There can be times when a self-employed client may be unaware of certain income streams which can be “added back” or included to increase the borrowing capacity.
Aussie Strathpine franchisee Rochelle Hall said it pays to use a broker who will understand the full picture of the borrower’s financial position.
“Quite often, self employed applicants utilise trusts to distribute amongst beneficiaries for taxation purposes so it’s important that applicants are dealing with an expert to ensure their borrowing capacity is not decreased as a result of missing something like this,” Rochelle said.
“Furthermore, self employed applicants circumstances tent to change more frequently, so, financials need to be examined properly for items that may be ‘added back’ to the taxable income to again increase borrowing capacity.
“For example, was there an interest expense that is no longer continuing? Perhaps there was a large one-off capital purchase such as machinery?”
Over her career in broking, Rochelle has handled hundreds of applications for self-employed borrowers and said the most common question she receives is: “Will I have to pay a higher interest because I am self employed?”
“Thankfully the answer is “NO” as those days are long gone, and, provided your broker is well trained, he/she should be able to achieve an excellent outcome.”
ROCHELLE’S TIPS FOR SELF-EMPLOYED BORROWERS
So what should a self-employed applicant have ready for their broker?
- The last two years company tax returns and financials including their profit and loss, and, their personal tax returns. These are are all usually bound together in one booklet that is provided by their accountant.
- In addition, they should know how long they have had their ABN and GST registration if applicable.