For self-employed clients, business performance can move quickly. The latest tax returns may show where the business has been, but not always where it is today. Alt Doc lending is an alternative way for self-employed borrowers to verify income when traditional financial documents may not reflect their current business position.
In a recent MA Money webinar, Sarin Yedelian, NSW Business Development Manager, and David Clarke, Credit Development Manager, explored how Alt Doc lending works, the different ways income can be verified and the types of scenarios where it may be useful.
What is Alt Doc lending?
Alt Doc is short for alternative documentation and is designed for self-employed clients who may not be able to provide the traditional income documents used in a Full Doc application.
The webinar explored three supporting income verification options that may be used alongside a self-declaration: an accountant’s letter, BAS or business bank statements.
Each offers a different way to understand the client’s income and current business position.
- An accountant’s letter was highlighted as one of the most commonly used approaches.
- BAS income verification can be useful when recent trading provides a clearer picture than the latest tax returns.
- Business bank statements provide another option where other forms of verification may not be available.
Looking at how the business is performing today
One of the key themes from the webinar was that Alt Doc lending is not simply about replacing one document with another. The broader business still matters.
Credit may consider the industry, location, trading history, business structure and overall asset position to understand whether the income being presented fits the business behind it. That can be particularly relevant for self-employed clients whose businesses have grown, changed or developed since their last set of tax returns.
BAS can also provide a more current view of turnover, costs and wages. For seasonal businesses, looking across a longer period can help show how trading changes throughout the year.
More than one way to verify income
Alternative income verification gives brokers more than one way to look at a self-employed client’s circumstances. An accountant’s letter may suit one business, while BAS may provide a better reflection of another client’s current trading position.
The webinar also discussed business bank statements as another option, although these can require a more detailed review where personal and business transactions are mixed together. The right method depends on the business and the information available, rather than expecting every self-employed client to fit the same approach.
Every business has a different story
A mechanic, electrician, physiotherapist or business owner operating through a trust can each have very different income patterns, costs and structures. That is part of what makes self-employed lending different.
The webinar explored how factors such as business expansion, more recent self-employment and changes in cash flow can sit behind the figures being assessed. It also showed how the broader context of the business can help build a clearer picture of the client’s position.
Alt Doc lending in practice
The webinar brings these ideas to life through several real lending scenarios. These include a more recently self-employed borrower, a business using BAS to demonstrate current trading and a client refinancing following business expansion.
The session also looks at scenarios involving cash out, different borrower structures and previous credit issues. Together, they show how Alt Doc lending can provide another way to consider self-employed clients when traditional income documents do not tell the full story.
A broader view of self-employed lending
For brokers, Alt Doc lending can open up another conversation with self-employed clients whose businesses have moved ahead of their most recent financials. By using alternative income verification and looking at the business behind the figures, it can provide a more current view of the client’s position.
Watch the full webinar with for a closer look at Alt Doc lending, BAS calculations and the real client scenarios discussed.
