Report Your Income and Expenses Correctly with a Profit and Loss Statement
Profit and Loss Statement
When it comes to borrowing money from the bank, a mortgage company or other institution providing financial aid, getting approved for a loan always comes down to the applicant’s ability to prove credit worthiness. To check your credit worthiness, there are several factors to take into account: previous credit history, current income to expenses ratio and obligation in case of non-payment. To ensure the approval of the loan, the borrower is required to gather and provide a number of financial documents. Of particular importance is the Profit and Loss Statement.
In this blog post, we will consider the process of preparing the Profit and Loss Statement with Chase bank acting as a creditor in this example.
Who needs a Profit and Loss Statement form?
Each borrower who is self-employed or working as an independent contractor should complete this form while applying for a loan in order to summarize revenue, costs and expenses they had during a particular period, usually a fiscal quarter or year.
What is the Profit & Loss form for?
The Profit and Loss Statement provides information on total expenditure and revenue in order to show net income after taxes. This information can be used by a lender to modify loan terms.
Is the Sample Profit and Loss Statement form accompanied by other forms?
At the initial stage of applying for a loan from Chase bank, the borrower should provide detailed information about their overall financial situation. The following document packet must be prepared when a self-employed customer applies for a mortgage:
- Request for Mortgage Assistance
- IRS Form 4506T-EZ
- Sample Profit and Loss (P&L) Statement
- Authorization to Obtain Consumer Credit Report
- Form SSA-89
- Bankruptcy Attorney and Borrower Authorization Form
- Authorization to Provide and Release Information
When is the Profit & Loss Statement form due?
The minimum period covered by the report is three months. It is intended that this report be submitted by the borrower once per quarter; it can be submitted less often if previously arranged by the creditor.
How do I create a Profit and Loss Statement form?
Borrowers should provide accurate information about:
- their company and type of business;
- their personal information;
- gross income before taxes;
- net income.
The document should be signed by the borrower(s).
Where do I send the Profit and Loss Statement form?
This document, completed and signed, must be directed to the address of the creditor. However, a copy of the paper should be kept by the borrower as a personal financial record.