Can a Sole Proprietor Use an Enrolled Agent Letter for a Bank Statement Loan?

The Quick Read: Usually, yes: a sole proprietor can often use a letter from an enrolled agent to document the real expense ratio on a business bank statement loan, but acceptance is a program decision, not a rule, so the investor should confirm the lender takes enrolled agents before paying for the letter. The letter is optional. It only replaces the lender’s default expense assumption when the borrower’s real costs run lower.

• The letter only matters on business bank statements. Personal statements generally apply no expense factor.
• An enrolled agent is a federally credentialed tax professional, and many programs treat one as a credible third-party preparer.
• Acceptance varies by lender program, so a quick question to the loan officer comes before any fee.
• The letter supports the expense ratio. It does not replace the 12 months of statements and does not promise an approval.
• A DSCR loan skips the income question entirely, which matters for investors who run rentals as a sole proprietorship.

What does the letter actually do on a bank statement loan?

The letter swaps the lender’s default expense assumption for the borrower’s documented one. On a business statement file, the lender totals eligible deposits over the statement window, averages them, and then removes an expense factor to reach qualifying income. When the borrower’s real costs are lower than the default, a preparer’s letter can lower that factor.

The math is plain. Qualifying income equals average monthly eligible deposits times one minus the expense factor. As an illustration only, a 50% factor leaves half of the deposits as income. A 20% factor leaves four-fifths. Same deposits, 60% more qualifying income. That is why the letter matters.

Expense factors differ by program, and across the wholesale network the strictest overlays and the most flexible ones sit far apart. No universal factor exists, so treat any figure you read online as one lender’s number.

Eligible deposits are recurring, business-related receipts. Transfers between your own accounts, loan proceeds, and one-off deposits are typically excluded or need an explanation.

Why does a sole proprietor face extra questions?

A sole proprietor has no entity, so the lender has less paper to lean on. There is often no Secretary of State filing, no operating agreement, and sometimes no separate EIN. The lender still needs proof the business exists and that the deposits belong to it.

Typical substitutes include a business license, a website, an EIN letter, or a preparer letter confirming the start date. An enrolled agent can sometimes cover two jobs in one letter: the expense ratio and the confirmation that the business is real. Many programs treat these as separate items, so ask which the file needs.

The account type also changes the picture. StatementsReady explains that personal-statement programs generally apply no expense factor, while business-statement programs do. On a personal-statement file, an expense letter is usually beside the point. On a business-statement file, it is the one document that can move the number.

For the broader income side, Lendmire’s piece How a CPA Letter Raises Bank Statement Income for a Sole Proprietor covers the same mechanics from the CPA angle.

What is an enrolled agent, and why would a lender accept one?

An enrolled agent, or EA, is a tax professional who earned the right to represent taxpayers before the IRS. According to the IRS, EAs qualify by passing a three-part exam or through past IRS employment. They have unlimited practice rights, like attorneys and CPAs, and complete 72 hours of continuing education every three years.

The National Association of Enrolled Agents describes EAs as the only federally licensed tax practitioners who specialize in taxation. CPAs, by contrast, are licensed by states. That federal credential is the main reason many programs see an EA as a credible preparer of an expense ratio.

Underwriters can also check the credential. The IRS keeps a listing of active enrolled agents, and an EA who has missed renewal or been suspended cannot rely on the designation. A lapsed credential is a preventable reason for a letter to be rejected.

Competence is not the issue when a lender says no. Acceptance is a program choice. Some programs name CPAs only. Others list CPAs, EAs, and other qualified preparers. A few lenders in the network accept the broader list, and some do not.

How do an EA, a CPA, and another preparer compare?

On most files, the preparer’s credential sets the posture, and the lender sets the final answer. The table below shows how the three common preparers usually line up.

Unenrolled preparers, sometimes called PTIN-only preparers, have limited representation rights under IRS rules. Do not assume a lender that takes an EA will also take an unenrolled preparer. A bookkeeper, a financial advisor, or the borrower writing their own letter generally does not count.

An EA is often the cheaper route to a qualified letter. That only helps if the program accepts it. Paying for a letter that gets rejected costs more than a CPA fee would have.

What must the EA letter include?

A usable letter is short, specific, and matched to the file. Across the programs in the wholesale network, underwriters look for the same core items.

Two details cause most of the trouble. The first is a period mismatch. A letter built on a prior tax year, while the statements cover a different 12 months, invites questions. The second is vague wording. A letter that says expenses are about half, give or take, gives the underwriter nothing to apply.

A simple template for your preparer reads like this. “I am an enrolled agent, credential number. I have reviewed borrower’s name’s business records and bank statements for period. Based on that review, the business’s expense ratio for that period is percentage. Business name is a sole proprietorship that began operating on date.” Then a signature, a date, and contact details.

What does a worked example look like?

Consider a borrower whose business deposits average the same each month across 12 statements. Treat the deposits as 100 units, which keeps this a pure ratio illustration and not a network figure.

1. Default path. With an illustrative 50% default factor, qualifying income is 50 units.

2. Letter path. The EA letter documents a 25% expense ratio. Qualifying income is 75 units.

3. Result. Same deposits, 50% more qualifying income. That can change how large a loan the file supports on a bank statement program, subject to lender guidelines.

The letter works only when the stated ratio is believable for the industry. A very low ratio in a high-cost trade will get questioned. A tax return that shows heavy expenses and a letter that shows light ones will also draw attention.

