P&L Loans

What Is a P&L Loan?

A P&L loan is a type of non-QM mortgage that allows self-employed borrowers to submit profit and loss statements from their business as proof of income. This provides more flexibility for self-employed individuals and business owners who may not have standard income documentation like W-2s or pay stubs.

P&L loans are similar to bank statement loans and 1099 loans in that they’re ideal for individuals with non-traditional income sources who want to qualify for a mortgage based on their P&L statements, which may be a more accurate representation of their income compared to tax returns. 

P&L mortgage loans are ideal for:

• Individuals who are self-employed or have variable income and take advantage of tax deductions that lower their reported income.
• Small business owners, entrepreneurs, or those with income derived from business ownership
• Freelancers or gig workers with irregular income patterns.

How Does a P&L Loan Work?

A profit and loss loan considers the profit and loss statements of a business owner instead of relying on traditional personal income. Lenders evaluate the P&L statements, which detail the income and expenses of the business over a specific period, typically a year.

Unlike conventional loans, P&L loans acknowledge the natural fluctuations that often accompany self-employment, making them more adaptable to the irregularities common in entrepreneurial ventures.

With a P&L loan, you can qualify using:

• Business P&L statement(s): We require at least one P&L statement in order to assess your company’s financial health and make a lending decision. The P&L must be prepared by a third-party professional with a valid PTIN.
• Bank statements: You can also submit one or more of the business’s bank statements and, based on that, we can approve you for a loan.

What do lenders look for on a P&L statement?

When lenders ask for your profit and loss statements for a mortgage application, they are primarily focused on assessing the financial health and stability of your business to ensure that you can afford to repay the loan you’re taking out.

Some of the key metrics lenders review include:

• Revenue
• Gross profit
• Operating and non-operating expenses
• Net income

Ultimately, lenders want to see a consistent and reliable stream of income over a prolonged period. This demonstrates the business’s ability to generate revenue consistently, assuring the lender that you can meet P&L loan repayment obligations.

Lenders may also analyze the trends in revenue to understand the business’s growth or stability. Positive trends over time indicate a healthy business, while a consistent decline or significant fluctuations might raise concerns.

Benefits of P&L Mortgages

Key benefits of P&L mortgages include:

• Flexibility in income documentation: P&L mortgages provide flexibility in documenting income. Instead of relying on traditional pay stubs or tax returns, borrowers can use their business’s profit and loss statements to represent their financial situation accurately.
• Accommodation for irregular income: Self-employed individuals often experience fluctuating or seasonal income. P&L mortgages acknowledge these variations, making it easier for borrowers with irregular earnings to qualify for a home loan.
• Customized eligibility criteria: Lenders offering P&L mortgages often have more lenient eligibility criteria. This flexibility caters to the unique financial circumstances of self-employed individuals and business owners, making homeownership more accessible.
• Higher loan approval chances: Those with variable incomes may find it easier to get approved for P&L loans than traditional mortgages with strict income verification requirements. This is also true for self-employed individuals who take advantage of deductions on their taxes.
• Entrepreneurial flexibility: P&L mortgages recognize the entrepreneurial spirit by accommodating various income sources. This is particularly beneficial for individuals with multiple revenue streams or unconventional business structures, including those pursuing high-net-worth lending opportunities.
• Competitive interest rates: While interest rates may vary, P&L mortgages often come with competitive rates, allowing borrowers to access financing without paying excessively high interest.
• Fast loan processing: With fewer traditional income verification hurdles, P&L mortgages may have quicker processing times than conventional loans, enabling borrowers to secure financing quickly.
• Versatile property financing: You can use profit and loss for mortgage financing on various property types, including your primary residence, a second home, or investment property loans.

Overall, P&L mortgages offer benefits that are similar to those offered by other non-traditional mortgage options, such as bank statement loans and asset-based loans.

P&L Mortgage Requirements

If you meet the following criteria, you may qualify for a P&L mortgage from Griffin Funding:

• At least two years of self-employment. Borrowers must prove they’re self-employed or own a business. You can provide business registration documents, tax ID numbers, or other relevant proof.
• At least one profit and loss statement. The main documentation for this loan, profit, and loss statements, assess the business’s income, expenses, and overall profitability to determine your ability to repay the loan.
• Meet minimum reserve requirements. At least three months of PITI reserves in the bank for loan amounts under $1 million.
• Meet a minimum credit score requirement. We accept credit scores of 620 or above for P&L loans.
• Apply for a qualifying loan amount. The minimum loan amount is $100,000, and the maximum loan is $5,000,000.
• 10% minimum down payment. You must have at least 10% down or higher, depending on your credit score.

P&L Loan Checklist

​​Use this checklist to ensure you have everything you need to streamline your P&L loan application process:

• Valid identification documents: Driver’s license or state-issued ID plus your Social Security card or passport.
• Proof of self-employment status: Business license or registration, articles of incorporation or partnership agreements, and professional licenses (if applicable).
• Certified profit and loss statements: Prepared by a licensed CPA, Enrolled Agent, or CTEC-registered tax preparer and dated within 90 days of loan closing.
• Bank statements: Typically 2-3 months of personal or business bank statements.
• Personal financial information: Credit reports and scores, asset statements, and any debt obligations and monthly expenses.
• Additional business documentation: Business tax returns, if available, client contracts or invoices, and professional references.

Having these documents organized and ready before you apply will help expedite your loan approval process and demonstrate your financial stability to lenders. For additional guidance on the application process, check out our comprehensive home buying FAQs.

P&L Mortgage Loan Example

Let’s say you run a successful freelance marketing consultancy and want to purchase a $500,000 home. You earn $120,000 annually but don’t have traditional W-2 forms or pay stubs to verify your income. Here’s how you can use a P&L loan:

The Situation:

• Self-employed marketing consultant for 3 years
• Annual income: $120,000 based on profit and loss statements
• Down payment: $100,000 (20%)
• Loan amount needed: $400,000

P&L Loan Process: You work with a CPA to prepare certified profit and loss statements showing a consistent monthly income of $10,000. You provide bank statements that support your business deposits and personal financial stability. The lender uses your P&L statements instead of traditional income verification to qualify you for the mortgage.

The Result: You secure a competitive mortgage rate and purchase your dream home without the hassle of trying to document self-employed income through traditional methods. The P&L loan allows you to leverage your proven business earnings for homeownership.

Apply for a P&L Loan Today

Griffin Funding makes the P&L loan process even more efficient with a cutting-edge AI-driven underwriting platform. This innovative technology streamlines loan processing and helps deliver faster decisions while maintaining the personalized service you deserve.

Experience the freedom of flexible financing designed for self-employed individuals and business owners. With streamlined documentation, tailored eligibility, and competitive rates, Griffin Funding is your premier partner on the path to homeownership.

Don’t let conventional loan requirements hold you back — apply for a P&L loan today and step into the home you’ve been dreaming of, or download the Griffin Gold app to learn more about our other home loans for business owners and entrepreneurs.