How Does The Bank Assess Self-Employed Workers When It Comes To Obtaining Finance?
Dilleen Property Group 2022
How does the bank assess self-employed workers when it comes to obtaining finance? What are some of the things they look at? What are the requirements? These are all common questions asked by people who are self-employed. Obtaining finance as a self-employed worker can be challenging, however below is some information regarding the different policies if you are looking at obtaining finance.
Many banks have different policies when it comes to people that are self-employed. There are some lenders that require two years’ worth of the company’s financials, and there are some lenders that only require one year of the company’s financials. In the beginning of my business, I was able to obtain finance through NAB with only one year of company financials. Therefore, it is important to note that there are options out there if you are looking to obtain finance with a young business.
Lenders will also assess your yearly taxable income from the Australian Taxation Office to determine your borrowing capacity, and whether they will approve finance for you. As an example, if a self-employed person makes $150,000 per year, and their tax return from an accountant is $120,000, the bank will base their assessment off the $120,000 as this is your net income. If there is a big variance between the first and second year of your business operating, they will usually add these together to determine your average self-employed income. It is important to note that if you have only been employed for 3-6 months, it will be very difficult to obtain finance.
If you are self-employed, it’s always a good idea to keep track of how much you are paying yourself. The banks always want to see evidence and documentation that you are paying yourself that money. Accounting software that you may use is Xero and QuickBooks. Unfortunately, it can be very hard for people wanting to obtain finance even when you earn a good income, and lenders are usually more lenient to people who are employed.
Another point to mention is, if you are a casual worker, you can sometimes obtain finance if you have a minimum of 3 months’ worth of documentation. Some other banks will say 6 months to a year. Therefore, it is important to have the right mortgage broker apart of your team. If your property investment goal is to get to 6-8 properties, then make sure that your broker has helped someone achieve this firsthand. Ask them about their experience and what they currently know about property investing.
The first step when investing in property is to reach out to a mortgage broker who can advise you of the necessary steps and documentation to get you from A to B.
Disclaimer: This is not intended as legal, financial, or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature, you should seek advice from a qualified and registered legal practitioner or financial or investment adviser.
