Self-Employed & Refinancing – What Business Owners Need to Know

Self-Employed & Refinancing – What Business Owners Need to Know

Refinancing when you’re self-employed can feel intimidating. Tax returns don’t always show the full picture, business income can fluctuate and lenders often ask for more documentation. But with the right preparation, business owners can still secure sharp rates and strong loan options.

This guide explains how self-employed refinancing works, what lenders look for and how to position your application for the best outcome.

1️⃣ Why Refinancing Matters for Business Owners

Self-employed borrowers often:

• Have complex income structures.
• Optimise tax deductions (which can reduce borrowing capacity).
• Experience fluctuating revenue year-to-year.
• Need flexibility for growth, cash flow and investment.

A refinance can help lower repayments, unlock equity and stabilise your loan while your business grows.

2️⃣ What Lenders Look for With Self-Employed Applicants

Lenders typically review:

• Tax returns (last 1–2 years): Both personal and business.
• Business financials: Profit & loss, balance sheet, BAS.
• Business structure: Sole trader, partnership, company or trust.
• Stability: Minimum 1–2 years in business is ideal.
• Trends: Increasing or stable revenue is a strong sign.

Some lenders also accept alternative documentation for more flexible assessments.

3️⃣ What Counts as Valid Income?

Lenders may use:

• Net profit + your wage: Common for company owners.
• Business profit: For sole traders or partnerships.
• Add-backs: One-off or non-recurring expenses.
• Depreciation: Often added back to strengthen borrowing capacity.
• Company distributions or dividends.

This can significantly increase your assessable income compared to what your tax return shows at first glance.

4️⃣ Low-Doc Refinancing Options

If your financials aren’t perfectly up-to-date, some lenders offer low-doc policies:

• Accountant’s declaration.
• BAS statements.
• Business bank statements.
• Alternative income verification.

Low-doc loans typically have slightly higher rates, but still far cheaper than business overdrafts or credit cards.

5️⃣ How Borrowing Capacity Is Calculated

Borrowing capacity depends on:

• Your average income over 1–2 years.
• Your current debts and credit limits.
• Your living expenses.
• Your repayment history.
• Your business’s financial stability.

Even if one year was weaker, a broker can find lenders who allow one-year financials or consider upward trends.

6️⃣ Common Challenges for Self-Employed Refinancers

Business owners often face:

• Lower taxable income due to deductions.
• Irregular revenue.
• Outdated financials during tax time.
• Large business expenses reducing net profit.

These aren’t deal breakers — they just require the right lender and strategy.

7️⃣ How to Strengthen Your Application

A few targeted tweaks can make approval easier:

• Minimise new debts for 3–6 months before refinancing.
• Keep business and personal accounts organised.
• Ensure BAS are lodged and up-to-date.
• Prepare recent financials or draft tax returns if needed.
• Avoid large unexplained expenses.

Consistency and clarity matter more than perfect numbers.

8️⃣ Unlocking Equity for Business or Personal Use

Self-employed borrowers often use equity for:

• Renovations or upgrades.
• Business investment or cash-flow support.
• Debt consolidation.
• Purchasing a commercial asset.
• Setting up a buffer for quieter months.

Refinancing gives you flexibility — especially when business needs shift quickly.

9️⃣ When You Should Consider Refinancing

Refinancing is worth exploring if:

• Your rate is above competitive offers.
• Your business income has stabilised or grown.
• You want to switch to a more flexible loan structure.
• You’re planning renovations or investments.
• You want to consolidate debts from the business or personally.

Self-employed borrowers often see some of the biggest savings from refinancing.

🔟 The Smartest Way to Refinance When You’re Self-Employed

A broker can help you:

• Choose lenders with flexible policies for business owners.
• Use add-backs to increase your borrowing power.
• Compare full-doc and low-doc options.
• Prepare financials to present your income in the best light.