Tax return loan
- Income proof
- Last year’s tax return
- Period covered
- January to December of last year
- Net profit
- $170,000 a year
$14,167/mo
Qualifying monthly income
For business owners with clean books
P&L Only Loans for Business Owners
Qualify on the profit your accountant reports today, not on last year’s tax return.
- Up to $4M
- Loan amount
- 640+
- Credit score
- From 15%
- Down payment
- 12 or 24 months
- Profit and loss
Why this loan exists
Your tax return is a year old. Your business isn’t.
A traditional mortgage reads your income from your last one or two tax returns. For a business owner, that can be a problem twice over. Your CPA uses every legal write-off to keep that number low, and the return can be well over a year old by the time you apply. If your business grew since then, the lender never sees it.
A profit and loss statement, or P&L, is the report your accountant already prepares to show what your business took in, what it spent and what was left over. A P&L only loan uses that report, for the last 12 or 24 months, as your proof of income. It shows the business as it runs today, and it skips the stack of bank statements a bank statement loan asks for.
This is a non-QM (non-traditional) loan. That label means it doesn’t follow the federal “qualified mortgage” checklist, which is what lets the lender read a P&L instead of a tax return. You still have to show you can afford the payment, and rates typically run 1% to 2% higher than on a traditional loan.
I still read your tax returns first, every time. Some write-offs, like depreciation, can be added back to your income, and if your returns carry the loan after that, a traditional loan costs less. The P&L loan is the tool for when they can’t.
Side by side
Last year’s tax return or this year’s P&L?
A tax return covers last calendar year. A P&L can run through last month. Take the owner of a roofing company shopping for a $1.2 million home. His last tax return shows $170,000 of net profit. Since then he added a second crew, and his CPA’s 12-month P&L shows $300,000.
P&L only loan
- Income proof
- CPA-prepared profit and loss statement
- Period covered
- The most recent 12 months
- Net profit
- $300,000 a year
$25,000/mo
Qualifying monthly income
Same owner and same business, with $10,833 more a month a lender can count.
Pick the right tool
P&L only loan or bank statement loan?
Both loans skip your tax returns. The difference is what the lender reads instead, and the right choice depends on how clean your books are and how your money moves.
P&L only loan
- Income proof
- A profit and loss statement from your CPA or tax preparer
- How income is figured
- Net profit, times your share of the business
- Down payment
- Usually 20%, as little as 15% with top credit
- Best fit
- Owners with current, professional books
Choose this if your accountant keeps your books up to date and your deposits are hard to read.
Bank statement loan
- Income proof
- 12 months of personal or business statements
- How income is figured
- Deposits, minus a set share for business costs on business accounts
- Down payment
- As little as 10% with a 700+ score
- Best fit
- Owners whose money runs through one clean account
Choose this if your income lands in one account and your deposits tell the story.
Bottom line
I often run both. Think of a contractor who buys materials for every job, so lots of money passes through but the margin is thin. That business usually does better on a P&L, because the lender sees real profit instead of guessing at costs. A business with high margins and one clean account often does better on a bank statement loan. If you’re not sure where you fit, my self-employed options page lays out all six paths.
Real math
Three owners, three reasons to use a P&L
Here are three owners: a law firm partner who owns half her firm, an event planner whose deposits are mostly other people’s money, and a builder whose two years looked very different. Each one gets a cleaner answer from a P&L.
Scenario 1 · Owns part of the business
Law firm partner buying a $1.6M home
She owns 50% of a growing law firm with one other partner. The firm’s CPA prepares its books every month.
Income inputs
- Firm net profit (12-month P&L)
- $900,000
- Her ownership share
- 50%
- Her share of the profit
- $450,000 a year
Qualifying result
$37,500/mo
Qualifying monthly income
The lender counts the firm’s net profit times her share of the business. Her half of a strong year is the number the lender uses to size her loan.
Watch for: The lender will want proof of her 50% share, so I ask for the partnership agreement or a letter from the CPA at the start.
Scenario 2 · Other people’s money in the account
Event planner buying a $950,000 home
Her clients pay her for the whole wedding or gala, and she pays the venues, caterers and florists out of the same account.
Income inputs
- Total revenue on her P&L
- $2,400,000
- Paid to venues and vendors
- $1,760,000
- Other business costs
- $380,000
- Net profit
- $260,000 a year
Qualifying result
$21,667/mo
Qualifying monthly income
Her deposits look huge, but most of that money belongs to her vendors. A P&L shows the profit she actually keeps, so nobody has to guess.
Watch for: If her P&L and her deposits tell very different stories, the underwriter, the person at the lender who signs off on the loan, will ask why. A good CPA can explain the vendor payments in one short note.
