A P&L statement loan is a mortgage program that uses a Profit and Loss statement (also called an income statement) prepared by a CPA or tax professional to verify a self-employed borrower's income, rather than relying solely on tax returns. These loans are designed for business owners whose tax returns may not fully reflect their actual income due to legitimate business deductions and write-offs. The P&L statement shows a business's revenue, expenses, and net profit over a specific period, typically the most recent 12-24 months.

For a P&L statement loan, your profit and loss statement typically needs to be prepared by a qualified third party, such as a Certified Public Accountant (CPA), licensed tax preparer, or in some cases, an enrolled agent. Some loan programs may accept P&L statements prepared using accounting software like QuickBooks, but these usually require additional verification. The preparer generally needs to sign the P&L statement and may need to provide a letter verifying their preparation of the document and their professional qualifications.

Lenders typically verify P&L statements by comparing them to your business bank statements from the same period. They'll check that deposits match or reasonably align with the revenue reported on the P&L, and that withdrawals align with reported expenses. This is why it's essential that your business banking activity supports your P&L figures. Some lenders may also require a business license, verification of business existence, or other supporting documentation. Any significant discrepancies between your P&L and bank statements will need to be explained.

Most P&L statement loan programs require a minimum credit score between 640 and 680, though this can vary by lender and specific program. Some lenders may offer options for credit scores as low as 620 with compensating factors like a larger down payment or stronger P&L figures. For the best rates and terms, aim for a credit score of 700 or above. Your credit score will impact not only your approval odds but also your interest rate and possibly your down payment requirement.

For P&L statement loans, lenders typically use the net profit shown on your profit and loss statement as a starting point. They verify this against your business bank statements to ensure consistency. Some programs may apply an expense factor to your gross receipts instead of using reported expenses. Lenders generally average your income over the period covered by the P&L (usually 12-24 months) to account for seasonal fluctuations. For businesses with growth trends, some lenders may weight recent months more heavily in their calculations.

Yes, many P&L statement loan programs are available for investment properties and second homes in addition to primary residences. However, loans for non-owner-occupied properties typically require higher down payments (often 20-25% minimum) and may have slightly higher interest rates than those for primary residences. The property's expected rental income may also factor into the qualification process for investment properties, potentially supplementing the income shown on your P&L statement.