Home loans for small business owners

Introduction to home loans for sole traders and small business owners

Sole traders and small business owners face unique hurdles when applying for a home loan. Unlike traditional employees, your income may vary month to month, and you might not have payslips or consistent tax returns that lenders typically look for.

Understanding what Yard looks for and knowing what documentation is required can significantly improve your chances. Yard offers home loan products tailored specifically for sole traders, featuring flexible documentation requirements and consideration of alternative income evidence.

Understanding sole trader business loans vs. sole trader home loans

While both are forms of credit, sole trader business loans and sole trader home loans serve different purposes:

• Sole trader business loans are used to support or grow your business. They can fund equipment, inventory, or cash flow.
• Sole trader home loans, on the other hand, are personal loans secured against property, intended for purchasing a home or investment property.

Home loans are specifically designed to help you purchase residential property and typically offer lower interest rates than business finance. While business loans can be used to purchase commercial property or support business operations, they might not be suited for buying a home to live in. Choosing the correct loan type can lead to substantial savings and ensures you're using the right product for your needs.

Challenges faced by self-employed individuals in securing home loans

Self-employed applicants often encounter the following barriers:

• Irregular income: Lenders prefer consistency, and fluctuating earnings can raise red flags.
• Lack of payslips: Traditional verification methods don’t apply.
• Complex financials: Business structures and deductions can reduce taxable income, affecting borrowing capacity.

Yard assesses self-employed individuals by diving deeper into their financials. We may request personal and business tax returns, profit and loss statements, and bank account analysis to gauge reliability and risk. If tax returns are not available, Yard may still be able to assist through a low doc home loan. These loans allow you to verify your income using alternative documentation such as BAS statements, bank statements, or an accountant’s letter—making them a valuable option for applicants with a shorter or less conventional financial history.

Home loans for self-employed under 2 years

If you've been self-employed for less than two years, the path to securing a home loan becomes narrower but not impossible. Yard typically prefers at least two years of financial records, but we also offer alternative solutions and can consider individuals with less than two years of trading history.

How to improve your chances:

• Provide interim financial statements prepared by a qualified accountant.
• Use previous employment history to demonstrate industry experience.
• Consider a guarantor or larger deposit to reduce risk.
• Look into low doc home loans with Yard, which accept alternative forms of income verification.

Sole trader home loan requirements

Depending on the type of loan you're applying for, Yard has different documentation requirements. Here's what to expect:

Full doc loans

If you're applying for a standard (full documentation) home loan, Yard typically requires:

• Personal and business tax returns (2 years preferred)
• Profit and loss statements
• ABN and GST registration details
• Proof of deposit

We may also consider your credit score, existing liabilities, and loan-to-value ratio (LVR) when assessing your application.

Low doc loans

If you're unable to provide full financial documentation, Yard offers low doc home loans. These are ideal for self-employed applicants with a shorter financial history or unconventional income structures. For low doc loans, Yard may accept alternative forms of verification such as:

• Business Activity Statements (BAS)
• Bank statements showing consistent income
• An accountant's letter confirming income details

Low doc loans provide a flexible solution for borrowers who are otherwise in a strong financial position but lack traditional paperwork.

Tips for sole traders to improve home loan approval chances

Even with challenges, there are proactive steps sole traders can take to strengthen their application:

• Maintain clear and up-to-date financial records.
• Engage a qualified accountant to prepare professional financial statements.
• Reduce unnecessary expenses and limit tax deductions that lower your net income.
• Save for a larger deposit to reduce LVR.
• Check and improve your credit score before applying.
• Work with Yard. Our team specialises in helping self-employed Australians secure the right home loan.

Home loan options for small business owners

There is a growing range of home loan products tailored to small business owners, and Yard provides access to many of these, including:

• Low doc loans: Suitable for applicants without full financial documentation.
• Offset accounts: Help reduce interest by offsetting your loan with savings.
• Variable rate loans: Offer flexibility and potentially lower interest rates.
• Interest-only loans: Useful for investors looking to maximise cash flow.

Comparison is key. Understanding the features and terms of each loan product ensures you find the one that fits your needs.

Conclusion

Navigating the home loan process as a sole trader or small business owner may be complex, but it's far from impossible. With the right preparation, proper documentation, and expert advice from Yard, you can unlock homeownership on your terms.

Take the time to understand your financial position, seek professional guidance, and explore all your options. Owning your own home while running a business is not only achievable—it's a smart financial step towards long-term security.