Home – New Forums Starting your journey New Business start-up and how will it affect my personal borrowing.

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  • #990748
    Brizee
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    Hi,

    I have just formed a company and am about to sign my first contract till December 2016. I will be leavbing my current fulltime role of which i have had for over 4 years to be fulltime in my new company.

    I am looking at setting it up with myself being an employee and paid a salary fortnightly.

    Do you know if this will affect my ability to borrow money from a bank, my wife and I plan on purchasing our first house mid year?

    Thanks Brizee.

    #1178419
    Base Legal
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    Hi Brizee

    Lenders will look at your overall financial position with both incomes. I think generally, lenders do require a longer proof of income period for a small business than an employee. For example, if you are an employee you provide a few months pay slips, but a small business owner can be required to show at least 12 months of earnings if not more.

    A mortgage broker could probably give you more guidance.

    Best of luck.
    Fiona

    #1178420
    LucasArthur
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    Hi Brizee {interesting name}

    Welcome to the forums, feel free to drop in and introduce yourself in the intro section :)

    Re borrowings and self employment, whether directors fees or wages or whatever, the most important thing is that banks want to miminise their risks and expect full disclosure of your circumstances.. Meaning, you cant hide behind you ‘business’ by being an employee if the income is derived solely from ‘your’ company.

    Hope that makes sense?

    As Fiona suggests, banks will have a better understanding although as a self employed individual they do require you (generally) to jump through a few extra hoops especially in todays economic climate.. A few years back, if you had a decent deposit, you could do ‘self declared income’ apps which were a little easier to get across the line although slightly higher interest rates. Now days, you need to have a proven income stream of 12-243 months on your tax returns and so forth.

    Your previous employment tenure is looked at as well and earning capacity should it all hit the fan and you need to return to work etc.

    Honestly, best bet is to sit with a lender and talk through everything.. No committal as such and dont say you have started etc, just say you are considering do xyz and want to know how it will impact you.. Depending on where you are based i have a few contacts and depending on which bank you want to go with.

    Cheers
    Jason

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
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