Profit & Loss Loans
What are Profit & Loss Loans?
Profit & Loss (P&L) loans are non-qualified mortgages (non-QM) that use a borrower’s profit and loss statements, rather than W-2s or tax returns, to determine eligibility for a home loan.
Who Benefits?
- Self-employed individuals who may not show steady income on traditional documents.
- Small business owners with complex financial structures.
- Freelancers or gig workers whose taxable income looks lower due to deductions.
How Do P&L Loans Work?
Lenders Evaluate
- Business revenue and expenses over a set period, usually 12 to 24 months.
- Consistency and stability of income from the business.
- Trends in growth or decline that may impact repayment ability.
In most cases, profit and loss statements must be prepared and signed by a CPA.
Typical Requirements
- At least two years of self-employment history.
- CPA-prepared profit and loss statements.
- Credit score typically ranging from 600 to 660 or higher.
- Down payment between 10% and 30% depending on lender.
- Loan amounts up to $5–6 million depending on the program.
Pros
- No need for W-2s, pay stubs, or tax returns.
- Flexible approach to income verification.
- Faster approval process compared to conventional loans.
- Interest rates that are competitive, though sometimes slightly higher than standard mortgages.
Cons
- Down payments may be higher than with traditional loans.
- Interest rates can also run above conventional mortgage options.