Non-QM P&L Loans: How Lenders Use CPA-Prepared Statements to Qualify Self-Employed Borrowers

P&L loans are a non-QM product that allows self-employed borrowers to qualify using a CPA-prepared profit and loss statement instead of tax returns. The program exists because many self-employed borrowers use aggressive depreciation and deduction strategies that reduce taxable income well below their actual cash flow. A P&L loan uses a simpler income picture to qualify the borrower.

How Income Is Calculated

Most P&L lenders accept either a 12-month or 24-month P&L prepared by a licensed CPA. The income figure used is the net income on the P&L after operating expenses but before depreciation and amortization. Some investors use gross revenue multiplied by an industry-specific margin assumption instead of the net income figure. The CPA must certify the P&L, which typically includes their signature, license number, and a statement that the P&L was prepared based on the borrower's business records. The P&L must be current within 60-90 days of the application date.

Documentation Requirements

• ✦CPA-prepared and certified P&L statement (12 or 24 months depending on investor)
• ✦CPA license verification (the lender verifies the CPA is licensed in good standing)
• ✦Business bank statements for the same period to cross-reference reported revenue (most investors require business bank statements to confirm deposits are consistent with P&L revenue)
• ✦Proof of business existence: business license, corporate filing, or professional license
• ✦Evidence that the borrower is self-employed for at least 2 years (prior tax returns or IRS transcripts showing self-employment, even if income is not used for qualifying)

LTV, FICO, and Pricing

P&L loans carry a rate premium of 0.50 to 1.00% above equivalent bank statement loans at the same LTV and FICO. Most investors cap P&L loans at 75-80% LTV for purchase and 70-75% for cash-out refinance. Minimum FICO requirements are typically 680-700. Some investors will go to 85% LTV on P&L loans at FICO 740 or above with strong business bank statement deposits. P&L loans are priced case-by-case at many non-QM investors and are not always on the standard rate grid.