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tradespeople who haven’t been in business by themselves for very long, or their financial records are a little out of date.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 spoke to Sydney based, business lending expert, Chris Brown from New Vision Financial Services about how tough it can be for tradies to get finance for property and this his advice for them to follow:
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
Chris says up-to-date financial information is critical to securing financing and you need two years of financial records at a minimum. Chris also mentions that banks will rarely look at financials that you haven’t lodged with the Australian Taxation Office. He does offer some hope and says he can point tradies towards lenders who will use other means to determine levels of income.
3. Include your business “add-back” items
Chris is surprised by how many tradies neglect to include their add-backs as part of their income, as it can significantly boost their 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. Quarantine your loan
Chris states that he is more than happy to work with an accountant to help self-employed tradespeople claim some of the interest back as a tax deduction, but this strategy requires the correct loan structure from the very beginning – if it isn’t, it’s probably too late.
5. A business loan does not necessarily mean a higher rate
Most lenders will charge you a higher rate and demand yearly reviews if you have a business loan says Chris, 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 will may be able to structure business loans at home loan rates or in general, help you get a better deal.
6. 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. Chris emphasises that it’s important to assess your future financial needs and plan for at least 3 to 5 years.
7. Get every dollar working for you
Every little bit can add up to thousands of dollars in interest and shave years off the loan, which is why Chris emphasises the importance of making 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.
About Chris Brown from New Vision Financial Services
Ex-lawyer, turned mortgage broker is what we learned when we got together with Chris Brown from New Vision Financial Services, based in Sydney. Chris prides himself in leaving no stone unturned to help his clients find the perfect loan solution.
Chris has a special niche in helping trade business owners and with access to over 40 different lenders, Chris and his experienced team offer great flexibility and options in order to help you make the right decision.
Chris offers a FREE 10 – 30-minute finance health check, check out his services and how he can help you.