What Is a P&L Loan?

A P&L loan is a type of self-employed mortgage designed for individuals who are self-employed or own businesses. They’re similar to bank statement loans in that they’re ideal for individuals with non-traditional income sources or W-2 employment who want to qualify for a mortgage based on their P&L statements rather than tax returns, pay stubs, or W-2 forms. 

These loans use the business’s profit and loss statements to assess financial viability, allowing for a more flexible and tailored approach to lending. P&L loans recognize the unique financial circumstances of self-employed individuals, offering a financing solution that aligns with the dynamic nature of their business. These 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. Additionally, since P&L loans look beyond traditional criteria, they offer a more flexible approach to eligibility. Self-employed individuals and business owners with varying income streams may find it easier to qualify. 

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. 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

P&L mortgages are similar to other types of non-QM mortgages, like asset-based loans and no-income verification mortgages, and offer several of the same benefits for self-employed individuals and business owners. The primary benefit is that P&L loans open up homeownership opportunities for individuals who might face challenges with conventional loan requirements. Other benefits 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. 
  • 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.

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. 
  • At least three months of PITI reserves in the bank for loan amounts under $1 million. 
  • A credit score of 620 or above. 
  • The minimum loan amount is $100,000, and the maximum loan is $5,000,000.
  • You must have at least 10% down or higher, depending on your credit score.
  • A certain amount of financial reserves, depending on the loan amount. 

Apply for a P&L Loan Today

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.