We all know that the GFC was caused by dodgy lending standards. The finger of blame was often pointed at the lo-doc loans often used by the self-employed who could not or would not prove their actual income.
Thereafter it became harder for the self-employed to get finance.
But today, if you are running your own business, it is still possible to arrange finance – sometimes even full doc loans.
Here are a couple of good tricks that good brokers know to arrange finance for the self-employed – at low rates.
One Big Four Bank will assess a self-employed applicant’s income based solely on their last two Notices of Assessment from the Australian Tax Office. There is no need to show individual tax returns or company accounts.
I am currently arranging finance for such a client; he deliberately runs his company at a loss. But, because this bank only needs to see his personal Notice of Assessments, they do not need to see the losses and, as a result, are happy to give him a loan at 4.3 per cent.
For self-employed applicants, most banks like to determine an applicant’s income by taking an average of the last two years’ financials. But another Big Four Bank has a policy of just using the last year’s financials. This is very handy if you company is in growth mode. If 2014 was a passable year, but 2015 was great, then this bank will lend you significant amounts at great rates.
But there are times when a self-employed client has to arrange a lo-doc loan – fortunately the rates are still very competitive.
Here, understanding individual lenders’ policies is key to arranging finance as not all lender are the same.
Many of the major banks have pretty much pulled out of the lo-doc market. But there are still some specialist lenders such as Pepper, Liberty, La Trobe and Bluestone who can deliver for self-employed borrowers. Here’s a couple of example of lo-doc loans I am arranging.
- One client runs a very-successful training company. Exceptional circumstances meant that her company made a loss in 2015 and as a result, she could not get a full-doc loan. In this instance, I have been able to arrange a $1.1m loan with income demonstrated by her last two BAS statements.
- Another client runs a construction company and does not have up-to-date accounts. For him, I am arranging a $2.2m loan with income verified by an accountant’s letter.