There have recently been changes made by some lenders surrounding how self employed people are financially assessed when applying for loans. This means it may not be as difficult at it has been at times in the past for small business owners to get onto the property ladder.

When it comes to self employed borrowers, they are not necessarily deemed more or less risky, although the requirement for documentation and proven history are more than someone who is on a salary would have to provide. For example, there are some lenders who will accept a salaried borrower in just their first pay cycle, or even their first day in their job, although self employed borrowers are required to show at least 1 year, and in some cases 2 years of financials before they will be considered for finance. Lenders will look at difference industries more or less favourably dependent on a few things. One being deemed security within a position (lawyers, doctors, accountants) and the other being proven history (sometimes a carpenter who has been PAYG and switches to a self employed contract role with the same business will be considered under a shorter term if evidence can be shown).

• Make sure your financials are up to date – if your tax returns are more than 6 months past the end of the most recent financial year, you already exclude more than 50% of the available lenders, and risk not having your true financial position being shown to the lender.

• Be ready to explain any unusual aspects in your financials – every business is different, and whilst you are involved in the day to day running of your business, an assess at a lender wouldn’t have even had a conversation with you, so it is important everything is explained and noted to avoid delays in your application.

• Involve your accountant – allow your broker to speak to your accountant directly to assist with explaining any extraordinary figures noted in your financials. It will assist in ensuring an accurate depiction of your financial position is provided to the lender.

• Ensure you note all business and personal liabilities including car loans, business loans, and credit card limits, even if you don’t use them – In most cases, any loans in your business are used in the affordability test for your loan.

• Make sure you are pre-approved before looking for a property – if you find the dream home you want and you are not pre-approved, there is a chance your application may be delayed due to additional documents being required or clarification being sought to evidence your application. A pre-approval doesn’t cost anything, so you are always better to be safe than sorry!

Below Peasy director Joel Wyld chats to the ladies at Sky News Real Estate about property loans for small business owners:

If you have any questions about any of the above please get in contact with us, we’d love to have a chat.