There is often a misconception out there that if you are a small business owner, lenders will scrutinise you and would be less likely to assess your loan application favourably. The good news is there are several solutions to obtaining a loan, and the loan purpose could include many different purposes.
Cash out for working capital
Often businesses use overdraft facilities or business loans for their business, this can be costly and difficult to refinance later on to a normal residential loan facility with the big banks. There is a lender that can provide a normal residential loan at a home loan rate of for example 3.79% for business or investment purpose.
Paying a tax debt
As we know, cash flow is king when you are running your own small business and often, the need for marketing, building brand awareness and just the cost of goods does absorb the money you may have had good intentions of putting aside for tax time. Most banks struggle in accepting someone as a client with a tax debt owing. There are several lenders that do not struggle with tax debt, these lenders often are only accessible via a mortgage broker, which is a good reason to use a broker.
Mortgage brokers have access to lenders
This leads us on to one of the most important things you should know, mortgage brokers have access to lenders that can lend up to 90% loan to value ratio on a low documentation basis, even if you have not completed your most recent tax returns, you do not need tax returns or full financials. All you would normally require is one or two of the following:
- An accountant declaration stating a figure you earn as a taxable income or stating you can afford the loan
- 6 months BAS statements
- 6 months’ bank statements
This is good news for many, particularly in the case of just providing an accountant letter, as it allows a letter to state a figure that may not be supported by one of the most recent tax returns. If providing tax returns, lenders need either the most recent year in a couple of instances, or the two most recent years and they either average the two years or take the lower of; the previous year plus 20% or the most recent year.
In the case of commercial finance against a commercial property, there are lenders that do not undertake annual reviews on your industry so your exposure to debt in relation to your industry is not reassessed later on, likewise there are a couple of lenders that do not carry out annual valuations either. This is comforting to know that the risk of having to pay down some of your debt is removed. You can also have up to a 30 year loan term with commercial finance, this is excellent for the cash flow of your business and amortising the repayments over 30 years instead of 15 years.
Lack of flexibility is a real bugbear for small business owners. What if you could apply for a loan with unlimited cash out with of course redraw and offset options available, but without the hassle of loads of red tape to get through to have to reapply for finance? You can have the loan in a trading trust, or non-trading trust, trading or non-trading company or of course a personal name.