3 Proofs of Income Lenders Accept From Freelancers

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Being your own boss is an attractive idea, but it comes with several layers of difficulties. Besides the fact that you’re the only one responsible for your endeavour’s success, there’s also the increased difficulty of navigating a world designed for traditionally employed people with a W-2.

Let’s take loans as an example. As a freelancer, you can absolutely get a loan, but it’s significantly more complex and often more difficult than for an employed person. The challenge lies in demonstrating consistent, verifiable income that meets a lender's risk requirements.

And, while it’s relatively easy to get an unconventional loan, if you’re looking for a mortgage or a personal loan, things get tricky. Still, if you have the patience, determination, and income, it is not an impossible task.

Today, we’ll talk about the three categories of income proof that lenders accept from freelancers.

1. Tax Documents

This is the golden standard for the more serious loans, like mortgages and similar. But, again, it’s not enough to bring just one form; your lender may ask for several, such as:

• Federal tax returns (Form 1040): Lenders usually request the past 2 years of personal tax returns, along with all applicable schedules.
• Schedule C (Profit or Loss from Business): This shows your gross income, business expenses, and the resulting net income (which is what lenders primarily use to qualify you for a loan).
• 1099 Forms (1099-NEC, 1099-MISC): These are issued by clients who paid you over $600 in a year and officially verify specific income sources. Lenders often request the last two years.
• Business Tax Returns (e.g., Form 1065, 1120-S): If you operate as a partnership, S-Corp, or C-Corp, you will need to provide your business tax returns in addition to your personal returns.
• IRS tax transcripts: Lenders may request that you authorize them to obtain a copy of your tax transcript directly from the IRS (using Form 4506-C) to verify the information on your submitted returns.

2. Financial Statements

If you’re going for a personal loan and have a high credit score, you can convince a lender with just your financial statements.

These are your bank statements and your Profit and Loss (P&L) statements. For bank statements, lenders usually want to see the last 3 to 12 months to verify cash flow and consistent deposits from your freelance work.

The P&L, also known as an Income Statement, summarizes your business's revenue and expenses over a specific period. It helps lenders assess your current business performance, especially if you are applying mid-year before your next tax return is filed.

3. Supporting Documentation

Supporting documentation is not high on any lender’s list of requests, but it can add context, clarify anomalies, and verify continuity that the primary documents alone might not show.

These can include paid invoices, client contracts, a CPA letter, and even self-generated pay stubs. While paystubs you generate are not official, third-party records (like an IRS tax return or a bank statement) are acceptable if they are accurate and professional. Many lenders will accept them.

This is why it’s best to use self-employed paycheck stub templates that look like official documents. The professional design and included information give this unofficial document more weight.

In Summary

Most lenders will first ask for your tax documents. This is how they determine your qualified income. Financial statements and supporting documentation are mostly there to sell the story of your business's stability, continuity, and ability to repay the loan.