Considering getting a loan when you're self-employed? There are a few things you need to know before going to the bank. By knowing these things, you increase your chances of getting your application approved, and at a rate amenable to you.
Your taxable income is a double-edged sword. Have zero or very low levels of this and you'll find it difficult to convince lenders to grant your loan application. Meanwhile, a high taxable income means that you would send most of your money to the Australian Taxation Office (ATO) instead of your pocket.
The key here is to know the level of taxable income the lender requires to approve your credit application. Once you know that, work to get your taxable income around that level with the help of your accountant.
Your lender would request for your personal tax returns for the last two years. Ideally, you want to demonstrate that your business is humming along steadily--preferably showing a steady rise during the period. Any radical dip or jump in your taxable income could be a red flag to your lender as this could indicate an unstable business.
If your figures are like the latter, check what caused the drastic change. It could be that the first year was the same year you established your business, which meant huge, one-off expenses on acquiring equipment, setting up your office, and the likes. The lender won't know your reasons and would likely treat the huge expenses you made as recurring expenses. In this case, your accountant or your broker could help you. Tell them about the reason why there was a huge change in your figures, and they might be able to find something to narrow the difference between the two years.
As you notice, your broker and your accountant will be key people to help you increase your chances of getting your loan application approved. Be open with them and provide them with all the information you think they might need to assist you. Getting a loan as a self-employed individual may require more steps than those with day jobs, but it isn't entirely impossible.
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