A good fit if
- Your business is stronger now than your last tax return shows
- You work with a CPA or tax preparer who knows your books
- Bank statements would understate your income
Probably not if
- You don't have a professional who can prepare or sign the P&L
- Your deposits tell a cleaner story (a bank statement loan may price better)
- You're a W-2 employee
How P&L Loans Work
Your CPA, enrolled agent, or licensed tax preparer prepares a profit and loss statement for the last 12 or 24 months, usually with a letter confirming they prepared it and that you own the business. The lender uses the net income on the P&L as your qualifying income.
Some lenders ask for two or three months of business bank statements to confirm the deposits are in line with the P&L. Others offer P&L-only versions with no statements, usually with stronger credit or a lower LTV.
Example: a consultant's 12-month P&L shows $300,000 in revenue and $75,000 in expenses, so $225,000 net, or $18,750 a month. On a bank statement loan with a 50% expense factor, the same $300,000 of deposits would count as only $12,500 a month.
P&L Loan Requirements
- Credit: usually 640–680; from about 620 at some lenders when bank statements support the P&L. P&L-only versions often need 700–720+.
- Down payment: usually 20–25% on a purchase, and 15% at some lenders for strong files.
- Cash-out: usually up to 70–75% LTV.
- Self-employment: usually 2 years.
- Debt-to-income: up to 50%, and 55% at some lenders.
- Loan size: up to about $2.5–3 million at many lenders.
- Deposits: when statements are required, deposits usually need to come within about 10% of P&L revenue.
For a deeper look, read the P&L only mortgage guide.
Who Can Prepare the P&L
- A CPA
- An IRS enrolled agent (EA)
- A licensed or registered tax preparer, such as a CTEC-registered preparer in California
The preparer must have prepared your most recent tax return or have a working relationship with your business at many lenders. Self-prepared P&Ls generally aren't accepted.
How to Qualify for a P&L Loan
- Ask your preparer for a 12- or 24-month P&L ending within the last couple of months.
- Make sure revenue on the P&L lines up with what goes into your business account.
- Confirm your preparer will sign a short letter about the P&L and your ownership.
- Check your credit; if you're under 700, plan on providing supporting statements.
- Send me the numbers, and I'll compare P&L with bank statement qualification.
Documents You'll Need
- A 12- or 24-month P&L, prepared or signed by your CPA, EA, or tax preparer
- A preparer letter confirming business ownership and how long the business has operated
- 2–3 months of business bank statements, if the program requires them
- Proof the business exists, such as a license or state filing
- Two months of statements for your down payment and reserves
- Photo ID and credit authorization
P&L vs. Bank Statement Loans
Both skip tax returns. A bank statement loan calculates income from deposits, while a P&L loan uses your actual reported expenses. If your real expenses are low, a P&L can produce a higher income than a 50% bank statement expense factor. If your books are messy, bank statements may be simpler.
| P&L loan | Bank statement loan | |
|---|---|---|
| Income based on | Your actual reported expenses | Deposits minus an expense factor |
| Paperwork | P&L, preparer letter, 0–3 months of statements | 12 or 24 months of statements |
| Credit needed | Often a bit higher | Often a bit lower |
P&L Loan FAQ
Can I prepare the P&L myself?
Usually no. Most lenders require a CPA, enrolled agent, or licensed tax preparer to prepare or sign it.
Does the P&L need to be audited?
No. An audit isn't required, but the preparer must stand behind it, and the numbers should be consistent with your deposits.
Do I need bank statements with a P&L loan?
Many lenders ask for 2–3 months. P&L-only versions skip them but usually need stronger credit or a lower LTV.
Can I use a P&L loan to buy a home I'll live in?
Yes. P&L loans work for primary residences, second homes, and investment properties.
What if my P&L shows a big jump in income?
Lenders may ask for an explanation or supporting statements. A 24-month P&L can smooth out a recent change.
Available for properties in California. Guidelines shown are typical and are not a commitment to lend. Your terms depend on credit, documentation, property, and the lender's current guidelines, and can change without notice.