Telling the self-employed lending story

Brokers are expected to be many things these days – price comparers, trusted advisers, counsellors and diversified finance gurus. For brokers with a heavy contingent of self-employed borrowers on their books, they’re increasingly expected to be something else: storytellers.

Increasingly, every self-employed application must be, in effect, a pitch. And the applications that stall rarely do so because a document is missing – they stall because a broker didn’t explain what the numbers actually mean. A business with multiple entities, several income streams, or a one-off expense sitting oddly in the financials isn’t necessarily a red flag. It’s just a plot point nobody has explained yet – and left unexplained, it becomes the assessor’s problem to solve, rarely in the applicant’s favour.

One of the challenges Caesar Ibrahim (pictured top of page, left), group manager – residential at Liberty, sees is receiving a self-employed application with an incomplete story. “Many self-employed customers have multiple entities, income streams and business expenses that can be difficult to understand without the right context,” he says. “It’s helpful to highlight anything unusual early, whether that’s a recent change in business structure, large one-off expenses or fluctuations in income.”

Logan Hilton (pictured, below), regional sales manager for NSW, ACT and Qld at Resimac, couldn’t agree more. “The most common issue is not always the documents themselves, but the explanation around them,” he says. “A strong self-employed application should clearly explain how the business earns income, what, if anything, has changed over the relevant period, and whether any one-off items, add-backs or structural changes need to be explained.”

Tim Lemon (pictured top of page, right), national sales manager at MA Money, points to two details that often go missing from that story specifically. “Existing tax debt may affect product eligibility and cash-out options, as the debt may need to be repaid as part of the loan,” Lemon says, “while changes or continuation in an ABN can be important when assessing their self-employed history.”

“Self-employed customers are often assessed through a backward-looking lens, but when dealing with lenders, brokers can add real value by explaining the direction of the business and the factors supporting future income” – Caesar Ibrahim, Liberty

The end result of failing to tell the right story? Miss any of it, and a customer “may not be matched with the product that best suits their circumstances”.

And if telling a complete story is important, so is ensuring the story is travelling in the right direction. “Self-employed customers are often assessed through a backward-looking lens, but when dealing with lenders, brokers can add real value by explaining the direction of the business and the factors supporting future income,” Ibrahim says. “The clearer that picture is, the easier it becomes to identify pathways forward for the customer.”

Simon Elwig (pictured top of page, centre), head of broker operations at ME Bank, part of BOQ Group, stresses that financials, on their own, simply aren’t enough. “The most common issue is not providing enough context upfront,” Elwig says. “Financials tell part of the story, but broker commentary is often what helps connect the dots.”

Where there have been unusual business expenses, large write-offs, changes in profitability, tax arrangements or shifts in business structure, he says explaining those upfront “can significantly improve assessment efficiency”.

“A business can be performing well, but the customer may be waiting for invoices to be paid or experiencing a timing gap between income coming in and expenses going out” – Tim Lemon, MA Money

Rising mortgage stress

The need for a narrative comes at a critical time for self-employed borrowers.

New data from Equifax shows SME owners are carrying mortgages roughly 50% larger than those of the general public and falling behind on repayments at a faster rate. This condition suggests that when cash flow tightens, the business owner’s own home loan is often one of the first things pushed to the back of the queue to keep the business running. Rising tax defaults, softening SME cashflow confidence, and a fresh compliance load from the payday super reform are only adding to that pressure.

Read more: SMEs shifting into survival mode, but their mettle shines through

“Self-employed customers can face different financial pressures to PAYG borrowers because business income can be more variable and influenced by broader economic conditions,” says Sergio Delvescovo, national sales manager, broker channel at ING Australia. “However, every customer’s circumstances are unique, which is why it’s important to understand the strength of the business, the sustainability of income and the customer’s overall financial position, rather than relying on broad assumptions.”

“The most common issue is not always the documents themselves, but the explanation around them” – Logan Hilton, Resimac

While Hilton is careful not to characterise all self-employed customers as higher risk, “we do recognise the importance of understanding their full financial position” – making “early engagement and clear deal structuring” of paramount importance.

Lemon notes that MA Money hasn’t seen a significant rise in stress so much as a consistent, often misread pattern: “A business can be performing well, but the customer may be waiting for invoices to be paid or experiencing a timing gap between income coming in and expenses going out. That can create short-term pressure even when the underlying business remains sound.”

