The Type Of Income Lenders Look At For A Self-Employed Loan
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When you’re looking for a self-employed loan, it can be confusing to find a definitive summary of what type of income lenders will look at. Generally, lenders will like you to have a fairly steady form of income before they approve your application. You may need to supply documents such as business statements and tax returns to be approved, although what exactly you need to supply may differ between lenders.
If you are having difficulty proving your income, there are other types of low doc loans you could apply for that we go through below.
Read on to find out more about the type if income lenders look at for a self-employed loan.
The type of income lenders look at for a self-employed loan
When you apply for a self-employed loan, lenders will generally want to see that you have a steady stream of income from your business. This will tell the lender that you will be able to meet your repayments on time.
As a general rule, you usually need to have been in business for at least 18 months, or you need to have been in the same industry for at least two years. This isn’t to say that every lender abides by this guideline, so it is best to check with your lender when you begin your application.
If you haven’t been making a profit yet, it could be possible to try to apply for a low doc loan. With these types of loans, you typically do not need to provide the level of documentation that you would with a traditional loan. In a low doc loan, it’s possible that special consideration may be taken for being in the same line of work for many years, even if your profits are limited. Of course, this would be up to your lender.
How are self-employed loans different?
Whether you are self-employed or a salaried employee, lenders will need to find out if you can repay your loan based on your current earnings. Lenders offering traditional loans usually use your payslips and bank accounts to determine your income levels.
When you’re self-employed, you may find it more difficult to prove that you will continue to have a steady income to repay the loan. Lending criteria for self-employed borrowers may differ between lenders, especially in terms of the income documents you will be asked to supply.
You may be asked to show your tax returns or even to sign an income declaration instead of supplying your own payslips. Usually, you may need to submit tax returns as an extra form of income proof.
You may also be asked to provide a verified statement of your income, an accountant’s letter, and Business Activity Statements. Your lender will usually also ask you for both bank statements and business statements to get an idea of your overall finances.
If you are having trouble supplying these documents, you may still be approved for a loan that requires less documentation.
What you may need to supply
Though you may not have the same documents as a standard borrower, you will still need to provide some information to verify your income. When you’re self-employed, the documents you will need to supply in order to get approved for a loan may include:
- ABN –Lenders will generally want to see proof of your ABN number being registered to you
- A borrower’s income declaration – You may be asked to provide a signed declaration of your income so that your lender can be confident that you will be able to make your repayments
- Business activity statements –You may be asked to provide your Business Activity Statements from the last 6 to 12 months, and these will usually need to be verified by the ATO for a lender to accept them
- Business and personal transaction statements –You may be asked to provide both business and personal transaction and bank statements, though how far back you will need to provide may differ with each lender
- GST registration –A lender may want confirmation that you have been registered for GST if you meet the minimum turnover levels
What if I can’t prove my income?
If you’re having difficulty supplying documents to prove your income, you could try to apply for a low doc loan. Low doc loans are for when a business owner cannot provide business financial statements and tax returns for the previous two years, or proof of income.
In addition, some low doc loans are unsecured. This means you do not have to provide your lender with any sort of security or collateral, which also results in fewer documents. A traditional loan often requires extensive amount of paperwork before approval is possible, including income verification, financial statements and business plans. This is also on top of the regular personal documents needed in order to apply for a loan.
Low doc loans can make the process less complicated. They can potentially offer an easier option to those who cannot provide the long list of documentation required by lenders for the more traditional loan options.
Where does Tiger Finance come in?
With Tiger Finance, we can help to get you a loan in four easy steps. You will have a free consultation with one of our specialists, and we will tailor-make you a loan. We will negotiate with lenders on your behalf before you are approved.
We have helped countless Australians with both good and bad credit ratings to be funded for their dream loan. We understand that lending criteria from other lenders are too strict and can stop you from achieving your goals. That is wrong, and it should not hold you back.
How we can help
Our finance specialists can help you find the right loan for your project. Self-employed loans are a complicated topic, but we will find a loan that makes your dream project that much easier.
If you are one of the many Australians finding getting a loan difficult, Tiger Finance can make the process simple and pain-free.
Call our loan specialists today for your free initial consultation.
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