Avatar's Blog
» P&Ls - Making Monthly Payments
The purpose of asking for P&Ls (profit and loss statements) when performing due diligence on a real estate property is to determine whether the borrower can reasonably afford to make the monthly loan payments without damaging the business or putting themselves so far out on a limb that the company is in jeopardy. Avatar looks for a ratio of 1.2:1 of gross income to expenses or better. This kind of fiscal health indicates that the company can afford the loan and still have a few dollars to put in the pocket at the end of the month. In the event of a problem, the borrower will be able to get over the bump in the road and keep on course without major impact to the company supporting the loan. Run your numbers. Make sure you can afford a hard money loan before you apply. Then provide the numbers you ran as proof of that ability when you make your loan request.
