Self-employed and looking to get finance? Here's what you need to know.
Many self-employed workers can find it difficult to get finance, but what they don’t understand is why.
8 May 2017
Being self-employed can be both challenging and hugely rewarding. On the one hand it provides the freedom to work flexible hours, on the other hand businesses may take some time to build before they start generating a consistent income.
Unfortunately for many self-employed workers, this can make it hard to get finance, particularly during the early years of business.
What’s the issue with being self-employed?
Because self-employed workers often earn an irregular or inconsistent income, traditional lenders are often reluctant to offer finance, and unfortunately “sorry we can’t help you” can be a common response to many an application for finance.
While it can vary by lender, most big banks will require self-employed workers to have filed at least two years’ worth of tax returns as evidence of their earnings.
However, when you have a business to run, keeping on top of your tax returns can fall down the priorities list. Plus deadlines for lodging your business’ tax returns can vary depending on the structure of your business and whether you are using a registered tax agent.
This can mean that a self-employed worker has to be in business for longer than two years before they even start to meet the banks’ assessment criteria.
If your financials are not up to date or you’re in the first few years of being self-employed, which is often when new equipment or a new vehicle is needed, it can be hard to get the finance to help the business move ahead.
What options do self-employed workers have?
Thankfully there are lenders in the market that offer more flexible solutions for self-employed borrowers.
Rather than demanding tax returns, some lenders will consider using alternative documentation such as BAS and bank statements to verify income levels.
Liberty has a wide range of solutions for self-employed borrowers looking to buy either a home or car, or to simply fund their next business purchase. If you need help getting started, then get the right advice and talk to a Liberty Adviser today. You can find your nearest Liberty Adviser here.