What is a Profit & Loss Statement—And Why Lenders Care About Yours
- Mark McKenna
- Apr 16
- 3 min read
7 things that Lenders look for in your P&L
If you’re a small business owner, you’ve probably heard people talk about a Profit & Loss Statement (also called a P&L or Income Statement). But what exactly is it—and why do lenders make such a big deal about it?
What Is a Profit & Loss Statement?
Think of your P&L as a financial report card. It shows how much money your business earned, how much it spent, and whether you ended up with a profit (yay!) or a loss (womp womp) over a specific time—usually monthly, quarterly, or yearly.
It’s a simple formula: Revenue – Expenses = Profit (or Loss)
Why Do Lenders Look at It?
When you apply for a loan, lenders don’t just want to know what your business does—they want to know if your business is making money. Your P&L helps them answer that question.
Here’s what Lenders look for:
1. Revenue Trends
Lenders want to see if your income is steady or growing. If your sales are all over the place—or going down—it raises red flags. Steady or increasing revenue shows that customers want what you’re selling.
2. Gross Profit Margin
This tells lenders how much money you’re making after paying for the cost of your product or service (materials, inventory, etc.). A healthy margin shows you’re pricing things right and managing costs well.
Quick Tip: Gross Profit = Revenue – Cost of Goods Sold (COGS)
3. Operating Expenses
Are your expenses under control, or are they eating into your profits? Lenders check to see how much you’re spending on rent, payroll, marketing, and day-to-day costs—and whether those numbers make sense for your business size.
4. Net Income (a.k.a. The Bottom Line)
This is what’s left after all your expenses—including taxes and loan payments. If you’re consistently in the green, that’s a good sign. If not, lenders might worry about your ability to repay a loan.
5. EBITDA
This stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It’s a fancy way of saying: “How much cash is your business generating before extra stuff is taken out?”
Lenders like this number because it gives a clearer picture of your business’s actual cash flow.
6. Profit Margins & Ratios
Lenders may run a few quick calculations to compare your business to others in your industry. Are your profit margins healthy? Are you making money efficiently? These ratios help answer those questions.
7. Trends & Surprises
Lenders want to see consistency. Big swings or weird one-time losses (or gains) might require extra explanation. Stability builds trust.
Final Thoughts
Even if numbers aren’t your thing, your P&L is one of the most powerful tools you have as a business owner. It tells your financial story—and shows lenders you’re serious about your business.
Not sure where to start? Use this P&L Template to get started. Review your own P&L each month, and look for patterns, celebrate wins, and keep an eye on costs. The more you understand your numbers, the stronger your business (and your loan applications) will be.
About Groundswell Capital
Groundswell Capital is a mission-driven lending nonprofit dedicated to sustainable economic growth, focusing on clean energy, small business financing, and community development. By aligning financial returns with environmental and social responsibility, Groundswell Capital is helping to shape a resilient and equitable future for Arizona.
For media inquiries, contact:
Dre Thompson
President,
Groundswell Capital
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