Foreclosures don’t just happen to people who are out of work—they can happen to anyone. White collar and blue collar workers are both represented among their statistics. A recession or faltering economy can drastically reduce the income of a host of careers, including self-employed entrepreneurs. Once thriving in a booming economy, these entrepreneurs have found themselves struggling to keep their businesses alive, with significant reductions in income that hinders their ability to meet their financial obligations.

The good news is that the government has revised the eligibility requirements to qualify for a loan modification under the Home Affordable Modification Program (HAMP). As a result, more entrepreneurs will qualify based on the program’s revised debt-to-income formula. However, because entrepreneurs are self-employed, their income is also calculated differently. Those who are not self-employed usually receive a paycheck, and their income is based on their yearly wages. Entrepreneurs, on the other hand, must take their expenses into account when determining their income.

When applying for a loan modification, entrepreneurs must submit a Profit and Loss statement, showing both their income and their expenses. The difference between the two is considered income if the profit is higher than the losses, or it is considered to be a loss in the event expenses outweigh income. Lenders will use profit and loss numbers to determine gross income, backed up by deposits reflected on bank statements.

In order to qualify for a loan modification, entrepreneurs will have to meet specific criteria. Under HAMP, they must:

  • Show proof that they can afford the new modified monthly payment. This will be verified with bank statements and their Profit and Loss statement. If income is insufficient, entrepreneurs should find ways to increase their income—if necessary, finding a part-time to supplement their income, renting a room, or using other creative ways to increase their income and decrease their debt.
  • Have accurate and up-to-date records.
  • Know their numbers and verify the numbers used by their lender when qualifying them for a loan modification. It’s not uncommon for banks to err when calculating income, especially when it relates to the self-employed. When learning that incorrect numbers were used, many entrepreneurs have been successful in being approved or reversing a denial.
  • Be their own best advocate, maintaining organized and indisputable records, and learning the specifics of applying and qualifying for a loan modification or other assistance that will make their mortgage payment more affordable.
  • Persevere and be prepared to provide information about your business that could affect your qualifications. If your business is seasonal or business fluctuates from week to week or at certain times of the year, keep track of those trends. By keeping income calculations up to date and providing lenders with annual totals and your most recent tabulations, you can show trends in your income that may provide a more accurate income report than your most recent quarterly statement.


Assistance and relief are available to entrepreneurs, whether they are small business owners, coaches, consultants, or service providers. Know your facts and be persistent—above all, have faith that the steps you are taking now will affect your outcome. With preparation, commitment, and accurate income figures that meet your lender’s eligibility qualifications, you can receive a loan modification that will lower your monthly mortgage payment, making it affordable, even during a time when business or sales have declined.

Anna Cuevas, ex-bank executive turned homeowner advocate known as “America’s Loan Modification Guru,” has empowered and guided thousands of Americans in keeping their homes from foreclosure through loan modification self-advocacy. A popular blogger (, Cuevas has been called a “superhero of the loan modification industry” and has been nominated for CNN’s Heroes. She is the #1 bestselling author of SAVE YOUR HOME Without Losing Your Mind or Money.

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