Our self-employed and contractor clients seem to get the run around from their banks when they are trying to get a loan to buy their own home. Quite often, they get bounced around from bank to bank only to be told ‘no’ – or they need to go down the low doc path, which involves higher rates and fees.

There is a distinction between a contractor and being self-employed, so this is reviewed on a case-by-case basis.

This example looks at a couple who runs their own successful café, but had to jump through hoops when they went to the bank they already do all their business banking with.

The Scenario

They have been running a thriving café in the suburbs for the last three years and were now ready to buy their own home. The business was performing well and they felt confident to now take on a mortgage.

The Process

  • We contacted their accountant and worked together to discuss the business’s financials. It helped that their financial information was up-to-date and had been lodged with the Australian Tax Office
  • We explained to the clients how they would be assessed by the banks for their borrowing capacity, given some lenders are stronger in this space then others
  • We worked through their ‘add backs’:
    • Interest expenses
    • Excess superannuation contributions
    • Depreciation
    • Relevant allowances
    • Non recurring expenses
    • Non cash expenses
  • We ensured their cash flow could weather any storms with their business and they were not over-committing themselves.

The Outcome

  • Working collaboratively with their accountant ensured the clients were in the right loan structure
  • They reviewed their business expenses, which uncovered additional savings
  • They bought their own home and could not have been more thrilled.

Comments

  • In the case of self-employed clients we have encountered, they may have business loans, unpaid tax debts with the ATO, or poor repayment performance on their existing home loan. There is no reason why any of these issues should hold a client back from reviewing their situation and in fact these are the cases where intervention and consolidation are most needed. We understand that business owners are sometimes focused on running their day-to-day business operations rather than having the time to review all their finances
  • We can help business owners streamline their finances by having an accountant take an in-depth review of the business’s financial performance to see how we can improve or continue to build the success of their business.