If you run your own business, you already know your income doesn’t look like a payslip. Lenders know it too, and they each have their own way of working it out. Understanding the basics can save a lot of frustration.
Full doc loans
A full documentation loan uses your tax returns and financial statements. Many lenders want the last two years, and some average them. Others will consider only the most recent year, which may help if your business has grown.
Lenders don’t just look at your taxable income. Many will add back certain expenses, such as depreciation or one-off costs, which can lift the income they use.
Low doc loans
If your tax returns aren’t up to date, a low doc loan may be an option. Instead of full financials, a lender may accept an accountant’s letter, BAS statements or business bank statements. Low doc loans can come with higher rates, extra fees or a larger deposit requirement, so they’re worth comparing carefully.
Paying yourself a wage
If you’re a director who draws a regular wage from your company, some lenders may assess that income in a similar way to an employee’s, alongside company information.
Companies, trusts and tax debt
Borrowing through a company or trust adds paperwork, and not every lender caters for it. If you have an ATO debt, mainstream banks may be cautious, but some non-bank lenders may consider it, subject to their criteria.
How to prepare
- Keep tax returns and BAS lodgements current where you can.
- Separate business and personal accounts.
- Talk to your accountant before a big purchase: decisions that reduce tax can also reduce borrowing power.
- Speak to a broker early, ideally before you start house hunting.
Let’s look at your situation
Every business is different, and so is every lender’s policy. Book a free 15-minute chat and we’ll outline which lenders may be worth approaching.
This article is general information only and doesn’t take your personal circumstances into account.