Hi, it's Connie from Prosperity Finance,
sharing the best of financial tips
so that you can be more successful
with achieving your financial goals.
Now, due to this COVID-19 a lot of self-employed people
already struggled with their business performance.
On top of that, if they're going to the bank
and trying to borrow money to buy their home
or rental property,
they will more likely to get disappointing results.
Needless to say,
most of the customers who are self-employed
have been impacted by this COVID-19.
Their performance dropped in certain degrees.
Some are even out of business.
But here I'm talking about people
who are already recovered or on the path to recover,
but when they go to the bank
and banks really scrutinize, ask a lot of questions,
but in the end, still decline your application
or significantly reduce the lending.
So here we talk about,
there are three common reasons
that the bank give that outcome.
So number one is if you already applied a business loan
under the government's kind of assistant package,
or if you applied the wage subsidy,
especially after the first one,
the second one I'm talking about
that kind of indicate your business really struggle.
Now, if you applied for business loan,
but you haven't used it just because you just want,
you know, just for the rainy days,
but you haven't really used it.
And you can tell that your business
is actually doing not too bad,
actually, you can just refund that business loan
and that will help you get a better results from the bank.
But if you also applied for wage subsidy, the second one,
that's going to be hard
because that indicates your business,
at least your income reduced by 40%.
So for the banks, they're really concerned,
what is the trend going forward?
So not really got a solution
for the second wage subsidy but for business loan
if you are doing okay,
if you refund it's not too bad.
It's not going to be just declined straight away.
Now, the second reason we observe
is that if business trading is less than a year.
Now, before COVID if it's less than a year it's not too bad,
you can do a forecast
and the bank would take into account.
But now it's going to be really really challenge.
Now you haven't really have enough records
to show the bank that the bank comfort
that what's your business trading,
in the near future,
because you only have a few months trading.
Now with that, yeah, it is hard,
but some banks do consider if you already traded
for like nine months or a bit more.
Alternatively some prime non-bank lenders
would consider based on a number of things
like your accountant letter, based on your GST return,
based on bank transactions.
They're still going to consider that if your bank said no.
Now, the third common scene for decline
is if you go to a bank
that you don't have your business' transaction.
What I mean by that is,
let's say you have ABC limited
and ABC limited bank with ANZ for example,
but then you go to BNZ for a home loan.
Now, before COVID
I would recommend that you have a separate bank
for your home loan and your business.
So that just in case,
if you enter a trouble situation unfortunately,
that at least the two things are separate
and bank has no control over your business cashflow,
for example.
But in the current strange environments,
you probably get the best outcome from your own bank,
'cause they know you better.
And also we been asked by a bank,
why they don't go through their own bank.
It sounds silly, but they kind of suspect.
Did you get a decline from your bank?
Is that reason you come to me?
So it's very strange time.
So what I'm trying to say here
is maybe now consider your own bank first and later on,
once your business' more stable once COVID is gone.
Then you can one day refinance your home loan
to another bank that's not your business banks.
So you can do it later,
it doesn't have to be a perfect structure right now,
but importantly, you get a best approval outcome
from your own bank.
So these are the three common reasons
that bank decline your home loans.
Now you probably also see some people yourself,
if you're self-employed, the loan amount was reduced.
Yeah, you got approval but the loan amount was reduced.
So there's a couple of reasons
that you potentially could get a better outcome.
The first one is bank all kind of
shade the profit to some degrees because you know,
the reality is most of us, if you're self-employed,
you get impacted at lockdown on level four.
You couldn't operate at all, level four.
So you're trading kind of put on hold anyway.
So the bank almost in all situation shade your income
in the percentage.
The common one we see is at least 15%.
If you are doing,
your business was impacted a bit longer at level three
or level two, they will shade more.
But yeah, generally speaking, at least they will shade 15%.
So you probably get a different shading
from one bank to the other.
Maybe you go to bank A and you got 30% shading,
but when you go to another bank,
they only shade 15%.
So it's the same financial, right?
And the same, everything, same supporting docs
but you get different outcomes.
So don't just accept that offer,
think about what other banks.
Why the bank only approved this much.
So the shading make a difference?
Now, the second thing is if your 2020 financials
looks much better than 2019, with the mainstream banks,
they will look at the both years
and then they will average the two years.
So because of the '19 was bit less than 2020.
So kind of the average
will be less than just looking at the 2020 alone.
Now there's the solution.
So some primary non-banks,
they only look at the latest year.
And so potentially they can use more income,
therefore approve more.
So you probably heard me saying primary non-bank
a couple of times in this video.
So they are still mortgage lenders,
but they are not New Zealand-registered banks.
Now they offer solutions where the banks,
the mainstream banks say no, or they approve less.
So these primary non-bank lenders,
they provide mortgage solutions at slightly higher rates.
Just put into a context, for example,
mainstream bank probably offer 2.49%,
whereas primary non-bank they're offering sub 3%,
so 3.2, 3.3.
So yes, it's a bit higher, a percent higher,
but hey, 3% are still affordable rather than,
you wait for another year
and then the property have gone up in value.
So you have to pay more.
So it could be option if 2020 year was better than '19,
and you're not happy with the loan amount
with your main bank,
so it could be a better option elsewhere.
So yeah, I just want to let you know
if you've been declined or you got a loan approval
that not what you're after,
not what you expected.
There could be a solution to improve the results.
And I hope you find this video useful.
If you are not a self-employed customer,
but your family and friends are, please pass on this video
so they might struggling at the moment
and this video would help them tremendously.
And I'll appreciate,
really appreciate your doing that favor.
So thank you so much.
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Thank you.
Bye.