P & L Statement
Cash-out Refinance

A Profit and Loss (P&L) Statement Cash-Out Refinance is a mortgage refinancing option designed for self-employed borrowers or business owners who want to tap into their home equity by leveraging their business’s cash flow as documented in a P&L statement. This type of refinance allows them to refinance their mortgage for a higher loan amount than they currently owe and receive the difference in cash, which can be used for various financial needs, such as reinvesting in the business, consolidating debt, or funding home improvements.

With a P&L statement cash-out refinance, lenders use the borrower’s P&L statement instead of traditional income documentation (like W-2s or pay stubs) to evaluate their financial stability and ability to repay the loan. The P&L statement typically shows the business’s revenue, expenses, and net income over the past 12 to 24 months, providing a clear picture of profitability and cash flow.

To qualify, borrowers need to demonstrate steady business income or growth over this period, which assures lenders that the borrower has sufficient funds to support the higher loan amount. The P&L statement may be accompanied by additional documentation, such as recent bank statements, to verify consistency in cash flow.

Primary Considerations
– Self-employed borrowers can tap into their home equity without relying on standard income verification methods.

-The cash-out amount can be used for any purpose, such as expanding a business, consolidating debt, or improving the home.

– The P&L statement provides a way to qualify based on business performance, making it ideal for entrepreneurs who have tax deductions that may otherwise reduce their taxable income.

– Because this loan type is based on non-traditional income verification, rates will be higher than those in standard cash-out refinancing.

– Large fluctuations in the P&L, or periods of low income, may make it more challenging to qualify.

-Lenders will require the P&L to be prepared or verified by a CPA or tax preparer to ensure accuracy.

A P&L statement cash-out refinance offers a unique way for business owners and self-employed borrowers to access funds based on their business’s profitability, even if they lack conventional income documentation.