No Doc loans and Ninja loans were two of the causes of the Global Financial Crisis – loans were arranged for people who had no income or no ability to prove their income.
I am not advocating a return to the loose lending standards of the past, but Asset Based Commercial (ABC) loans can often get business owners out of a tight fix – without the need to demonstrate income.
Lenders have greater flexibility in arranging commercial loans because they are not governed by the National Consumer Credit Protection Act (NCCP). Here, so long as you have assets you can borrow money without proving income – but you can only do it if you own a company.
Typically, they can be used by businesses to buy a property rapidly – without all the normal fuss of loan applications; if the borrower can prove ownership, the lender will lend up to 65 per of a property’s value.
I have used this sort of loan structure to buy sought-after commercial properties, such as shops, rapidly.
But there are some occasions when you can get a loan for residential property in high demand areas of Melbourne and Sydney rapidly without proving your income.
The company does not have to be a business that makes things; it could simply be a trust or holding company that many property investors use to manage their investment portfolio. In such instances the lenders will loan up to 65 per cent of all the property’s value without the need to prove income.
Clearly, because the lenders will only loan up to 65 per cent of the value of a property, if you want to buy a new property via an ABC loan, you will need to have plenty of equity tied into your existing properties to find the remaining 35 per cent.
ABC loans are not for everybody – and at 10 to 12 per cent per annum (plus fees) they are far from cheap. But, if you own a company they can be an excellent means of you buying a property – no matter what type and before you can sort out your income and a more suitable loan.