Getting a loan is not as easy as it used to be… 

We are seeing more and more people seeking finance…. whether it is to buy an investment, renovating a home, buying a new home, purchase a car, new business equipment or just wanting some extra working capital.  Anyone who has been through a loan process recently can attest to how difficult a seemingly simple transaction can now be.

So here are some tips to help you get that loan:

Plan ahead

The biggest tip we can give, is to plan ahead. The first thing the bank will likely ask for is up to date Financial Statements and Tax Returns.

Accountants often have 1 months worth of work (or more) on at any one point in time.  So while Holmans will try to prioritise matters where possible, we can’t guarantee urgent turnaround of financial statements and tax returns in a really short space of time.  So if you are considering finance, get your information to us as soon as possible and plan ahead.  This is particularly important if you are considering an investment early in the 2023 year as banks will require up to date 2022 figures before approving loans (2021 figures are generally no longer accepted as up to date by the bank).  The same may apply if you are applying for Government Grants or support.

Understand you may need to lodge earlier than normal

Prior to approving the loan, the bank may also require you to lodge current tax returns immediately, just so they know the figures won’t change.  This can bring forward payment deadlines for your income tax and PAYG instalments. So it is important to plan ahead and ensure you have the cashflow available to pay the taxes early.

Ensure you have profitable business figures

Sounds obvious, but nothing is worse than claiming silly deductions (or hiding cash sales) one year to save a bit of tax, only to miss out on the home of your dreams a year later.  We have seen it multiple times – particularly as Banks are increasing their conservativeness in an increasing interest rate market. Saving tax is only part of the puzzle.  If obtaining a loan is a short term goal, you should be aiming to be as profitable as possible (even if that means more tax).

Ensure your current year management figures are up to date

Your internal records (Xero/MYOB so-on) should be reconciled and reviewed at least monthly. Also check the internal figures make sense (not showing large losses for example because of the mis-categorisation of an asset purchase or drawings). There is a chance the ATO will want to review interim figures.

Ensure all your lodgements and tax debts are up to date

Outstanding tax returns, BASs or debts are a major red flag for most of the banks.  So much so, that any outstanding ATO debts will often mean the loan is denied. 

Accountant letters

Unfortunately, a recent trend has seen banks request detailed letters from the Accountant “explaining” the Financial Statements or tax returns, and confirming ATO lodgement status for the group.  These letters take considerable time to verify and document.  Each bank or loan seems to be different. Often the bank will require multiple letters for a single loan.  Accountants are also limited in what we can and can’t say. For example we can’t guarantee your wage levels, future profitability, or future cashflow.  Despite this, we have seen banks or brokers requesting these and making finance subject to receiving such statements.

Instead, the bank (or Broker) should really be discussing future business matters with you (how you expect to trade in future, are you buying for investment or personal so-on) and you can then provide the supporting information yourself where possible. 

However, where an Accountant letter is required, you need to allow for an additional cost for the time taken to prepare the letters and supporting documentation.

Unfortunately, getting a loan is not as easy as it used to be, particularly in the current market.  The banks are taking longer and want more information than years gone by. The key is planning ahead…. a bit of preparation now will save unnecessary stress later.

Good luck

Disclaimer: This article contains general information only. Regrettably, no responsibility can be accepted for errors, omissions or possible misleading statements or for any action taken as a result of any material in this guide. It is not designed to be a substitute for professional advice, as such a brief guide cannot hope to cover all circumstances and conditions applying to the law as it relates to these items.