Hi Susan,
All business’ operate at a cost of the total income. This is known as the expense factor. Whether the expenses are labor, rent, materials or all of the above; business always have a cost. There is usually a standard percentage used by the lender if no CPA letter is submitted (40%-60% in my experience, depending on biz type). But not all business cost 50% of their income to operate.
In that case, a borrower can use a CPA letter to lower the expense factor. This will allow the borrower to use a larger percentage of their self employed income and give them more purchasing power.