Whatever the stress data shows, it hasn’t dented lender appetite for the segment. If anything, the opposite is true at ME Bank. “We’re seeing strong growth in self-employed lending through the broker channel, outpacing growth across our broader broker book,” Elwig says, pointing to increased application volumes and average self-employed loan sizes that now sit above the broker-channel average. He adds a degree of caution, though: “While growth has moderated in recent months and remains something we’re monitoring closely, the broader trend is positive.”

Reading the real cash flow, not just the tax return

Storytelling matters most, in practice, at exactly the point where a tax return and a business’s real financial position start to diverge, which cost-of-living pressure has made a far more common occurrence than it once was.

“Cost-of-living pressures are affecting self-employed borrowers just as much as PAYG customers, so it’s important that living expenses are realistic and reflect what a customer is actually spending,” Elwig says. But he’s equally clear that the other side of the ledger needs the same scrutiny.

“A tax return doesn’t always tell the full story of a self-employed borrower’s position, so we’ll look beyond the headline figures to understand how the business is performing and the income it is genuinely generating.”

In practice, that means weighing verified business income, liabilities and eligible add-backs together, rather than anchoring to a single number. “That helps us assess each application on its merits, while ensuring we represent a borrower’s repayment capacity accurately and responsibly,” he says.

The Budget question

For all the noise around the Budget, the lenders assessing self-employed applicants are, for now, staying the course.

“At this stage, we continue to assess applications based on a customer’s financial position, income stability and ability to meet repayments,” Delvescovo says. “It’s still early to understand the full impact of the proposed changes, and we’re not seeing them materially change how we assess self-employed customers today.”

Ibrahim strikes the same note, while flagging where the real work is likely to land if the reforms proceed. Brokers, he stresses, “play an important role in helping to clarify a customer’s broader financial position, particularly where trusts, multiple entities or diverse income streams are involved”.

Hilton frames the changes as one input among several rather than a determining factor, with the focus remaining on “the applicant’s actual business performance, cash flow, obligations and capacity to service a loan over time”.

“It’s important to understand the strength of the business, the sustainability of income and the customer’s overall financial position, rather than relying on broad assumptions” – Sergio Delvescovo, ING Australia

Adapting to change

That steady-as-she-goes posture on tax policy hasn’t stopped any of the lenders from continuing to refine their self-employed offering more broadly.

ING has made three specific changes: eligible customers can now be assessed on one year of financials instead of two; joint owners holding at least 50% of a company can use profits proportionate to their ownership; and retained company profit can now be used for servicing. “Our focus has been on ensuring quality self-employed customers can be assessed on their individual circumstances,” Delvescovo (pictured, below) says.

Resimac has made comparable moves on documentation by accepting one-year financials in eligible scenarios and adopting a director wages approach. It has also leaned further into its risk tolerance, considering some Prime full-doc applicants with existing tax debt where the underlying business remains sustainable. Hilton dubs it “Resimac’s intelligent lending approach”.

“Financials tell part of the story, but broker commentary is often what helps connect the dots” – Simon Elwig, ME Bank

As always, MA Money accepts one year of financials on its Full Doc product and an Alt Doc pathway for borrowers without traditional documentation. Recent policy changes include accepting one-day GST registration and a six-month ABN for Near Prime Plus and Specialist loans. Outside of Budget-related changes, the group recently upped maximum loan amounts for properties in regional Australia, reflecting how much property values and borrowing needs have shifted in those markets.

Ibrahim frames Liberty’s approach less around specific policy levers and more as a philosophy applied case by case. “A one-size-fits-all approach doesn’t always work,” he says, and that flexibility extends beyond documentation into how the lender treats a changing market altogether. In his view, opportunities don’t disappear when conditions shift. “They evolve… our role is to help brokers identify pathways forward for borrowers whose circumstances may not fit traditional lending models,” he says.

ME Bank has also doubled down on flexibility, giving eligible self-employed borrowers three separate ways to demonstrate income: a wages-only assessment, one year of financials, or the more traditional two-year assessment. It has also cut its minimum business operating history requirement from two years to 18 months. These changes are less about loosening standards and more about providing additional verification pathways. “These changes better reflect the different ways modern small businesses are structured and how self-employed people earn their income,” says Elwig.

Regardless of the lender-specific mechanics, the messaging is the same: self-employed borrowers aren’t a one-size-fits-all cohort, and lenders are finally building policy that reflects it. Every business, and every business owner, comes with its own set of circumstances and requirements – and the brokers who can turn that into a clear, well-told story at the application stage are the ones who’ll stand out.