How Lenders Read Self-Employed Income
Employees hand over a payslip. You hand over a story told in tax returns. Here is what lenders usually look at. For a closer read, see how lenders read your last two tax returns.
Your last two years of returns
Most lenders start with two years of personal and business tax returns. They look at the direction as well as the number, so one soft year can change the answer.
Add-backs
Some lenders add certain expenses back to your income, such as depreciation or a one-off cost, to see what the business really earns. Which items they accept differs from lender to lender.
ABN and sole trader income
If you trade on an ABN, lenders generally work from your taxable income after deductions. How long you have held the ABN can matter too.
Company or trust income
Your pay might come as wages, dividends or trust distributions. Lenders look at the entity as well as you, so how you are set up shapes how your income is counted.
Two Lenders Can Give Very Different Answers on the Same Income
One lender averages two years. Another leans on the latest year. One accepts an add-back and the next does not. Same business, same returns, different borrowing figure. Policies vary by lender and we check them for you before anything is lodged, so you are not guessing which door to knock on.
Low Doc Options
Some people cannot show full financials yet. A newer business, returns that are not up to date, or income that runs through a few entities. Some lenders have low doc options for that. They are assessed differently and the terms differ, so it is worth reading how low doc loans work before you decide.
Premises, Business Funding and Structure
Buying business premises
Owning the place you trade from is a different loan to a house. See commercial finance. If super is involved, SMSF is a specialist structuring service for SMSF and Trust scenarios, not a standard loan product.
Business loans and working capital
Cash flow gaps, stock, a slow quarter. Our page on business loans and working capital explains how lenders assess the business.
Asset and equipment finance
Vehicles and equipment can be funded without tying up your cash. See asset and equipment finance.
Trust and company structures
Fewer lenders accept these, and the paperwork is stricter. Read which lenders say yes to trust lending, and we work with your accountant and solicitor.
Common Questions
How many years of tax returns do I need?
Most lenders ask for the last two years. Some will consider less in certain cases. Policies vary by lender, and we check them for you.
My taxable income is low because of deductions. Can I still borrow?
It can lower the income a lender counts. Add-backs may help, depending on the lender and the item. We run the figures with you first so there are no surprises.
Do I need a low doc loan?
Not always. Many self-employed borrowers qualify with full documents. Low doc is for when you cannot show full financials.
Can I buy my business premises through my SMSF?
Sometimes. It is a specialist structuring service for SMSF and Trust scenarios, not a standard loan product, and we work with your accountant and solicitor.
