Each of the small entrepreneurs is trying to conjure up the lowest tax base by using flat rates and concessions. But what if you want to apply for a loan? What success do you have as a small entrepreneur in applying for a mortgage, and what can make your legs trip if you need to secure this form of housing? This is the topic of the following article.
For most smaller entrepreneurs, the profit of the loan is complicated and the time and physical investment will not always return as we expect. Flat-rate expenses, tax credits and we are at zero. In such a case, the banks will in no way lend us.
The situation seems to be that according to the tax return we have an income of about ten thousand, which of course is not enough for the required loan and mortgage providers are putting their hands away. Some banks may eventually relax and offer you a reduced loan of up to USD 500,000. Banks know very well that your actual income is usually much higher, but they don’t care. The employee will prove his / her salary under the same conditions and will probably obtain the loan without any problems.
How do we really need a loan?
We ask for a mortgage loan on turnover , in which the bank calculates our ability to repay by dividing 12 by a certain percentage of total income (each bank has different, but mostly 20% of income). This calculation results in a number which the bank determines by the average monthly income.
For example, if we are a distributor (buying goods and then selling), there is a significant difference between profit and turnover – while profits are in the tens of thousands, trade turnover can be million.
Does that mean we have solved?
It sounds simple, but we will pay a premium for risk for recognizing revenue from turnover and not net profit. So all tax savings will turn against us when applying for a loan. The risk premium is up to one percent on the interest rate and banks will not withdraw from it.
In addition to making the mortgage more expensive, some banks have other specific conditions in place to show turnover revenues . Either you lend even 70% of the value of the mortgaged property, or even 90%, again with a rate increase. In addition, they may limit your accepted income level or decide how long you will repay (max. 20 years). In addition, each bank has completely different conditions and therefore, or our mortgage advisor, we run a decent circle to ensure the very best.
Is there any other solution?
Yes, it is enough to apply real costs to the tax return, to actually tax your income and to achieve the loan. However, it is difficult to estimate whether the additional tax return and the tax payment will pay more than the higher interest rate. This can be done, for example, by applying for a loan with a co-borrower who can prove income from employment, or on the basis of a tax return that shows better values.