What you usually hear, and the honest answer

This question usually shows up quietly, near the end of a call. The person has told us about their clients, their deposits and the house they want. Then they lower their voice a little and ask whether it matters that they never set up an LLC. Or that they work from the spare bedroom. Or that their accountant flatly refused to sign the letter a lender asked for.

None of those things, on their own, mean you are not a real business. Plenty of strong borrowers are exactly this: one person, one bank account, a steady list of clients and a tax return with a Schedule C attached. The goal of this post is to show you what an underwriter is trying to confirm, which papers tend to answer that question for a solo owner in Arizona, and how to get them ready before a lender asks.

What Makes a Business Real to an Underwriter

Underwriters are not judging how impressive your business looks. They are answering three plain questions. Does the business exist? Do you own it, or enough of it? Is it still operating today, so the income is likely to continue?

The first two are about identity and ownership. Fannie Mae, by name, treats a borrower with a 25% or greater ownership interest in a business as self employed, and its standard path reads two years of personal and business tax returns through a cash flow analysis on Form 1084. For a sole proprietor, ownership is simple: you own all of it. There is no operating agreement to read and no partner to explain.

The third question, is it still running, is where most of the paperwork goes. A return shows what happened last year. A lender also wants something recent that shows the doors are still open, so to speak, even if the door is your laptop.

On a bank statement loan, the deposits themselves carry a lot of that weight, because they show money coming in month after month. But deposits alone do not say what the business is. That is why a lender usually pairs the statements with at least one outside piece of evidence. Which piece depends on your work.

The Arizona Papers You May Already Have

Arizona gives solo owners a few public records that can help. None of them is required for every business, and that is the point: you use what fits your work.

A trade name registration. The Arizona Secretary of State says filing a trade name registers a business name for public record, is similar to a DBA, and is not legally required. It also says a trade name is not a corporation or LLC and does not grant exclusive rights to the name. Trade names last five years from the date of receipt. If you have been operating under a name, a filing gives an underwriter a dated public record that the business exists.

A TPT license. The Arizona Department of Revenue says businesses selling a product or doing a service subject to transaction privilege tax will likely need a license. Its list of taxable activities includes retail sales, restaurants, contracting, rentals and several others. The state fee is $12 per location, and ADOR requires licensed businesses to renew every year by January 1. If your work is on that list, a current license is strong evidence that you are operating. If your work is not taxable, not having one is not a red flag; it simply is not the right document for you.

Arizona Corporation Commission records. The ACC keeps a public database of corporations and LLCs. If you never formed one, you will not show up there, and that is normal for a sole proprietor. If you did form one at some point, even one you stopped using, tell your lender before they find it.

City licenses and professional licenses. Some Arizona cities charge their own TPT renewal fees, and many trades and professions carry a state license of their own. A current professional license in your name is often one of the cleanest proofs there is, because it ties you to the work.

When Your CPA Won't Sign the Letter

This is the part people are most embarrassed about, and it is usually not about you at all.

Lenders sometimes send a preparer a letter to sign that says the business is profitable or that you can afford a mortgage. Many CPAs say no, and their own profession tells them to be careful. The Tax Adviser, published by the AICPA, explained in 2018 that an attestation interpretation prohibits a CPA from providing any level of assurance about a client's solvency or ability to make debt payments. Its suggestion is that CPAs can simply confirm the facts as they understand them, such as the fact that they prepared your return, with a statement that they did not audit or verify the information.

So if your CPA declined, they were probably protecting their license, not doubting your business. The fix is to ask for less. A short note confirming they prepared your returns for certain years, and how long they have known the business, is often all a file needs. Some files also use the preparer's input on the expense side, because the expense factor on our program runs from 10% to 50% depending on industry and CPA.

If you do not have a CPA at all, that is not automatically a problem either. Other evidence from the table above can carry the weight. We confirm what your file needs before you spend time chasing paperwork.

Worked Example: A Chandler Dog Groomer With No LLC

Example numbers, not market data and not a quote. Dana runs a mobile dog grooming business out of a van in Chandler. No LLC, no storefront, no employees. Her clients pay by card, app and check, and everything lands in one business checking account. Her CPA files her Schedule C every year but will not sign a lender's profitability letter.

Here is how her file comes together. Her two most recent returns show the Schedule C. Twelve months of business statements show deposits totaling $144,000. Her trade name filing with the Secretary of State shows the business name she advertises under. Her CPA writes a two sentence note confirming they prepared her last two returns. She adds her business insurance declarations page and a handful of recurring client invoices that match deposits on the statements.

Now the money side. After legitimate deductions she takes with her CPA, her Schedule C shows a modest net profit, which is the number a full documentation loan would mostly use. A bank statement loan reads the deposits instead. Using an illustrative 30% expense factor, $144,000 in deposits becomes $100,800 a year, or $8,400 a month, of qualifying income. The real factor for her file depends on her industry and her CPA, inside our 10% to 50% range.

Say she buys a $425,000 home with 10% down, the low end of our 10% to 25% range. That is a $382,500 loan. At 7.18%, the Freddie Mac Primary Mortgage Market Survey 30 year average for the week of November 5, 2026, used here as a benchmark only, principal and interest come to about $2,591 a month. Taxes, insurance and any HOA are added on top. Our program asks for six months of reserves, so she would want roughly $15,550 set aside on principal and interest alone, more once the full payment is counted.