property’s rent is strong, a DSCR loan may fit better than a bank statement loan.
What Is a Bank Statement Loan, and Why Do Franchise Owners Use One?
A bank statement loan is a mortgage that reads your deposits instead of your traditional personal-income documentation. It belongs to the non-QM family. Non-QM means the loan does not follow the standard rules for conventional mortgages.
Franchise owners fit this product for a simple reason. A franchise can throw off strong cash while the tax return shows modest profit. Depreciation, payroll, royalties, equipment write-offs and ownership-level expenses all shrink taxable income. A conventional underwriter sees only that smaller number. A bank statement underwriter sees the money moving through the accounts.
This guide leans on first-hand broker experience with high-balance files placed across a wholesale network. Franchise-specific points below describe how the underwriting logic applies, since every program sets its own details. This page focuses on how you actually qualify.
The readers who benefit most are founders, physicians, attorneys and multi-unit operators whose traditional personal-income documentation understates income. Consumer mortgage lending through Lendmire is licensed in 16 states: AL, CA, CO, FL, GA, IN, MI, MT, NM, NC, OH, PA, TN, TX, VA and WA. If you are elsewhere, treat this as general education.
How Does Underwriting Turn Deposits Into Qualifying Income?
Several steps drive your qualifying income, and each one can move your number.
1. Pick the statement set. You choose between 12 and 24 months, personal or business. The bank portfolio program uses 12.
2. Screen the deposits. Revenue counts. Transfers between your own accounts, loan proceeds, refunds and one-time items are stripped out.
3. Average. Eligible deposits are divided by the number of statement months.
4. Apply the expense ratio on business accounts.
5. Prorate for ownership. If you own less than 100% of the entity, income is adjusted to your share.
6. Run the rest of the file. Credit, reserves, debts and the property are underwritten alongside the income.
Statements must be consecutive. A transaction history or a screenshot never substitutes for the full statement.
What expense ratio will the lender use?
Trade press such as Scotsman Guide uses a 50% expense factor as its example for business statements, and that is only an illustration. Across the wholesale network, the ratio depends on the business. Through select wholesale programs, subject to full underwriting, the fixed ratios typically look like this:
| Business profile | Typical expense ratio |
|---|---|
| Service business, no employees | Lowest ratio, set by the program |
| Service business, with a few employees | Middle ratio, set by the program |
| Larger staff, or any product business | Highest ratio, set by the program |
| Accountant-provided ratio | Set by the letter |
| Profit-and-loss method | Income capped by the program |
Most franchises have staff, and many sell products, so 50% is the realistic planning number. You do not pick the ratio. The program sets it, and a CPA letter or profit-and-loss statement can support a lower one only if the program accepts it.
A worked example in plain units
Say a single-unit owner’s business account shows eligible deposits averaging 100 units a month after transfers and refunds are removed. A 50% ratio leaves 50 units of qualifying income. A 40% ratio leaves 60. The gap between those two ratios is large, which is why the ratio matters as much as the deposits. These units are a modeled assumption, not market data.
Personal or Business Statements: Which Fits a Franchisee?
Personal statements are generally read closer to raw deposits. Business statements take the expense ratio first. The program lets you use business statements when you own at least 25% of the business.
Here is a detail many franchisees miss. Transfers from your own business into your personal account count at 100%. Say you pay yourself through owner draws or distributions into a personal account. The lender can read the personal account, and those transfers count in full without a further haircut. Your business accounts then serve as support. In that setup, personal statements often produce the cleaner number.
Business statements make more sense when the money stays in the business and you draw irregularly. You then trade the expense ratio for a larger deposit base. Run both versions before you commit, since one usually wins by a clear margin.
Franchise-Specific File Issues
Franchise files carry quirks that a generic self-employed borrower does not have. These come from how underwriting logic applies to franchises, and each program handles them differently.
Deposit sources. Card processors, delivery platforms and cash deposits are real revenue. Underwriters generally accept them when they are visible and consistent. Sales tax collected and platform pass-throughs may be treated as non-income, so expect questions.
Fixed costs. Royalties, ad-fund contributions, payroll, rent and inventory are heavy. An underwriter may resist a low expense ratio without third-party support. That is why an accountant-provided ratio can matter.
