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Finance without Tax Returns

Does this sound familiar? You need a loan, you believe that it is a worthwhile purpose and you are confident that you can afford the loan payments, but the bank says “NO”. Usually, this is because you haven’t completed your tax returns or simply because they say “you can’t afford it”! Frustrating isn’t it? Well, times have changed and there are a number of competitive finance packages on the market, generally referred to as “LOW DOC Loans”, which eliminate the need for tax returns.

Innovation and competition in lending has made it easier for people to get suitable finance for a variety of purposes.

“Low Doc” is an abbreviation for “low documentation”. With these types of loans, the Lender takes a less conservative view with the application, particularly when it comes to verifying income.

Instead of providing your bank with traditional information such as company financial statements, personal tax returns and pay slips, with a Low Doc loan the borrower is simply asked to sign a one (1) page statement as an acknowledgment that they believe they can afford all commitments. In other words, the borrower self-certifies that they can afford the loan as opposed to this being left to the Bank’s assessment.

One of the biggest advantages of this self-certification process is that the borrower can take in to account all forms of income and back their ability to repay the loan. A conventional loan application will be applied for based on “guaranteed” historical incomes as per your tax returns. Last year’s tax returns aren’t always a true indication of what income is available now because businesses have peaks and troughs. May be your tax returns haven’t been completed for a while. May be you haven’t been in business for very long. May be your business is growing.

Low Doc loans are secured by a mortgage over property. More and more, business owners are using low doc loans because it is smart business. The time that it can take a business owner to gather and supply the mountain of paperwork that a bank wants can be substantial. Then, when supplied with the information, the banks often want to debate whether you can afford the loan. Who has time for that frustration?

The Lo Doc loan has been on the market for over 20 years. Traditionally however, the Lo Doc loan was only for extreme cases of financial hardship (such as discharged bankrupts, and major credit impairments). In those days, there were only a couple of lenders in the Lo Doc market and they took advantage of this lack of competition and generally charged exorbitant interest rates.

Nowadays, a lot of the traditional lenders even offer a Lo Doc product. This competition has caused for greater product innovations within the Lo Doc market itself and much more competitive interest rates. You will

When would you consider a Lo Doc loan..

Borrowers should not think for one minute that Lo Doc loans are restricted tor “desperate” people or borrowers with poor credit ratings. There is a lot of high quality business which is being written as a Lo Doc option purely because it is the most convenient option available.

Provided that you own property and have equity in it you should think very seriously about a Low Doc loan next time you need to borrow. Some common examples include:

• To expand your business

• For extra cash flow

• To buy / establish a new business

• To refurbish a vehicle

• To consolidate some debts

• To raise a deposit to fund the purchase of a depot

• To upgrade your fleet, when traditional leasing and hire purchase loans aren’t an option

• For property renovations

• To finance a divorce settlement

• To finance a business partnership separation

• When you simply don’t have the time and / or desire to provide the mountain of information that your bank requires to assess your finance application

At 6-Point Finance we are writing a lot of Low Doc loans, including for very astute, wealthy people. In a lot of ways, it’s commonsense lending.