For self-employed or business applicants seeking finance, communication between their finance broker and accountant is crucial. In times of economic uncertainty, banks increasingly rely on accountants to explain the business health and future prospects of loan applicants.
The Expertise Gap
Credit assessors at financial institutions are rarely trained to be experts in reading financial statements. Similarly, while finance brokers may excel at navigating various finance options, few possess the expertise to accurately judge a business’ financial performance and position. This can lead to situations where two inexperienced individuals are working together to resolve an issue neither party fully understands.
Increased Scrutiny on Business Applicants
Credit assessors now have more questions than ever for business applicants. It’s not uncommon for mortgage brokers to explain what is ‘normal’ for a business, including income, expense, and profit levels under typical circumstances. Lenders are also increasingly requesting “Accountant’s Letters” to confirm various queries, including income, debt, and business sustainability. These letters can form a critical, necessary part of a self-employed applicant’s loan application.
Collaborative Approach
Finance brokers and accountants may work closely together throughout all stages of the credit application process to help achieve results for clients. This collaboration is particularly important in the early stages where affordability issues are often paramount. The accountant’s expertise allows the finance broker to approach their client with certainty regarding what income can be used for servicing and how that translates to borrowing power.
Benefits of Strong Broker-Accountant Relationships
A strong relationship between mortgage brokers and accountants can ensure a smoother process during a finance application. This collaboration helps in:
- Accurately assessing business health
- Explaining ‘normal’ business operations to lenders
- Providing necessary documentation, such as Accountant’s Letters
- Determining realistic borrowing power for clients
By working together, finance brokers and accountants can navigate the complexities of business finance applications more effectively, ultimately benefiting their mutual clients.
