A Profit and Loss (P&L) Loan is a Non-QM (Non-Qualified Mortgage) product that allows self-employed borrowers to qualify for a mortgage using a Profit and Loss statement prepared by a licensed tax professional—typically a CPA or EA—instead of traditional income documentation like tax returns or W-2s. A self-prepared P&L with a CPA review is also acceptable.
A P&L Loan is a mortgage solution specifically designed for self-employed individuals, business owners, freelancers, and entrepreneurs. Rather than requiring years of tax returns or bank statements, lenders assess income based on a borrower’s recent Profit and Loss statement—usually covering the past 12 to 24 months.
This streamlined approach simplifies the process for borrowers whose tax returns don’t accurately reflect their true income due to legitimate deductions and write-offs. P&L loans fall under the broader umbrella of Non-QM loans, offering an alternative path to homeownership or real estate investment without the red tape of traditional financing.
P&L Loans are ideal for borrowers who operate sole proprietorships, LLCs, or other small businesses, and prefer to leverage their business performance for loan qualification.
Traditional lenders often penalize self-employed borrowers for taking tax deductions, even when those deductions reflect smart and responsible business practices. P&L loans solve this problem by allowing borrowers to demonstrate their actual earning power through a P&L statement, not taxable income.
This makes P&L loans a more accurate and flexible way for business owners to secure mortgage financing that aligns with their true cash flow.
P&L Loans come with several advantages:
Here’s how a P&L Loan typically works:
