Self employed finance

[nicsa122]

Hi all, message about getting finance when self employed: I have very regular work and can get as much work as I want. But banks don't seem to like self employed people for lending purposes. Could my parents or partner set up a company and employ me to do my job and my invoices just go to the company then the company pays me? Seems like a backward way of doing things but want to keep bank happy and I earn way more working the way I do than if I were an employee

[Don't believe the Hype]

Ask fasastrix and theFan a couple of new guys here... They'll tell you that is fraudulent end dishonest!! The morality police are here to keep us safe from ourselves.

[Nick G]

What is your entity? Ie, how are you invoicing your clients?

Do you have a good accountant and broker? It's probably worth paying for half an hour of your accountant's time to have a meeting to work out a structure and loop the broker in to run the ideas past banks. I have an entity that is paid by a business I am a co-owner in and while it is painful sometimes to have to wait for financials to be done it seems workable to the banks.

[nicsa122]

What about if my parents acted as guarantors of my income?

[Keithw]

What about if my parents acted as guarantors of my income?

That might sound sensible but it is fraught with danger.
Best advice I ever heard was never be nor ask for guarantor for something you dont have direct control of.

There are many parents who have lost their house after the business that their children set up and they gauranteed, failed.

[nicsa122]

There's a severe shortage of people with my skills, there's no risk of me being out of work.

[Keithw]

just like there was a severe shortage of miners in Western Australia, now there is a massive oversupply, with some moving back to NZ & others having to find lower skilled jobs.
Well paid jobs have a tendency to lose shortages over time as education/ training catches up, immigrants come in to fill the space, or ex-pats come home when the situation overseas changes.

Nothing is forever

i used to be in manufacturing, now the number of manufacturers doing well in NZ can probably be counted on one hand.
The world changes, and in recent years has been changing rapidly

[Nick G]

"I'm good for it because I'm in demand" won't really cut it tho.

Why not set up a business and invoice as a business. The business pays you a salary.

[Keithw]

"I'm good for it because I'm in demand" won't really cut it tho.

Why not set up a business and invoice as a business. The business pays you a salary.

I would expect the bank to ask for the last 2 years accounts and ask questions about the business sustainability if it is obviuosly a recent setup.


Nicsa's experience with funding is a perfect illustration of why Kiwis invest in property, the banks just arent interested in lending to business unless that business is secured with property.

[brokerman]

Sounds like you need a 'Lo Doc' solution for now. No Financials and income is 'verified' via bank statements and GST returns. Around 1% more expensive than the Banks but legal and above board!

[flyernzl]

It has always seemed odd to me that a Bank will see greater income security in someone employed by me than in me.

If times turn tough, who am I going to lay off first - my employee or myself?

Mind you, in many ways Banks are seldom logical. Why do they all offer great low/no interest credit card terms to attract new customeers but not to retain their existing customers?

[Anthonyacat]

It has always seemed odd to me that a Bank will see greater income security in someone employed by me than in me.

If times turn tough, who am I going to lay off first - my employee or myself?

Mind you, in many ways Banks are seldom logical. Why do they all offer great low/no interest credit card terms to attract new customeers but not to retain their existing customers?

On the first point, I totally agree. Banks are stuck in an old age where employment is secure and self employment is risky. In most cases, those with the nous to run their own business will have no trouble finding a job if their venture goes under. But an employee with fifteen years at the same company (or worse, thirty) will often struggle with unemployability and lack of updated skills.

On the last point though - I'm sure the banks are aware of this juxtaposition, and I'm sure they have run the numbers. Most people are apathetic and lazy, and don't change banks regardless. They are the ones the banks want. Those who are truly considering leaving will leave eventually whether you pay to retain them or not. Why bother?

[nicsa122]

Sounds like you need a 'Lo Doc' solution for now. No Financials and income is 'verified' via bank statements and GST returns. Around 1% more expensive than the Banks but legal and above board!

Were initially just trying to re-finance existing loans to release equity so that's probably not going to work is it? What's involved with your loans? I have a husband on a 'high income' and I am a locum pharmacist with a history of regular work- would a 'Lo Doc' solution be an option for us?

[brokerman]

Were initially just trying to re-finance existing loans to release equity so that's probably not going to work is it? What's involved with your loans? I have a husband on a 'high income' and I am a locum pharmacist with a history of regular work- would a 'Lo Doc' solution be an option for us?

Looks OK to me, send me a PM and we'll sort it.

[nicsa122]

Looks OK to me, send me a PM and we'll sort it.

Ok, will wait to hear back from our broker if they can work it out first though. Just seems ridiculous. As a locum I have numerous 'employers' and if one were to bail on a booking I could just go work rurally to fill the gap, but if I were an employee I could be made redundant with four weeks notice and no redundancy payout, isn't being a locum therefore more reliable!?!? Freakin banks jerks.