Self employed bond frustrations

[seeking836]

@brandon9 Ahh bummer, yeah, that ain’t gonna work then!

 

[vyvanseonline]

@brandon9 If you are self-employed, you are treated as a criminal by the banks. I have 3 businesses and some of properties. 2 are in the same industry, one is completely different. I draw a salary from each company and have up to date AFS, management accounts, etc. I have a strong credit record. Not even counting another small business I own. Despite this, I still struggle to obtain finance. It is ridiculous. Get your originator to fight for you and threaten to move banks. You have to fight with them. Its the only way.

 

[sdowdell]

@brandon9 I think the mistake is not drawing a salary. Put together a payroll for your PTY and pay yourself a salary for 6 months. Formally become an employee of your PTY, pay UIF etc after 6 months at most you should be able to qualify as you will be having a regular salary.

 

[lin]

@brandon9 So banks are risk averse with bonds/loans and typically want to see salary earners that have been earning the required salary amount for a long time. This shows the bank that you'll most likely not have to default on the bond. If you can show a history of salary slips from both yourself (retainer) and your wife then they'll most likely grant it. If you can't then you'll need someone of good financial standing (like a parent) to step in and act as a guarantor if possible.

 

[saidagha]

@brandon9 You should get a bond originator.

But it does sound like you might be trying to get a bond that's too risky for the banks. One year of income probably isn't seen as stable.

My bond is about a 6th of my pre-tax salary. And I also struggled to get a loan with a 10% deposit. Only Standard Bank would give me one.

 

[ayryil]

@brandon9 Sadly this is all too familiar for self employed people. I had full purchase price for a property I wanted to buy, however wanted to bond the property and diversify my investments utilising a portion of my cash elsewhere. excellent credit record in 690/700 . Have premium accounts and a "private banker" but not even my own bank would assist. no other commercial bank would touch me either even though I gave them and met their every whim for paperwork requirements AFS etc etc. Am I a risk? Possibly, but life is a risk too! Ended up going to an external lender SA homeloans who approved in 2 days..
Sadly as a self employed person you are on your own, the banks will happily lend you money for a new car or extend credit on a short term loan but for something that will improve your life nope not gonna happen..
The best thing is my bank after I bought the property without their assistance was then calling me to offer insurance and contents cover, go figure! I told them to kick rocks

 

[thegospel]

@brandon9 Ive had clients that earns major salary but just because they dont have any credit on their name they get declined.do you have any credit on your name?, if not you going to struggle

 

[southwestforests]

@brandon9 There’s 2 things you can do to solve this

No 1) Register your company in someone else’s name so you aren’t the director. Then draw a salary (with a payslip) out of the company. This way you look like an employee. I did this with one of my companies, registered it to my Girlfriend and issued myself with a regular monthly salary (company paid UIF and income tax for me like any employee) and a payslip every month. As far as the banks were concerned I was a salaried employee (not a business owner)

No 2) if you’re self employed the banks need your tax return as income verification. This and your last 6 months personal & business bank statements will suffice to get approved.

An alternative is to take out the loan in the name of the company thereby using the companies financials and bank statements to secure the loan. Also, there are tax benefits to this so perhaps explore this if option 1 and 2 aren’t viable to you.

 

[swindon]

@southwestforests Do you worry about your girlfriend having so much influence over your finances? What happens if the romantic relationship ends, will you still continue the professional side of things?

 

[southwestforests]

@swindon You have to have a shareholders agreement drafted (ideally by a lawyer) that clearly stipulates you are the shareholder (ultimate beneficial owner as per the share register) and whomever you appoint as director (in my case my girlfriend) is a “nominee director”.

You will still be able to be the main signatory on the bank accounts etc as the bank asks who the signatory will be when opening the account and the signatory doesn’t always have to be the director - the director will just approve someone (in this case me) and sign a form to this effect when the account is opened (or after the fact).

