CPA profit loss loans California
Your business cleared $150k last year. Your CPA wrote off everything legal. Home office. Mileage. Equipment. Meals. Got your taxable income down to $85k. Smart tax strategy. Saved you thousands.
Now you’re buying a house. Apply for a mortgage. Lender sees $85k on your tax returns. Denied. Doesn’t qualify.
This happens every single day.
Your CPA did exactly what you paid them to do – minimize taxes. But mortgage lenders only look at bottom line income. Tax returns say $85k. Computer says no. Doesn’t matter that your business is crushing it. Doesn’t matter you’ve got $200k in the bank. Tax return is gospel.
CPA P&L loans fix this problem. Your accountant prepares a profit and loss statement showing actual business income before deductions. $150k. That’s what lenders use to qualify you. For W-2 employees with traditional income, conforming loans offer the lowest rates. Finally someone gets it.
How CPA P&L Loans Work
What Professional Income Statement Preparation Is Required for CPA P&L Loans?
Your CPA prepares a profit and loss statement for the last 12 to 24 months. Shows your business revenue. Shows your business expenses. Shows your net income before tax deductions.
Lender uses that number to qualify you. Not your tax return. Your P&L.
Been doing these since the mid-2000s. Helped hundreds of self-employed borrowers who got screwed by their tax strategy. Consultants. Contractors. Real estate agents. Small business owners. All making great money. All showing terrible income on tax returns.
Had a consultant last year. Business grossed $280k. After legitimate write-offs? Tax return showed $92k. Traditional lenders? No way. CPA prepared a P&L showing $175k net business income. Used that for qualification. Approved for $750k loan. Bought a house in Walnut Creek. Happy ending.
Why lenders like CPA P&L loans: Professional credibility. A CPA stakes their license on those numbers. Can’t just make stuff up. Lenders trust it more than bank statements because there’s professional liability involved.
Rates are better too. CPA P&L loans usually run 0.75% to 1.5% above conventional. Bank statement loans? 1% to 2% above conventional. That professional preparation saves you money long-term.
Who Can Prepare Your P&L
What Are the Requirements?
Not just anyone. Lenders want professional credentials.
Qualified preparers:
- CPAs (Certified Public Accountants)
- EAs (IRS Enrolled Agents)
- CTEC registered tax preparers
- Tax attorneys with business knowledge
Your brother-in-law who does bookkeeping? Doesn’t count. Needs actual credentials. License number. Professional liability. Skin in the game.
Existing relationship preferred. Lenders don’t like when you find a CPA the day before applying just to prepare statements. They want to see you’ve worked together. Filed taxes together. Actual business relationship.
Had a client try to use a CPA he met on Craigslist. Lender rejected it. Red flag. Found his actual long-term CPA. Prepared proper P&L. Approved. Relationship matters.
Income Calculation
Lender takes your net business income from the P&L. That’s gross revenue minus reasonable business expenses. Uses that number to qualify you.
Variable income? They average 12 to 24 months. Seasonal business? Use 24 months to capture full cycle. Shows complete picture.
Example: Landscaper makes $15k monthly in summer, $5k in winter. Average is $10k monthly = $120k annually. That’s qualifying income.
Documentation Requirements
What you need:
- 12 to 24 months CPA-prepared P&L statements
- 2 to 3 months business bank statements
- Business license (if applicable)
- CPA credentials and contact info
That’s it. Way simpler than tax returns. No depreciation schedules. No K-1s. No complicated business returns.
Requirements
Credit score tiers matter:
600-639: Possible but tough. Need 20%+ down. Higher rates. More reserves. Strong compensating factors.
640-679: Reasonable approval odds. 15% down works. Rates in mid-7s typically. 4-6 months reserves helps.
680-719: Good position. 10-15% down acceptable. Rates around 7% to 7.25%. Standard reserves (2-3 months).
720+: Best rates available. Sometimes 10% down works. Rates closer to 6.75% to 7%. Smooth approval.
Had a 640 credit client with 25% down and 8 months reserves. Ten years in business. Approved at 7.375%. Had a 710 credit client with 15% down and 3 months reserves. Approved at 6.875%. Credit plus compensating factors determine everything.
