Why getting approved can feel harder when you run a business
Lenders look for stable income, clean credit history, and a clear picture of your expenses. For business owners, income can rise and fall, and your finances may be more complex. Lenders also test your repayments at a higher “stress” level, which can make borrowing capacity feel tighter. In Australia, the prudential regulator expects lenders to add a 3 percentage point buffer when they test if you can afford the loan.
The goal is simple. Make it easy for a lender to see reliable income, sensible debts, and strong cash flow. The steps below show you how to do that without guesswork.
Step 1: Get your records in order
Strong record-keeping is the foundation. Keep your business and personal finances separate and your paperwork current.
Have these ready:
- The most recent personal and business tax returns and ATO Notices of Assessment. Many lenders ask for one to two years, depending on your structure and policy.
- Profit and loss and balance sheet for your business, plus business bank statements.
- BAS statements if requested.
The ATO sets clear rules on record-keeping for small businesses. Following them helps your loan application and your tax compliance.
Tip: If your accountant has not yet finalised your latest returns, get this done before you apply. Several lenders streamline assessment when your most recent financials and ATO assessments are ready.
Step 2: Show stable income and business health
Lenders want to see that your income is consistent and your business is sustainable.
Do this:
- Keep invoices, contracts, and management accounts up to date so trends are clear.
- Minimise large, avoidable fluctuations near application time.
- If your latest year is stronger than the previous one, some lenders may consider that favourably, subject to policy. Others will average two years. Check before you apply.
Step 3: Strengthen your deposit and understand LMI
A bigger deposit reduces risk and can improve approval odds. Many borrowers aim for 20 percent to avoid lenders mortgage insurance (LMI). LMI protects the lender, not the borrower, and is usually charged when you borrow more than 80 percent of the property value. There are times when paying LMI can help you buy sooner, but weigh the cost and benefits for your situation.
Step 4: Tidy your personal credit and lower unsecured debts
Before you apply:
- Check your credit score and credit report. You can do this for free. Fix any errors for free as well.
- Pay down credit cards, personal loans, and buy now pay later balances where you can. Lower ongoing commitments improve servicing.
- Avoid new credit applications in the months leading up to your mortgage application. These can reduce borrowing capacity.
Step 5: Build genuine savings and a cash buffer
Show a pattern of saving over three months or more. Lenders like to see funds you have built and held, not just gifted money. A cash buffer also helps you handle slow months or unexpected costs. Guidance on saving for a deposit is available from government sources and is worth a read as you plan your purchase timeline.
Step 6: Choose the documentation path that fits your business
There are two common documentation paths for self-employed borrowers:
- Full-doc: standard approach using tax returns, financial statements, and assessments. Best when your returns are up to date and reflect your true earning power.
- Alt-doc / low-doc: uses alternative proofs of income, such as BAS or bank statements, where allowed by policy. These often come with tighter conditions or higher costs. Understand the trade-offs before proceeding.
Your broker can explain which route may suit your goals and risk tolerance based on current policies.
Step 7: Understand how lenders assess affordability
When a lender tests your loan, they will:
- Review income after business expenses and add-backs they accept.
- Consider your living expenses and all debts.
- Apply the serviceability buffer to check that you could still afford repayments if rates rose by at least 3 percentage points. This is an industry-wide expectation from the regulator.
Knowing this helps you plan how much to borrow and when to apply.
Step 8: Time your application
Well-timed applications tend to go smoother. Try to:
- Apply soon after your latest tax returns and ATO assessments are lodged.
- Avoid big changes to your business structure or trading pattern just before you apply.
- Keep your personal spending steady in the months leading up to submission.
- Hold off on buying vehicles or equipment on finance until after settlement if possible, or allow for the new repayments in your borrowing plan.
Step 9: Work with a licensed mortgage broker
A good broker can compare policies, documentation paths, and lender appetites for small business income. Always check that your broker is properly licensed or authorised to provide credit assistance using the ASIC Professional Registers.
Practical checklist for small business owners
Identity and income
- Photo ID
- Two most recent personal tax returns and ATO Notices of Assessment, or as required by lender policy
- Business returns and the last two years of financial statements
- Recent BAS statements if requested
- 6 to 12 months of business bank statements
Debts and living costs
- Statements for credit cards, personal loans, car loans, and HECS-HELP
- Lease agreements and any other regular commitments
- A realistic monthly expenses summary
Deposit and property
- Evidence of deposit funds and savings history
- Gift letters if relevant
- Contract of sale and estimate of property costs when available
Business
- ABN and business structure details
- Accountant contact details
- Current contracts or pipeline evidence if helpful
These items reflect common requests published by major lenders for self-employed applicants. Exact requirements vary.
Risks and costs to weigh up
- Alt-doc loans can be useful if your paperwork is complex, but they may come with higher costs or tighter terms. Compare carefully.
- LMI lets you buy with a smaller deposit but adds cost. Understand the premium and how it is paid.
- Cash flow stress can occur if you borrow to the limit during a strong trading year. Keep a buffer so quieter months are manageable.
- Policy changes can affect how much you can borrow. Lenders update settings to align with regulators and market conditions. The current serviceability buffer setting is a key factor.
Local note for Gold Coast business owners
Tourism and seasonal demand can make income lumpy. Lenders will look closely at year-round trends. Solid records, strong cash reserves, and up-to-date returns make a clear case for approval.
Final word
Approval is achievable with the right preparation. Keep your finances current, reduce personal debts, build savings, and choose a documentation path that reflects your business. A licensed broker can help you compare lenders and policies and set a plan that fits your goals.
How Flexible Financial Solutions can help
At Flexible Financial Solutions, we specialise in helping small business owners and self-employed borrowers across the Gold Coast and South East Queensland. Whether you are a sole trader, contractor, or company director, we understand the unique challenges that come with running a business while applying for finance.
Angelique, our certified mortgage broker, can:
- Review your financial documents before you apply to highlight strengths and potential gaps.
- Compare lenders who are open to self-employed borrowers.
- Help you understand deposit options, LMI, and repayment scenarios.
- Guide you step by step so you feel confident in your application.
Ready to take the next step? Contact Flexible Financial Solutions today to see how we can help improve your chances of mortgage approval and find a loan that aligns with your business and personal goals.
Important information
This article is general information only. It does not consider your objectives, financial situation or needs. Lending criteria, fees, charges and terms apply. Loan features, documentation requirements and approval timeframes vary by lender and may change. Please consider seeking independent tax or legal advice where appropriate.
