have become a lot more cautious when assessing self-employed mortgage bond
applicants. Gone are the days that an income letter from an accountant,
supported by 6 months bank statements, sufficed. In this challenging economic
climate, banks want to scrutinize the stability of the organization before they
will consider a self-employed applicant as a viable debtor, irrespective of the
security offered as collateral. It’s now all about affordability and
So how do
self-employed entrepreneurs ensure that they are first in line when it comes to
laying their hands on some of the available funds in the banks’ coffers?
advisable to have separate business and personal current accounts. The turnover
through these accounts will be compared with all financial statements and
income declarations. If these figures don’t coincide, self-employed individuals
must be prepared to submit their latest income tax assessment as proof of
administration systems are vital, with all documents up to date, accurate and
readily available. The banks will require a full set of signed-off financial
statements with comparable year-on-year figures and management accounts from
the previous financial year to date. And as if this is not enough, certain
banks are even calling for cash flow projections.
only accept income letters and signed-off financial statements from a
registered accountants or bookkeepers. Business owners must ensure that their
accountants or bookkeepers are registered with one of following institutions:
o The Institute of Administration and Commerce of Southern Africa
o The Chartered Institute of Management Accountants.
o The Southern African Institute of Chartered Accountants.
o The Southern African Institute of Chartered Secretaries and
o The Chartered Association of Certified Accountants.
o The Southern African Institute of Business Accountants.
o South African Institute of Professional Accountants (SAIPA).
Lending policies differ from bank to bank, with some banks only accepting
application for self-employed individuals who have a business account with
them, while others will only consider this if the applicant is willing to put
down a substantial deposit. Where some may be tad more flexible, others will
stick to their rules no matter how strong the mortgage bond application may be.
bond applicants will only be made aware of which of the four commercial banks
is more likely to approve their application if they deal with a professional
independent mortgage bond consultant (originator).
In recent months, we have seen many a SMME downsizing, consolidating and
restructuring, with some even having to close their doors altogether. This,
coupled with the banks’ lack of appetite for risk, has led to some of the most
stringent credit criteria being applied to self-employed entrepreneurs. Good
governance and sound business practice is the rule of the game. Unfortunately,
those with the money to lend lay down the rules and those in need will just
have to comply.
details on the various costs involved in buying a property go here For more detailed information on Finance issues go here Go back to Buyers main page