With banks becoming more cautious when assessing self-employed mortgage bond applicants.

Gone are the days that an income letter from an accountant, supported by six-month bank statements, sufficed. In this challenging economic climate, banks want to scrutinise the stability of the organisation before they will consider a self-employed applicant as a viable debtor, irrespective of the security offered as collateral.

It's now all about affordability and sustainability! So how do self-employed entrepreneurs ensure that they are first in line when it comes to laying their hands on some of the available funds in the banks' coffers?

It is advisable to have separate business and personal current accounts. The turnover through these accounts will be compared with all financial statements and income declarations. If these figures don't coincide, self-employed individuals must be prepared to submit their latest income tax assessment as proof of income.

Effective administration systems are vital, with all documents up to date, accurate and readily available. The banks will require a full set of signed-off financial statements with comparable year-on-year (y/y) figures and management accounts from the previous financial year to date. And as if this is not enough, certain banks are even calling for cash flow projections.

Banks will only accept income letters and signed-off financial statements from a registered accountants or bookkeepers. Business owners must ensure that their accountants or bookkeepers are registered with one of following institutions:
- The Institute of Administration and Commerce of Southern Africa
- The Chartered Institute of Management Accountants.
- The Southern African Institute of Chartered Accountants.
- The Southern African Institute of Chartered Secretaries and Administrators.
- The Chartered Association of Certified Accountants.
- The Southern African Institute of Business Accountants.
- South African Institute of Professional Accountants (SAIPA).

Lending policies differ from bank to bank, with some banks only accepting application for self-employed individuals who have a business account with them, while others will only consider this if the applicant is willing to put down a substantial deposit. Where some may be tad more flexible, others will stick to their rules no matter how strong the mortgage bond application may be.

Mortgage bond applicants will only be made aware of which of the four commercial banks is more likely to approve their application if they deal with a professional independent mortgage bond consultant (originator).

In recent months, we have seen many a small and medium enterprise (SMME) downsizing, consolidating and restructuring, with some even having to close their doors altogether. This, coupled with the banks' lack of appetite for risk, has led to some of the most stringent credit criteria being applied to self-employed entrepreneurs. Good governance and sound business practice is the rule of the game.

Unfortunately, those with the money to lend lay down the rules and those in need will just have to comply. – Tess Rodrigues