Navigating the Mortgage Process: A Real-Life Guide for Small Business Owners

If you are a self-employed individual, getting a home loan can be daunting as lenders will scrutinise not only your personal circumstances but also those of your business. However, there are options that could help you, such as the Stratton Home Loans' Alt Doc (Alternative Documentation) home loan option. In this guide, we'll discuss in detail home loans for the self-employed, including what lenders look for, as well as tips to improve your cash flow.

What Lenders Look for in Self-Employed Home Loan Applicants

One of the essential things lenders look for when assessing home loan applications is whether you'll be able to make regular mortgage repayments. When applying for a Stratton Home Loans Alt Doc loan, you'll need to provide documentation that you've been consistently self-employed for at least six months. You'll also need to provide proof that you earn a regular amount each month, as well as ABN and GST registration.

Stratton Home Loans’ Alt Doc loan accepts applications using documentation that's more relevant to a small business owner's circumstances. You might be eligible for an Alt Doc loan even if you've only been self-employed for six months.

To apply for an Alt Doc loan, you'll need to provide evidence of:

• ABN registration for six months
• GST registration for six months
• A declaration of financial position plus one of the following: 6 months business bank statements (inclusive of the last one month) or six months business activity statements (BAS).

How Alt Doc Loans Differ from Low Doc Loans
Low Doc loans used to be a popular way to apply for a mortgage with minimal documentation, however they don't meet the responsible lending obligations required for lenders to assess whether a loan is suitable for a borrower.
Alt Doc loans, on the other hand, meet responsible lending obligations and accept alternative documentation options compared to traditional home loans.

The Power of Alt Doc Loans
An Alt Doc loan could give you the power to help buy your own home or invest in property. Refinancing a home loan to Stratton Home Loans could allow you to consolidate business debt, improve your cash flow by paying outstanding tax debts, or even obtain cash for business purposes. However, all loan applications are subject to credit assessment and eligibility criteria.

Tips to Improve Your Cash Flow
Cash flow can be one of the biggest concerns for any small business owner, and improving your cash flow can potentially make you a more attractive applicant to lenders. Here are some ways you can improve your cash flow:

1. Pay off outstanding debts, including personal credit cards and loans: This could help improve your credit score and help reduce the amount of interest you're paying on existing debts.

2. Reduce your payment terms: If you're always waiting to receive payment for your work, you could consider offering shorter payment terms. For example, reducing them from 30 days down to 14 or 7. Or you could offer discounts for early payers (just don't overdo it or you'll end up with different cash flow issues). Likewise, see if you can change your payment terms with suppliers. Lengthening how long you have to pay them could also improve your cash flow.

3. Control your inventory: Tying up too much of your money in unsold inventory can cause cash flow problems. It’s important to review your warehousing and inventory management as this may uncover ways to maximize cash flow, for example, only ordering stocks when needed.

4. Use a financial plan and forecast: You can't always predict what's coming around the corner for your business. But a little forward thinking can keep you from being on the back foot when you apply for your loan. Track your cash flow on a monthly basis and compare where you are each month. This can help you forecast and identify emerging patterns, such as seasonal demand. Also remember to set aside money for GST and tax.

We're here to assist you

While these tips can help you plan for a future home loan application, there are many options for self-employed individuals looking to get a home loan but have not yet succeeded.
At Stratton Home Loans, we have experience working with self-employed borrowers and are familiar with analysing the particular cash flows of small businesses. Our Alt Doc (Alternative Documentation) home loan is specifically designed to meet the needs of self-employed or small business owners who cannot provide the same income documentation required by traditional lenders and mortgage insurers.
If you're struggling to obtain a home loan because of your employment type or income structure, contact a Stratton Home Loans Lending Specialist on 1300 787 288 (option 1) to learn more about our self-employed home loans.

Disclaimer: Applications are subject to the lender’s credit assessment, eligibility criteria and lending limits. Terms, conditions, fees and charges apply. Information provided is factual information only, and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser.

Stratton Home Loans is a brand name of Stratton Finance Pty Ltd ABN 63 070 636 903 Australian Credit Licence 364340. Credit for Stratton Home Loans is provided by Pepper Finance Corporation Limited ABN 51 094 317 647. Pepper Money Limited ABN 55 094 317 665, Australian Financial Services and Australian Credit Licence 286655, is the servicer of home loans provided by Pepper Finance Corporation Limited.