How should the letter line up with Schedule C?

The letter and the tax return will not always match, and the gap needs an explanation. A sole proprietor files a Schedule C. A letter based on cash deposits and actual spending can differ from the return because of depreciation, timing, or deductions that are not cash costs.

An EA is well placed to explain that gap, since the EA is a tax professional. A one-line reconciliation in the letter or a short cover note keeps the underwriter from guessing. If the borrower keeps messy books, the EA should review the bank records, the returns, and any ledgers before signing. A signed ratio with no review behind it is a weak document.

Check before you pay: a short routine

Start with the least expensive step: ask before you pay.

1. Ask the loan officer. Does this program accept an enrolled agent letter for the expense ratio on a sole proprietor file?

2. Ask what the letter must say. Does the program want a set format, a specific period, or the credential number?

3. Ask about the preparer. Must the EA have prepared the tax return, or can a new client’s EA sign?

4. Confirm the credential. Check that the EA appears on the IRS active listing.

5. Send the draft early. Have the loan officer review the letter before the file goes to the lender.

A short request to your preparer helps too: “I need a letter stating my business’s expense ratio for period, on your letterhead with your credential number. Please base it on my bank statements and returns, and tell me if the number differs from my Schedule C.”.

What can an EA write, and what will one decline?

An EA can state a factual expense ratio based on records reviewed. An EA generally will not write assurance language, such as a guarantee that income will continue or an opinion on the business’s future. Lenders that ask for comfort language of that kind are asking for a different document.

This is a common source of friction. The borrower asks for a letter that says everything is fine. The preparer, rightly, writes only what the records support. A factual ratio statement is what an underwriter needs for an expense factor override. Keep the request narrow, and the preparer is far more likely to sign.

What if the lender says no to an EA?

A rejection is not the end of the file. The usual fallbacks, in order:

1. Ask for an exception. Some programs will review an EA case by case, particularly with strong credit and reserves.

2. Get a CPA letter. A CPA can review the same records, and the letter then fits the program’s accepted list.

3. Use a CPA-prepared P&L. Some programs accept a profit-and-loss statement instead, which is a different document from an expense letter.

4. Take the default factor. The file can still proceed on the lender’s standard expense assumption, with lower qualifying income.

Strong files in the network typically hold about 6 months of reserves, and leverage and loan size also shape the outcome. Lendmire’s piece How to Use a CPA Letter for a Bank Statement Jumbo Loan covers the CPA route for larger files.

What leverage applies, and does occupancy matter?

Occupancy changes the ceiling and the paperwork. Across the network, select lenders typically allow up to 90% LTV on a primary residence purchase or rate-and-term refinance. On an owner-occupied cash-out, the ceiling is up to 80% LTV with a fixed expense ratio, and 75% LTV with an accountant-prepared ratio. That second figure shows why an accountant’s ratio can matter even where the leverage cap drops. Investment-property cash-out tops out around 75% LTV, and investment purchase leverage on bank statement documentation varies by lender.

Loan sizes typically run from $125,000 to $3,500,000, subject to lender guidelines and credit. Every file is underwritten individually.

Occupancy also decides the disclosure regime. An owner-occupied file is a consumer mortgage. A bank statement loan on a non-owner-occupied rental, including a short-term rental, is business-purpose. Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income.

Does the CFPB require any of this?

No federal rule names enrolled agents, CPAs, or expense letters. The CFPB’s Ability-to-Repay compliance guide says a creditor must verify the income it relies on using reasonably reliable third-party records, and that self-employment income can be considered. How a program does that is the program’s call. A bank statement loan is an alternative way of documenting income. It is not a waiver of documentation.

When is a DSCR loan simpler for a sole proprietor?

If the goal is buying or refinancing a rental, a DSCR loan can skip the income question. DSCR loans qualify primarily on property-level rental income covering the payment, subject to lender guidelines. No expense letter, no deposit averaging.

An investor who runs several rentals as a sole proprietorship may find that cleaner. For the full picture, see the complete DSCR loans guide. The EA letter matters only when the borrower’s own income is the basis of the file.

Tax treatment varies by situation; consult a qualified tax professional before relying on any deduction.

Common mistakes to avoid

• Paying for the letter before asking if the program accepts it.
• Using a letter for a different tax year or period than the statements.
• Leaving out the credential number or letterhead.
• Stating a range instead of one percentage.
• Using a letter on a personal-statement file, where no factor applies.
• Writing the letter yourself.
• Letting an expired EA credential go unchecked.

Key Terms Defined

Enrolled agent (EA): A tax professional who earned the right to represent taxpayers before the IRS by exam or past IRS employment.

Expense factor: The share of average deposits a lender treats as business costs before it counts the rest as income.

Eligible deposits: Recurring, business-related deposits that count toward qualifying income.

Expense ratio letter: A signed letter from a qualified preparer that states the business’s actual expense percentage for a set period.

Business-purpose loan: A loan on a non-owner-occupied investment property, reviewed differently from an owner-occupied mortgage.

About Lendmire

Lendmire — NMLS# 2371349 — is a mortgage broker that arranges bank statement, P&L-only, 1099-only and asset-based home financing in 16 states through wholesale lenders, on primary residences, second homes and investment properties. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. StatementsReady – What is a bank statement loan

2. IRS – Enrolled agent information

3. National Association of Enrolled Agents – What is an Enrolled Agent

4. CFPB – Ability-to-Repay and Qualified Mortgage compliance guide