Multiple units and entities. Owners of several locations often run several LLCs. The lender needs statements for each account used, ownership documents and a screen for transfers between entities. Money moving from Unit A to Unit B must be stripped out so revenue is not counted twice. Statements for the business accounts you rely on, plus entity papers showing your percentage, make that screen faster to complete.
Commingled accounts. If personal spending runs through the business account, or the reverse, deposits are harder to classify. Clean this up before you apply.
Newly acquired units. A franchise bought recently may leave you with less than 12 months of history under your ownership. Some programs do not fit that situation. Others may look at prior operating history, depending on the program and the file.
Seasonality. Dips happen. A short written explanation, supported by the statements, helps the underwriter. Declining deposits over the statement period, though, are a real warning sign for underwriting.
Credit, Reserves, Leverage and Size
Credit, reserves and leverage decide whether the income number turns into an approval. Through select wholesale programs, subject to full underwriting, the typical ranges look like this.
| Requirement | Typical range |
|---|---|
| Credit score | 660 floor; 680 on bank program |
| Debt-to-income | Up to 50% |
| Reserves | 3 months to $500K; 6 to $1.5M; 9 above |
| Extra financed properties | 2 more months each, 12-month cap |
| First-time investors | 12 months reserves |
Debt-to-income, or DTI, compares your monthly debts to your monthly income. Trade press such as Scotsman Guide notes that some non-QM lenders allow DTI up to 50%, versus 43% for government-sponsored loans. In the wholesale network, 50% is the typical ceiling.
Loan sizes run from $300,000 to $30,000,000 through two wholesale programs. A portfolio non-QM program carries files to $6,000,000. A bank portfolio program carries twelve-month-statement files to $30,000,000 on its own ladder. Everything above $4,000,000 is reviewed case by case before submission.
Leverage steps down as size goes up. On a primary residence purchase, ceilings reach 90% to $1,000,000, 85% to $2,000,000 and 80% to $3,000,000. At the top credit tier, 75% is available to $4,000,000. On an investment property, expect about five points less at each size. A purchase between $300,000 and $1,000,000 typically tops out at 85% with 700+ credit, and a cash-out in that band at 75%. Above $1,000,000, 90% is not available.
Larger files carry overlays. Above $3,500,000 on a primary residence, and above $3,000,000 on a second home or investment property, programs generally want a 700 credit floor, a clean housing payment history and seasoning after any credit event.
Where the General Rule Breaks
The standard path is deposits, then an expense ratio, then income. These exceptions change the path.
Less than 12 months of history. A true bank statement loan needs the full statement set. A recently purchased franchise may not fit.
Profit-and-loss paths. A P&L-based method exists as a separate option, with income capped at 80%. Availability varies by program.
Asset-based paths. If deposits are thin but liquid assets are deep, an asset allowance divides liquid assets by 36, 60 or 84 months to create income, on primary and second homes only. An assets-only path needs liquidity equal to the loan plus closing costs, with no DTI test. Retirement accounts count at 70%, or 80% at age 59½ and over. Business funds, gifts and cryptocurrency never count.
Cash-out limits. On the portfolio program, cash-out is unlimited at or below 60% LTV and capped at $1,500,000 above that. Cash-out ceilings on a primary residence reach 80% in the lowest size band and step down from there. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Interest-only. Interest-only structures run to 85% on purchase and rate-term files on the portfolio program with a 700 floor. The bank program stops at 60%. The structure never raises a cash-out ceiling.
Occupancy. Primary, second-home and investment loans each have their own ladder. Second homes are one-unit only.
How Is a Bank Statement Loan Different From a Documentation-Free Loan?
It is not documentation-free. Income has to be documented. A bank statement loan is reviewed on documented income under the applicable program, subject to lender guidelines.
Investment purchases sit on a different footing. 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, a distinction the Federal Register rulemaking describes.
Bank Statement Loan or DSCR Loan for a Rental?
A bank statement loan underwrites you, using your deposits. A DSCR loan reviews the property’s rental income, using its rent against its payment. DSCR stands for debt service coverage ratio. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines.
