Self-employed and can't get a bond?

Why banks find business owners hard to lend to

A bank's home-loan model is built around a payslip: the same amount, on the same day, every month. Business income doesn't look like that. It arrives in lumps, it changes with the seasons, and it's often paid into a company account rather than to you.

So the bank isn't saying you can't afford a home. It's saying it can't easily prove that you can. That's a paperwork problem, and paperwork problems can be solved.

What banks ask the self-employed for

Expect a longer list than a salaried applicant gets. Typically:

• At least two years of trading history
• Business financial statements, prepared and signed by an accountant
• Six months of personal bank statements, plus business bank statements
• Recent tax returns and SARS assessments that show consistent income
• A letter from your accountant confirming your income or drawings

If you're married in community of property, your spouse's documents are needed too.

The tax paradox

Good accountants help business owners pay only the tax they owe. Expenses go through the business, and taxable income stays as low as the law allows. That's smart for tax.

But banks assess affordability on the income you declare. A business owner who lives comfortably on R60 000 a month but shows R25 000 of taxable income will be assessed as someone earning R25 000. Before you apply for a bond, talk to your accountant about how your income is shown, not only how much tax you pay.

Getting bank-ready in 12 to 24 months

• Pay yourself a regular salary from the business, on the same date each month.
• Separate your accounts. Keep personal spending out of the business account, and the reverse.
• File on time. Up-to-date tax returns and signed financials make you look like the safe bet you are.
• Cut short-term debt. Store cards and personal loans weigh heavily in an affordability test.
• Save a deposit. A deposit lowers the bank's risk and often your interest rate.

Let a bond originator shop for you

A bond originator submits one application to several banks at once and knows which ones are more comfortable with business owners. In South Africa, originators are paid by the banks, so the service is usually free to you.

One bank's “no” is not every bank's answer. An originator can also tell you exactly what's missing from your file, which saves you months of guessing.

Rent-to-own as the bridge

Getting bank-ready takes time, and you still need somewhere to live in the meantime. Rent-to-own lets that time count. You move into the home you want, your price is fixed on day one, and while you build your two years of clean financials, the home is waiting for you.

When your file is ready, you buy with any bank and your option fee counts as your deposit. If the bank still hesitates, Nine Stones Capital can finance the home over 30 years. Either way, you're not starting your search from scratch.

How we look at business owners

We're business owners too, so we read bank statements the way you'd want them read. We look at what comes in, what goes out, and what's left over each month. We don't need a payslip.

What helps us: six months of personal and business bank statements, your latest financials if you have them, and a clear picture of what you've saved for the option fee.