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The Profit & Loss Statement (P&L) Only Loan

How Business Owners Skip the Paperwork Entirely in 2026

Business owners are often denied for mortgages because tax returns don’t reflect real cash flow.
This article explains how P&L-only loans work and when they apply.

Real Denial Scenario

A self-employed business owner applies for a mortgage to buy a primary residence in Ohio.
Credit is solid. Cash in the bank is healthy. The payment makes sense. The denial comes anyway.

“Your tax returns don’t show enough income.”

On paper, it’s true. The borrower writes off expenses aggressively. Net income on the tax return looks thin, even though the business generates real cash flow every month. Conventional underwriting doesn’t care how the business actually runs. It cares how income appears after deductions.

That’s where the file stops for most lenders.

Why This Happens

Conventional and government loans calculate self-employed income using:

Personal and business tax returns
Net income after deductions
Multi-year averaging

For business owners who optimize taxes, this creates a structural problem:

Legitimate deductions reduce taxable income
Lower taxable income reduces qualifying income
Lower qualifying income breaks DTI

The borrower isn’t risky. The documentation model just doesn’t fit how the business operates.

The Actual Rules That Matter (P&L-Only)

P&L-Only loans remove tax returns from the income calculation entirely and replaces them with a single document:

a CPA-prepared Profit & Loss statement.

This is not a workaround or exception. It’s a different underwriting framework.

Core Eligibility Rules (Ohio)

General program guidelines include:

Minimum credit score: 640
Business age: Operating more than 2 years
Property types allowed:

Primary residences, Investment properties, Condos, New construction

DTI limit: 43%
Reserves: 3 months PITIA

Guidelines vary by lender and program and are subject to change.

How Income Is Actually Calculated

There is no averaging. No tax transcript review. No W-2 analysis.

Income is calculated as:

Gross revenue
Minus documented expenses
Equals net qualifying income

Key points:

Only net income is used
No depreciation or expense add-backs
No reliance on prior-year tax filings
No income averaging across years

The underwriter is evaluating whether the business produces enough real cash flow right now to support the payment.

What Gets Reviewed (And What Does Not)

Required

CPA-prepared P&L covering the most recent 12 months
Signed by the CPA
Accompanied by a CPA letter
Credit report
Asset statements
Standard loan application items

Not Required

Personal tax returns
Business tax returns
W-2s or 1099s
IRS transcripts

Documentation volume drops. Scrutiny does not.

Why Choose Conrad Mortgage?

Conrad Mortgage works with business owners and self-employed borrowers across Ohio. We focus on clear documentation review, straightforward communication, and loan structures that reflect how businesses actually generate cash flow.

Have questions about P&L-only loans or self-employed income options?
Speak with a licensed loan officer to discuss next steps. →

Written by Emerson Lindsley
Loan Officer | NMLS #2646547
Northeast, Ohio

01/29/2026

Where These Loans Actually Fall Apart

Most P&L-Only files don’t fail on credit or income. They fail on liquidity.

Common issues:

Large deposits without sourcing
Funds moving between business and personal accounts without clarity
Assets that exist on paper but can’t be documented cleanly
Cash that isn’t seasoned or traceable

If the funds are there but not explainable, the file stops.

Legitimate Options

If a borrower is denied elsewhere due to income calculation:

A P&L-Only Non-QM loan can be evaluated immediately
No waiting for a new tax year
No amended returns
No restructuring the business

However:

The P&L must be accurate and defensible
Liquidity must be documented
DTI still matters

This is not a “low-doc” loan. It’s a different doc loan.

Neutral Next Step

If you’re a business owner in Ohio who was told your income “doesn’t work,” the first step isn’t an application. It’s a document review. A CPA-prepared P&L and asset breakdown can determine whether this program applies before a full submission is ever made.

No assumptions.
No promises.
Just a clean read on whether the numbers work under the rules that apply.