A franchise owner buying a rental has two routes. The deposits can carry the file, or the property can. Four questions usually decide it.
| Question | Points to bank statements | Points to DSCR |
|---|---|---|
| Does the rent cover the payment? | Weak coverage | Strong coverage |
| Is DTI a problem? | DTI is fine | DTI is tight |
| Are deposits stable? | Stable | Declining |
| Is the file simple? | Clean accounts | Messy accounts |
Select lenders in the network offer DSCR programs below 1.00 coverage, but LTV and terms adjust. If your deposits are strong but the rental is thin, bank statements may carry it. If your business is lumpy and the rent is strong, DSCR can leave the business out of the equation. Lendmire’s comparison of DSCR and bank statement loans for investors goes deeper, and the complete DSCR loans guide covers the property-based route.
In practice, many franchise owners with several units need both tools over time. One suits the primary residence or a vacation home. The other suits the rental portfolio.
Document Checklist and a 90-Day Prep Timeline
Must have: every page of 12 or 24 consecutive statements for each account used, ownership documents showing your percentage, and two months of asset statements for reserves.
If applicable: a CPA letter supporting a lower expense ratio, a profit-and-loss statement, entity papers for each LLC, and a short note explaining dips or large one-time deposits.
Skip: screenshots, partial pages and transaction exports.
Preparation works best in three stages.
- 90 days out: separate personal and business spending, and stop moving money between your own accounts without a reason.
- 60 days out: gather statements and entity papers, and ask your CPA whether a ratio letter is realistic.
- 30 days out: pay down revolving balances that inflate DTI, and label any large deposit that is not revenue.
What Makes Files Stall, and How to Fix Them
Most stalled files trace back to a handful of causes. Unexplained transfers are the first, and the fix is a clear label for each one. Declining deposits come second. Show the cause and, where true, the recovery. Commingled accounts are third, and a few months of clean separation helps. Missing pages, especially across multiple entities, come fourth, and a complete set solves it. A low credit score or thin reserves come last, since those are checked alongside income.
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Key Terms Defined
Non-QM: a mortgage that falls outside the standard conventional rules, which lets lenders use alternative ways to document income.
Expense ratio: the share of business deposits the lender subtracts as operating cost before income counts.
DTI: debt-to-income, your monthly debts divided by your monthly qualifying income.
Reserves: liquid money left after closing, measured in months of housing payments.
Seasoning: the waiting period or history a program wants, such as time after a credit event.
DSCR: the property’s rent divided by its monthly payment, used when the property carries the loan.
Frequently Asked Questions
Can I use the statements from my franchise’s business account?
Yes, if you own at least 25% of the business, through select wholesale programs and subject to full underwriting. The lender applies an expense ratio of 20%, 40% or 50%, or an accountant-provided ratio. If you move money into a personal account, those transfers count at 100% in that account.
Do I need 24 months of statements, or are 12 enough?
Twelve is enough on most programs, and the bank portfolio program uses 12. Twenty-four months can help if your recent year was weaker than the one before. Ask a broker to compare both on your numbers.
Will a CPA letter lower my expense ratio?
It can, but the lender decides. An accountant-provided ratio is one of the allowed methods, and a profit-and-loss statement is another, with income capped at 80%. The letter needs to come from a third-party tax professional.
Can I buy a rental with a bank statement loan?
Often yes, depending on the program. Investment properties generally carry about five points less leverage than a primary residence at each size. A DSCR loan is the other route if the property’s rent is strong.
What if I bought my franchise recently?
A short ownership history may not fit a full bank statement program. Some programs consider prior operating history, and asset-based paths may work if you hold deep liquid assets. Every file is underwritten individually.
Lendmire’s self-employed mortgages page presents both super jumbo programs, bank statement and DSCR, side by side.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage that arranges both bank statement mortgages and DSCR investor loans through a wholesale lending network. Bank statement files qualify on documented personal or business deposits under the applicable program, subject to lender guidelines, and consumer mortgage lending is licensed in 16 states. DSCR investor programs run in 40 states plus Washington, D.C. — 41 markets total — and qualify primarily on property-level rental income covering the payment, subject to lender guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Scotsman Guide: Rev Up the Engine for Non-QM Lending
This article is part of Lendmire’s super jumbo bank statement loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Qualify for a Bank Statement Loan for Musicians · How to Qualify for a Bank Statement Loan for Attorneys · How to Qualify for a Bank Statement Loan for Executives Paid in Stock
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.