Self-employed and business owners

Where exactly does the bank stop?

At the net income line on your return. Most big banks read what is left after every expense, not what the business took in.

For illustration only: the business brings in 300,000, expenses and depreciation run through it, and the return shows 60,000. You did your taxes properly. The bank reads 60,000. That is two systems measuring the same thing differently, not a problem with you.

Does low reported income mean you cannot buy?

No. It means the list of lenders gets shorter, and the proof has to come from somewhere else.

Generally there are three routes: add back what can legitimately be added back at a mainstream lender, use a business-for-self program that reads deposits, or use an alternative lender as a bridge. The cost and the bar are different on each, and not everyone has all three open.

How does a lender that reads deposits actually calculate income?

It looks at what actually landed in the business account, then applies a profit margin that is reasonable for your industry.

The usual package is six to twelve months of business statements plus business registration, a GST number and an accountant letter. Most lenders also want the deposit number and the tax return to tell a consistent story. How much gets applied, and whether it is accepted at all, varies a lot by lender. That step largely decides what you can get.

What does an alternative lender cost, and how do you get back out?

It costs more, plainly: a higher rate than a mainstream lender, usually a lender fee, generally a shorter term, and often a larger down payment. I do not soften that.

So the exit plan is part of the decision on day one. An alternative lender is a bridge, not a destination. The usual version is one to two years spent fixing what was missing — two clean years of returns, enough time in business, credit tidied up — then a move back to a mainstream lender at renewal. Whether that works out depends on the file, but nobody should walk in without the plan.

Can profit left inside the corporation count?

Sometimes, if you own enough of the company and it has been profitable for a couple of years.

Lenders who do this generally want two years of financial statements and T2 returns, plus an accountant letter confirming your ownership percentage and years in business. Heavy corporate debt, large shareholder loans, or profit that swings hard year to year usually close it off.

What if you have been self-employed less than two years?

It can be done, but the list is shorter, and the file leans on down payment, credit and your track record in the same industry.

Two years is a common benchmark, not a rule. If you were an employee in the same field before going out on your own, many lenders will count that, as long as the evidence connects: old T4s, an employer letter, the contracts you hold now.

Will money owed to CRA stop this?

Yes, and it is one of the most common things I see stop a file.

Most lenders want CRA paid, or at minimum a payment arrangement already running. Once CRA registers a lien, most lenders stop reading. A smaller balance can usually be handled before closing, but you want to know early, not in the last week.

Three things you can do this week

First, log in to your CRA account, download the last two Notices of Assessment, and look at the balance owing line while you are there. Plenty of people are carrying a small balance they forgot about. Check that line before anything else.

Second, export twelve months of business bank statements as PDFs into one folder — the official statements, not phone screenshots. Third, do not rush to have your accountant amend or refile anything. Refiling has a cost and it is not always needed. Let me look at what you already have first.

Common questions