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Flexibility for the recently self-employed
For recently self-employed borrowers who have been operating their business for less than 24 months, or have been in the same line of work for less than 24 months, additional eligibility factors may include:
- acquiring an established business
- sufficient cash reserves
- predictable earnings
- previous training and education
- borrower’s demonstrated history of managing credit
Documentation to support income verification
Documentation will depend on each borrower’s unique situation and financial circumstances. Acceptable documents may include:
- previous employment documentation based on type of income
- recent account statements
- business documentation
- signed contracts
Documentation to support length of business operation
Documentation is required to demonstrate the length of business operation and financial stability for self-employed individuals. Acceptable documents include:
- income tax returns supported by the Notice of Assessment (NOA)
- business credit reports
- GST returns
- active business account statements
- financial statements accompanied by a review engagement report signed by a practicing accountant
- business license or articles of incorporation
- audited financial statements
Documentation to support income
To verify the income of self-employed individuals, the following documents are required:
- Notice of Assessment (NOA) accompanied by T1 General (for verification purposes and to determine breakdown if borrower has several sources of income)
- proof of income (for verification purposes)
- statement of business (T2125)
Recognizing that self-employed borrowers may deduct expenses, income from self-employment in the case of sole proprietorships or partnerships may be grossed up by 15% or by using an “add back” approach of eligible deductions.
If the borrower has several sources of income, the NOA should be accompanied by the T1 General to determine the source of income and if any of the income may be grossed up.