Down payment: 10% to 25%. More down = better rates. Every 5% down improves pricing. 15% is sweet spot. 20% is ideal. 25% gets you almost conventional pricing.
Reserves: 2 to 6 months. Show you can handle payments if business slows. Self-employed income varies. Reserves prove stability. Higher reserves offset weaker credit or lower down payment.
Business history: 2 years self-employed minimum. Shows stability. Ten years is better than two. Lenders want proof this isn’t a side hustle. Established business with long-term CPA relationship? Gold.
Business Types That Work Best
What High-Performing Business Categories Qualify Best for CPA P&L Loans?
Service businesses: Consultants, coaches, IT professionals. Clean P&Ls. Low overhead. Lenders love these.
Had an IT consultant client last month. $180k showing on P&L. Tax returns? $95k after home office, equipment depreciation, vehicle expenses. All legitimate. CPA prepared 24-month P&L. Approved for $650k loan. 680 credit. 15% down. Rate was 7.125%. Closed in 35 days.
Licensed professionals: Doctors, lawyers, CPAs, architects. Established income. Predictable.
Doctor client. Private practice. Grossed $340k but wrote off everything. Medical equipment. Office lease. Continuing education. Malpractice insurance. Tax return showed $127k. P&L showed $225k net business income. Qualified at the higher number. Got the $900k home he wanted in Palo Alto.
Contractors: Electricians, plumbers, HVAC. Need contractor license. Good track record helps.
Electrical contractor. Been in business 8 years. Grossed $420k yearly. After truck expenses, tools, materials, insurance, employee costs? Tax return showed $88k. But his CPA’s P&L showed $165k net. That’s what counted. Approved for $700k loan. 25-year-old business. Strong payment history. Lender loved it.
Real estate agents: Variable income but works with 24-month average. Commission-based income qualifies.
Agent client closed $3.2M in sales one year, $1.8M the next. Variable. But averaged $180k in commissions over 24 months. After desk fees, marketing, vehicle? Tax returns showed $71k average. P&L showed the full $180k average before deductions. Used 24-month P&L. Got approved.
Rates and Costs
Rates: 0.75% to 1.5% above conventional. Currently that means 7.25% to 7.75% when conventional is 6.5%.
On a $600k loan:
- Conventional at 6.5%: $3,792 monthly
- CPA P&L at 7.25%: $4,095 monthly
Difference? $303 monthly. Worth it when conventional won’t approve you at all.
CPA preparation cost: $500 to $2,000 depending on complexity. One-time expense. Worth every penny.
CPA P&L vs Bank Statement Loans
What Documentation Do You Need?
CPA P&L advantages:
- Better rates (usually 0.25% to 0.5% lower)
- Professional credibility
- Cleaner documentation
- Easier underwriting
Bank statement advantages:
- Don’t need CPA relationship
- Faster sometimes
- Works when you don’t want CPA involved
Had a client who switched CPAs mid-year. New CPA wouldn’t prepare P&L for mortgage (liability concerns). Went bank statement route instead. Worked fine. Rate was 0.5% higher but got approved. High net worth borrowers with substantial assets but irregular income should consider asset depletion loans instead.
Bottom Line
CPA P&L loans solve the self-employed mortgage problem with professional credibility. Your accountant prepares statements showing real income. Lenders trust professional preparation. You qualify based on actual earnings.
Better rates than bank statement loans. Cleaner than tax returns. Professional approach that works.
Been doing these for years. Success rate is high when prepared properly. Your CPA stakes their license on the numbers. Lenders respect that.
Two years in business. Professional CPA relationship. Clean P&L showing solid income. Recipe for approval. Tech employees with stock awards should explore stock award income programs for RSU qualification. High-value properties above conforming limits? Jumbo financing works with CPA P&L documentation. Call (510) 589-4096 to explore CPA P&L loans or view all special income documentation programs.
Explore More Special Income Documentation
Not sure if CPA P&L loans fit your situation? Retirees with substantial assets should explore asset depletion loans for asset-based qualification. Compare our other special income documentation programs including bank statement loans (deposit analysis), full documentation loans (traditional W-2), asset depletion loans (asset-based qualification), and stock award loans (equity compensation) to find the perfect documentation approach for your California home.