By Jeremy Harper, Director — hFinance
If you run your own business, you already know the catch. The year
you reinvest hardest — new equipment, new hires, a big contract — is the
year your tax return looks its weakest. Then you go to borrow against
your home, and the bank reads that return literally.
Strong business, strong equity, and still knocked back. It’s one of
the most common frustrations self-employed homeowners bring us.
Why lumpy income
trips the servicing test
Banks want smooth, provable income. Business owners have the
opposite: money reinvested, one-off expenses, timing differences between
work done and cash in the door. A single soft financial year can sink an
application, even when the business is clearly growing and the pipeline
is full.
The equity in your home is real. The servicing test just isn’t built
to see past last year’s numbers.
Using
equity to back the business — without monthly repayments
For equity-rich business owners, a second mortgage through a
specialist lender can release funds against the home to fund growth or
clear pressure, typically with no monthly repayments and no fixed term.
The loan accrues interest and is repaid later — from a refinance once
the financials recover, or from business profits.
A recent example. An owner of an electrical
contracting business had a home worth around $2.9M with a $1.25M
mortgage. The business had won several new commercial maintenance
contracts but needed $260K for vehicles, equipment and supplier deposits
— and was carrying a $140K ATO payment arrangement that was squeezing
cashflow.
The bank viewed the income as inconsistent because of reinvestment
and one-off costs in the prior year. A business loan was available, but
the monthly repayments would have drained working capital at exactly the
wrong moment.
A $400K second mortgage against the home released $260K for the
vehicles, tools and supplier deposits, and $140K to clear the ATO
liability. No monthly payments. The new contracts got funded, the ATO
pressure was gone, and the working capital stayed in the business — with
the loan set to be repaid from future refinance or profits.
Why the ATO piece matters
An unresolved ATO arrangement doesn’t just cost interest — it can
quietly block your ability to refinance or borrow elsewhere down the
track. Clearing it as part of a broader restructure often does more for
your borrowing position than the headline dollars suggest.
The honest trade-off
No monthly repayments is the feature that makes this work for a
growing business — but it also means interest accrues and compounds
against your equity until the loan’s repaid. It fits a clear plan: fund
the growth, let the financials catch up, then refinance into cheaper
mainstream lending. It’s a bridge, not a permanent structure.
Where we come in
We understand how self-employed income actually works, not just how
it looks on a tax return. We’ll assess whether releasing equity
genuinely strengthens the business or just adds cost, model the exit
into mainstream lending, and line up the right specialist lender if it
stacks up. If a standard self-employed loan can do the job, we’ll point
you there first.
Growing the business but boxed in by the bank? Let’s
talk — we’ll give you a straight answer on what’s possible.
Written by Jeremy Harper, Director of hFinance. I understand how
self-employed income really works — not just how it reads on a tax
return.
General information only, not personal advice. We’ll assess your
specific circumstances before recommending anything.