P&L-only loan vs. Conventional loan
For a self-employed borrower with a clean, profitable business, a P&L-only loan is the lightest-documentation path there is: qualifying income comes from a profit-and-loss statement prepared by a CPA or tax preparer, sometimes with no bank statements and never full tax returns. A conventional loan does the opposite — it wants two years of returns and averages the net income after every write-off, in exchange for the lowest rate.
The trade is documentation for price. A P&L loan is fast and forgiving of write-offs; conventional is cheaper but only if your net income holds up.
Side by side
| Factor | P&L-only loan | Conventional loan |
|---|---|---|
| Qualifying income | CPA-prepared P&L (net profit) | Net profit from 2 years of tax returns, averaged |
| Tax returns required | No | Yes (2 years) |
| Bank statements | Often none (P&L alone) | Not used to qualify income |
| Down payment | 10–20% typical | As low as 3–5% |
| Minimum credit | 660–700+ typical | 620+ |
| Rate vs. conventional | ~1–2% higher | Baseline (lowest) |
Figures are representative ranges, not quotes, and vary by lender. Read the full guides: P&L-only loan · Conventional loan.
Who should pick p&l-only loan
Self-employed borrowers with a profitable business and a CPA who can attest to a current P&L, who want the fastest, lightest documentation and whose tax returns understate their real earnings.
Who should pick conventional loan
Self-employed borrowers whose two-year net income (after add-backs) qualifies them, who want the lowest rate and smallest down payment and don't mind supplying full returns.
Bottom line
Still deciding? Take the 5-question loan quiz, compare every option on the loan types page, or size a purchase with the affordability calculator.
FAQ
Most lenders require the profit-and-loss statement to be prepared or signed off by a licensed third party — a CPA, enrolled agent, or tax preparer — rather than the borrower alone. Some also ask for a few months of bank statements to corroborate it. Exact rules vary by lender.
No. A bank statement loan derives income from your actual deposits over 12–24 months; a P&L-only loan uses the net profit on a prepared profit-and-loss statement, sometimes without any bank statements. P&L loans can be faster but hinge on the preparer's credibility; bank statement loans lean on documented cash flow. See the P&L-vs-bank-statement comparison for that specific matchup.
Educational information only — not financial advice, and not a quote, pre-approval, or offer of credit. Mortgage Merlin is a publisher, not a lender or broker.