Scenario 3 · Two very different years
Custom home builder buying a $1.4M home
A big project ran long last year, so his most recent 12 months were slower than the 12 months before.
Income inputs
- Net profit, most recent 12 months
- $280,000
- Net profit, the 12 months before
- $380,000
- Average of 24 months
- $330,000 a year
Qualifying result
$27,500/mo
Qualifying monthly income on a 24-month P&L
On a 12-month P&L he would qualify on about $23,300 a month. Many programs let him use a 24-month P&L instead, and the average of both years counts for more.
Watch for: A drop like his needs a short explanation, so I have him write a few sentences about the delayed project and how this year is tracking.
Get my options
Have a P&L from your accountant? Tell me your situation.
Three quick taps and an optional note. I read every one myself and tell you which path fits, usually the same day.
What are you looking to do?
How do you earn most of your income?
When would you like to buy or close?
Optional. A sentence or two about your situation helps me come to our call prepared.
Where should I reach you?
Your answers are already filled in below, so I’ll know your situation before we talk.
Rather just talk?
Find your fit
Not sure a P&L is your best path?
Answer a few questions about your income and your home, and Find My Best Loan points you to the loan built for you. To compare, you can also run your numbers on a bank statement or 1099 loan.
Find My Best Loan
Answer a few quick questions about how you earn, what you’re buying and your credit. You’ll see the loan that fits you best, why it fits, and the documents to gather. It takes about a minute, and nothing checks your credit.
Find my best loanAlready know your path? Run the numbers
Who this is for
The business owners a P&L loan fits best
P&L borrowers usually have one thing in common: a CPA or tax preparer who keeps their books current all year, not just at tax time.
Owners with a CPA on call
Your accountant closes your books every month or quarter. The P&L already exists, so there is very little new paperwork to gather.
Businesses that move client money
Event planners, travel agencies, staffing firms and general contractors collect money they pay right back out. A P&L shows the profit you keep, not the money passing through.
Companies with several accounts
Operating, payroll, tax and merchant accounts make 12 months of statements hard to read. One P&L pulls them into a single, clear number.
Businesses that grew this year
You landed bigger contracts or opened a new location, and last year’s tax return doesn’t show it yet. A recent P&L does.
Online sellers and creators
Marketplace and platform payouts arrive after fees and refunds. If you’ve been selling online for two years and your accountant keeps your books, a P&L shows your real profit.
Owners who value privacy
Some owners would rather not hand a lender a year of bank statements. With many P&L programs, you share one report instead.
How your income is figured
What makes a P&L a lender will accept
Not every P&L qualifies. The lender needs to trust that the numbers came from someone who keeps real books. So the statement has to be prepared and signed by a CPA, an enrolled agent or another licensed tax preparer. An enrolled agent is a tax professional licensed by the IRS (IRS).
The math is simple once the P&L is right. The lender takes the net profit, multiplies it by your share of the business, and divides by 12. If you use a 24-month P&L, the lender uses the average of both years.
How a lender turns your P&L into income
- Net profit on the P&L $420,000 The bottom line for the last 12 months
- Your share of the business × 100% A 50% owner counts half
- Divide by 12 ÷ 12 Turns a year into a month
- Qualifying income $35,000/mo The number the lender uses to size your loan
Who can prepare it
A CPA, an enrolled agent or a licensed tax preparer. In California that includes preparers registered with the state’s tax education council (CTEC). Their name, license and signature go on the statement.
How recent it has to be
The P&L should run through a recent month, not end last December. See the watch-outs below for how to get the date right the first time.
Bank statements, sometimes
Some programs ask for a couple of recent business statements to back up the P&L, and others don’t. The FAQ below explains how I choose.
Requirements
P&L only loan requirements
These are the typical terms across the P&L programs I can access.
- Credit score
- 640+
- Better pricing and lower down payments start around 700
- Down payment
- From 15%
- Usually 20%; 15% with top credit
- Profit and loss
- 12 or 24 months
- Prepared and signed by a CPA, enrolled agent or licensed preparer
- Self-employed
- 2 years
- In the same business or line of work
- Reserves
- About 6 months
- Of the new payment; varies by program and loan size
- Loan size
- Up to $4M
- Larger loans may need more down
Use a P&L only loan to buy, to refinance for a better rate or term, or to take cash out, on a primary home, second home or investment property. There is no monthly mortgage insurance. Reserves are the money you have left after closing; retirement and business accounts often count toward them.
