Avatar's Blog
» Building a Hard Money Loan Package - P&Ls
P&Ls is an abbreviated term for "Profit and Loss Statement". A P&L is generated for the bussiness or other entity that will support the monthly loan payments. It will tell how much is coming in and how much is being spent each month over a period of time, usually 6 month or one year increments. The difference is the net operating income (aka NOI).
This financial document can be created by you, your accountant, or your company's financial personnel. You will need to sign the P&Ls for your loan package, acknowledging that they are true and correct.
P&Ls serve to tell a hard money lender whether you can afford to make the monthly payments on the loan you are requesting. Avatar Financial Group likes to see income to expense ratios of 1:2 to 1. In other words, you should bring in at least 1.2 times the amount of money you spend on expenses each month. This gives you a buffer in the event that you run into a bump in the road. Avatar makes loans that make sense for both the borrower and the lender - use the P&Ls to determine for yourself whether and how much of a loan makes sense for your business.
