The banks are hard on tradies which is why….
Financial institutions seem to want more and more proof of income these days, which can make it tough on self-employed tradespeople who haven’t been in business by themselves for very long, or their financial records are a little out of date.
We know how tough it can be for tradies to get finance for property, so we have compiled a list of tips and tricks that you can do when applying for a home loan.
1. Don’t take the first offer
Using the same bank where you have your savings and business accounts comes with a certain amount of comfort factor, and banks rely on that to provide deals that aren’t so great. They don’t have to work for your business, so there’s no incentive for them to give you the best rates. Plus, if your financials aren’t up to date, banks will probably say no.
2. Get your financial information up to date
Having up-to-date financial information is critical to securing financing and you generally need two years of financial records at a minimum. Banks will rarely look at financials that you haven’t lodged with the Australian Taxation Office.
3. Include your business “add-back” items
Many tradies neglect to include their add-backs as part of their income, as it can significantly boost borrowing power.
“Add-backs” very common to tradies in business can include:
• Car allowance
• Interest expense that is being refinanced
• Extra superannuation expenses
• Non-recurring expenses
• Non-cash expenses
4. A business loan does not necessarily mean a higher rate
Some lenders will charge you a higher rate and demand yearly reviews if you have a business loan and you might also cop extra time and higher fees as well.
That’s one of the strong reasons for tradies to work with an experienced business loan specialist, who may be able to structure business loans at home loan rates or in general, help you get a better deal.
5. Consider your future
Every small business needs to have some idea about how their finances may be a few years down the track, and it’s no different for tradies. It’s important to assess your future financial needs and plan for at least 3 to 5 years.
6. Get every dollar working for you
Every little bit can add up to thousands of dollars in interest and shave years off the loan. Hence, it is important to make every dollar work for you. For instance, you can park your GST payments in an interest-bearing facility before you need to hand them over to the tax office.
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