As competition in the brokerage landscape continues to heat up, brokers are looking beyond conventional borrowers and turning their attention toward the self-employed market.
Self-employed borrowers are often in a strong financial position, but their income can look very different to that of a PAYG employee. Tax returns may not reflect their current trading performance, payslips simply don’t exist, and business owners often reinvest profits back into their businesses.
That’s where Alt Doc Lending can help. Designed with self-employed borrowers in mind, Alt Doc loans provide a practical pathway to finance when typical income verification doesn’t cut it. Instead of relying solely on standard financial statements, lenders can assess a borrower’s ability to repay using alternative documentation, like BAS, business bank statements, or even an accountant’s letter.
While the documentation requirements are more flexible, credit assessors still need enough information to understand the borrower’s circumstances and make an informed lending decision.
At a recent webinar, David Clarke, Credit Development Manager at MA Money took us through the million-dollar question: what exactly are credit assessors looking for when reviewing a self-employed application?
1. Strong broker notes
The success of an Alt Doc loan depends on more than just the alternative documentation provided. Broker notes play an important role because they help to tell the story behind the application.
Broker notes should provide clear context around the borrower’s business, how they generate income, how long they have been operating and the purpose of the loan. At the webinar, Clarke emphasised:
“Broker notes. Broker notes. Broker notes.”
Useful information to be provided in your notes may include:
- The type of business the borrower operates
- How long they have been trading
- Whether they employ staff
- How they generate business
- Whether they operate from commercial premises, online or from home
- Any recent changes that may affect income or cash flow
Providing strong broker notes upfront can reduce unnecessary and time-consuming back-and-forth later in the assessment process.
2. Does the income make sense?
Income verification is an important part of any Alt Doc application. But credit assessors are also looking at the context behind the numbers and whether it makes sense.
Throughout the webinar, Clarke repeatedly referred to what he described as the “pub test”. If you can’t explain a borrower’s income to a mate over a few pints at your local on a Friday night, there’s a good chance it won’t stack up from a credit assessment perspective either.
In simple terms, credit assessors want to know whether the income being declared is consistent with the borrower’s industry, location, business model and financial position.
For example, a borrower declaring a particularly high income may be able to support it with additional information about their business operations, staff, client base or trading history.
The aim here is to understand whether the income story aligns with the overall picture being painted by the application.
3. Looking beyond income
Another way credit assessors seek to understand the full story behind a borrower’s Alt Doc application is by zooming out to look at their overall financial position. A credit assessor could examine:
- Assets and liabilities
- Existing debt commitments
- Savings and reserves
- Business structures
- Credit history
- Loan purpose
For example, if a borrower declares substantial income but has no disclosed assets, savings or superannuation, it could prompt more questions from credit.
There may be a perfectly reasonable explanation behind the issue. Assets could be held within a company or trust structure, profits may have been reinvested into the business, or there may be other factors.
Instead of waiting for the credit assessor to request for more information, brokers can save time in the long run by providing it in the initial application.
4. Loan purpose and exit strategy
Credit assessors also want to grasp why the borrower is seeking finance and how the Alt Doc loan fits within their broader objectives.
Where cash-out is involved, detailed explanations are particularly important. Generic descriptions like “investment purposes” often lead to more questions than answers.
Instead, broker notes should include:
- What the funds will be used for
- How the amount has been calculated
- Whether professional advice has been obtained
- How the strategy benefits the borrower
Exit strategy is another important consideration. Particularly for complex applications, credit wants to understand how the borrower will repay the loan at or before the end of the loan term.
Whether the borrower intends to refinance, sell an asset, reduce debt through business income or rely on another strategy, detailing a clear exit route can help strengthen the application.
5. Think like credit
One of the most valuable insights from the webinar was Clarke’s advice for brokers to critically assess their own submissions from a credit perspective.
As he explained:
“If you were to read that yourself and think, ‘I’d be more than happy to lend to that person,’ that’s what you want credit to receive from you as well.”
In other words, the goal is to package the Alt Doc application in a way that gives credit confidence from the outset. Clear explanations, strong supporting documents and detailed broker notes make it much easier for an assessor to understand the borrower’s circumstances and assess the application efficiently.
6. Choose the right lender
Alt Doc lending can be a great option for self-employed borrowers whose circumstances don’t fit traditional income verification. The best Alt Doc applications are those that present the complete picture, explaining how the borrower earns their income and why the loan makes sense.
The success of the Alt Doc application also depends on one other factor: the lender. Choose a lender that takes a tailored approach to each Alt Doc application, like MA Money. Our BDMs and credit team are with you every step of the way, ready to work through the details and find a loan solution that fits.
Learn more about MA Money’s self-employed lending solutions here or contact a BDM.
Information for broker use only. This article does not constitute financial, tax or legal advice and does not take into account personal objectives, financial situation or needs. You should seek independent advice from a licensed professional before making any financial decisions. Applications for credit are subject to eligibility and lending criteria. Fees, charges, T&Cs apply (available on request).
MA Money Financial Services Pty Ltd ACN 639 174 315 Australian Credit Licence 522267.
