Profit and Loss Loans – How do they Work?

If you are self-employed, you might not have enough income on your tax returns to prove you can afford a loan. This could lead you down the frustrating road of declined mortgage applications and the inability to buy a home.

Profit and Loss Loans, however, are an option to help you get the funding you need. You won’t find these loans at ‘traditional’ lenders, but at Save Financial, we offer this program to help deserving self-employed borrowers the loan they need.

What is a Profit and Loss Loan?

A profit and loss loan looks at a company’s P&L statement to determine if you qualify for a loan. This eliminates the need to use your tax returns which can be helpful when you take a large number of deductions and don’t qualify for traditional financing.

A P&L loan gives you a chance to show your company’s profitability even if your tax returns and bank statements don’t reflect this information.

Qualifying for a P&L Loan

At Save Financial, we work with many lenders that have P&L loan options. While the qualifying factors can be different with each lender, here’s what you can expect on average:

  • A credit score of at least 620 – You don’t need perfect credit, but you must prove that you can handle your financial obligations
  • Proof you’ve been self-employed for at least 2 years – This gives lenders the satisfaction of knowing you have been successful for at least 2 years and that your business will likely continue
  • Provide a 12-to-24-month P&L statement – Providing P&L statements that average out the income over 1 to 2 years allows lenders to see your business cycles and its ups and downs so they don’t pre-approve you for a loan that you might not be able to afford year-round.
  • Provide a statement from a third-party, such as your CPA – This endorses the fact that you are self-employed and the income you claim on your P&L is accurate and true.

Why Use a Profit & Loss Loan?

P&L loans are most common for self-employed borrowers that take a lot of deductions at tax time. It’s also great for business owners that don’t have the bank statements to prove their regular income.

You don’t have to supply a reason – as long as you have P&L statements certified by your CPA, you can use them to prove your income. It’s a great way to get a mortgage loan much faster without having to mess with the deductions you’re allowed to take on your taxes.

Final Thoughts

A P&L loan is a great way to get a loan as a self-employed borrower. The interest rates are competitive and the fees minimal. If you’re looking to buy a primary residence or investment home, the P&L loan programs at the lenders we work with can be the perfect answer.

Contact Save Financial today to learn more about how we can help you get the perfect loan that meets your self-employment income needs.

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