So in my case I am the sole exclusive signatory on all bank accounts for the business despite my girlfriend being the registered director. She just had to sign this off with the bank when the accounts were opened.

You don’t have to necessarily use your girlfriend through, you can use your mother, sister, pretty much anybody. I just don’t have anyone other than her to do this and no siblings either so she was the natural choice.

By means of context - I also have 3 other businesses outside of the one I did this with - the structure I utilise is I funnel my personal income from the other businesses (which I control 100% and am the director of) through this business (which my girlfriend is the director of) which then issues me with a payslip and salary. So the money originates with my other businesses - this is just a funnel for my income to make it look like I’m a salaried employee.

 

[swindon]

@southwestforests I see…interesting.

 

[resjudicata]

@brandon9 On paper I’m self employed and I have multiple bonds. Standard Bank has always turned me down instantly, but in the end I always got offers from ABSA and FNB. Some banks are just more risk averse when it comes to self employed people.

Also, depending on what you earn, if you are on one of the higher banking packages you get an access to a personal banker who you can call that will make things happen much faster.

Just be patient, FNB at the very least will hook you up. Keep in mind because you are self employed, they are going to do much more due diligence and that takes times.

 

[fritzmb]

@brandon9 Had a similar situation, moved to Nedbank private banking and our banker fought for us. We got the bond.

 

[crystalturquoise]

@brandon9 How is your IRP5?

Also If you are doing 6 times the Bond requirement then rent for 3 years while you are building your cash reserves. Then just get the property cash at the when that time comes, it will work out better that way,

I would say find financial instrument that can help you compound the excess cash, for the future date. Allowing you to add the excess cash into that instrument.

 

[von20207777]

@brandon9 Do you have a business banker? Speak to them.
My husband has a business and he spoke to his banker and then somehow he got a bond. He only has this business, no other income. The business was about 3 years old at the time, so it's possible.
He also paid himself a salary, and tried to be consistent with it for a few months.

 

[coffeecups]

@brandon9 Once upon a time, it was easy , then small businesses started folding .Now, you have to jump through hoops even to buy a car , business is not what it use to be , it does help if you banked there for years if you don't.fit the computer your out

 

[markotwain]

@brandon9 As a self-employed consultant with 5 years of income history in my business, a reliable predictable annual income, supported by letters from my client confirming that they intend to make use of my services for years to come...

Our bond originator had to toss out all my financial information from the application and re-apply only using my husband's 1 year of permanent employment because the banks kept finding issues with my part of the application.

My husband ended up qualifying for the loan on his own. I used to pay myself a salary, had more than 18 month's worth of salary deposits into my personal bank account. It meant nothing to the banks. I've since stopped doing that, because as a sole proprietor, the business is me and I am the business - they are not separate entities.

I really can't give you any advice here, it really really sucks that our banks are so difficult about Homeloans for self-employed people. I am thinking of you, and hope you come right.

 

[brandon9]

UPDATE:

Thanks for all the advice and pointers, its greatly appreciated!

To clarify a few points, we entered the bond process with all of my ducks in a row. All management accounts up to date, all letters from accountant in, all annual financial statements done and submitted. We kept a close project team with our accountant and bond originators.

• FNB simply never got back to us, not even acknowledging the application which is wild.
• Nedbank declined and we appealed (still waiting)
• Investec didn't respond
• Standard Bank declined and we appealed (still waiting)
• ABSA declined twice, we appealed twice and we eventually go a final offer pending valuation at 14:30 on Friday. Why this is relevant is because Friday was the end of the validity of the timeframe that we have to secure finance (to be clear, it was an end to the extension) so cutting it fine.

The primary reason for the decline from all the banks was that I don't pay myself a salary, and the company isn't purchasing the property, I am. Apparently there was a change int he NCA in the last few months that placed importance on the separation of the company from the individual.

So to all who are research buying a property as a self employed individual - pay yourself a bloomin salary!!

Happy to say that we're taking early occupation and should be moving in early next week.