What Is a P&L Only Loan?
A P&L only loan — also referred to as a Profit and Loss mortgage — is a non-QM loan that uses a CPA-prepared or accountant-certified Profit and Loss statement as the primary income documentation in place of tax returns. This gives self-employed borrowers a more accurate picture of current business income, which may be significantly higher than what appears on a tax return after deductions.
P&L mortgages are particularly useful for business owners whose most recent tax returns don't reflect current income levels — for example, borrowers whose business has grown significantly in the past year or two.
How a P&L Loan Works
- A licensed CPA or accountant prepares a 12 or 24-month Profit and Loss statement
- The P&L reflects business revenue, expenses, and net income for the period
- The lender uses the net income from the P&L to calculate qualifying income
- Some lenders use gross revenue with an expense factor (similar to bank statement methodology)
- Tax returns are typically not requested — the P&L replaces them
Why a P&L May Show Higher Income Than Tax Returns
Tax returns reflect taxable income — which is reduced by depreciation, business deductions, retirement contributions, and other write-offs. A P&L statement captures actual operating income without those reductions, which may better represent the borrower's capacity to repay the loan.
P&L Loan Requirements
- P&L must be prepared and signed by a licensed CPA or accountant
- Covers either 12 or 24 months (lender dependent)
- Self-employment must typically be documented for at least 2 years
- Credit score typically 660+ depending on the program and LTV
- Down payment typically 10–20%+
- Reserves may be required after closing
- Available for primary residences and some second home or investment programs
P&L Loans in Southern California
Business owners across Southern California — from contractors and consultants to restaurant owners and real estate professionals — often show lower taxable income than their actual earnings. P&L loans give these borrowers a path to homeownership that reflects what their business actually produces, not just what's left after tax planning.
Pros and Cons
Advantages
- No tax returns required
- Reflects current business income
- Useful when income has recently grown
- Straightforward documentation
Considerations
- CPA preparation required and costs apply
- Higher rates than conventional loans
- Self-employed 2+ years typically required
- Fewer lenders offer P&L-only programs