Checklist
Your P&L loan checklist
You’ll need
- Your 12- or 24-month P&L, signed by the CPA, enrolled agent or licensed preparer who put it together
- A short letter from that preparer confirming they prepared it and that your business is active
- Your ownership paperwork showing your share of the company, like your operating or partnership agreement
- Something that shows two years in business, like a state filing or an older license
- Recent account statements, every page, for your down payment and savings
- Photo ID, your property list, and the signed contract once you’re under contract
Nice to have
- A couple of recent business statements, if the program asks for them to back up the P&L
- Your last two tax returns, so I can check whether a cheaper loan works first
- A few sentences explaining any big swing in profit from one year to the next
Who this loan fits
A cleaning company owner whose best year isn’t on a tax return yet
- Lake Norman, NC
- Location
- $1.25 million
- Home price
- P&L only loan
- Best fit
- $32,500/mo
- Income a lender counts
Here’s the kind of business owner I see this loan help most. He owns a commercial cleaning company with about 60 employees, cleaning office parks and medical buildings around Charlotte. Last year he bought a new fleet of vans, and his tax return showed $165,000 of profit after the write-offs. This year he signed two hospital contracts, and his business is having its best year ever.
His tax return can’t show that growth yet, and his bank statements are a maze. Money moves between an operating account, a payroll account and a card processing account every week, and most bank statement programs only count one account.
A P&L only loan cuts through both problems. His CPA already closes his books every month, so a 12-month P&L is easy for her to prepare, and it would show about $390,000 of net profit. That is $32,500 a month a lender can count toward a home around $1.25 million on Lake Norman, with 20% down.
Watch-outs
Where P&L loans go sideways
A P&L loan is only as strong as the P&L behind it. These are the problems I see most, and each one is easy to avoid before your accountant prints the statement.
-
A P&L that doesn’t match the deposits
If the lender asks for a few bank statements and they tell a very different story than the P&L, the file stalls. Your CPA should be ready to explain the difference.
-
Preparing it yourself
A P&L from your own accounting software, without a CPA, enrolled agent or licensed preparer signing it, doesn’t qualify for this loan.
-
An out-of-date statement
A P&L that ends months ago can be rejected. Ask me for the cutoff date before your accountant prepares it, so it only has to be done once.
-
Not knowing your exact ownership share
Lenders count your share of the profit, not the whole company’s. If your ownership changed recently, bring the paperwork that shows the current split.
-
Personal bills run through the business
When personal spending shows up as business expenses, the profit on the P&L shrinks. Keep them separate in the months before you apply.
FAQ
P&L loan questions I hear most
It is a mortgage for self-employed borrowers that proves your income with a profit and loss statement. You don’t need tax returns or a year of bank statements. Your CPA or tax preparer prepares the P&L for the last 12 or 24 months, and the lender counts your share of the net profit. It is a non-QM (non-traditional) loan, which means it sits outside the federal qualified mortgage rules, and rates typically run 1% to 2% higher.
A CPA, an IRS enrolled agent or another licensed tax preparer, including state-registered preparers in California. They sign the statement and usually add a short letter saying they prepared it. A P&L you build yourself in your bookkeeping software doesn’t qualify on its own.
It depends on the program. Some P&L programs ask for two or three months of business bank statements to back up the numbers, and some don’t ask for any. You will still need statements for the accounts holding your down payment and savings, like any mortgage. I match you to the program that fits how your money moves.
Whichever gives you the stronger, more believable number. If your business has grown, the most recent 12 months usually counts for more. If last year was slower than the year before, a 24-month P&L averages the two and can help. I run both before your accountant prepares anything.
Neither is better in every case. A P&L loan tends to win when a lot of money passes through your business or your income is spread across several accounts. In those cases the lender reads your actual profit instead of guessing. A bank statement loan tends to win when your money lands in one account and your margins are high. Bank statement loans can also go as low as 10% down, while most P&L programs want 15% to 20%.
Usually, yes. It is a non-QM (non-traditional) loan, which means it proves income outside the federal qualified mortgage rules. Because of that, rates typically run 1% to 2% higher than a traditional loan qualified on tax returns. That is why I check your returns first. Many owners take the P&L loan now and refinance into a traditional loan later, once their tax returns catch up with their business.
Yes. P&L only loans work for primary homes, second homes and investment properties, and for purchases, refinances and cash-out refinances. If the property is a rental, I also compare a DSCR loan, which qualifies on the rent instead of your income.
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Related articles and programs
Sources
Program terms are typical ranges across the programs I can access and can change. Not a commitment to lend. Dale Corley, mortgage broker, NMLS #1547543.
Let your P&L make the case
Start an application, then send your most recent P&L along with your last two tax returns. I look at the returns first because they may get you a lower rate, and if they fall short, your P&L becomes the case for the home you want.
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