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The non-bank lender has launched a new offering that aims to provide financial relief to self-employed borrowers.
Pepper Money has released a new package that aims to provide self-employed clients with “much-needed financial relief” given ongoing pressures faced by small businesses, particularly regarding serviceability, cash flow, and debt consolidation.
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The Prime Alt Doc Rate Relief Package, which was released on Tuesday (15 October), aims to support self-employed applicants looking to consolidate multiple debts into one lower repayment.
It does this by enabling self-employed borrowers to fix their mortgage for two or three years at a sharper rate than the current variable rate, with no break costs if they decide to move to a variable rate.
The fixed rates start from 6.49 per cent, with the lender saying that it had leveraged “favourable swap rates” to deliver “one of the lowest” alt doc rates in the non-bank segment.
Pepper is also using a 2 per cent serviceability buffer (with further discretion available for investor purchases, refinance and debt consolidation, and some fixed-rate loans) and said it can accept a broad range of income verification methods, including business bank statements, BAS statements, accountant’s letters, the last two years’ notice of assessment, and – in some cases – one-year financials.
Speaking of the new package, Pepper Money’s general manager for mortgages and commercial Barry Saoud said the offering comes at “a critical time” for small businesses and that Pepper continued to tailor its offerings for self-employed borrowers (who make up around 40 per cent of Pepper applicants).
He said that the rate relief package was designed to provide SMEs with “peace of mind” by giving them the ability to lock in “a competitive rate” for two or three years and the flexibility to switch to a variable interest rate at any time, without having to pay break fees.
“Our latest prime alt doc fixed rate offer allows small businesses to lock in certainty with no break fees and focus on their ambitions instead. Unlike traditional fixed rates, we’ve removed the handcuffs, so this is a safe bet each way for the client,” he said.
Saoud said that the offer may be particularly attractive to brokers servicing SME borrowers at this time, as many small businesses have been struggling to repay debts in recent months, particularly given the Australian Tax Office’s move to prioritise debt collection and amid high interest rates, which have placed pressure on cash flow.
Saoud said: “Brokers can use our debt consolidation option to help their SME clients. Consolidating debts into their mortgage means they can pay off high-interest liabilities like credit cards and car loans in one fell swoop, which can be a huge relief for borrowers.
“If you have any clients who fall outside the traditional prime lending criteria, such as the self-employed or those who have experienced financial setbacks but are on the road to recovery, these rates represent a great opportunity for them to refinance and consolidate debt or get into the housing market.
“We also note that self-employed customers are a good client type for cross-selling opportunities, particularly for leasing, insurance and asset finance products, and often they are much ‘stickier’ clients with more regular finance needs as their business needs regularly change.
“As we look to the future, Pepper Money remains dedicated to being a trusted partner for SMEs. We will continue to innovate and adapt our products and services to meet the evolving needs of our customers.
“Our goal is to empower brokers and their clients with the financial tools and support they need to succeed, no matter what challenges they may face.”
The Pepper offering is the latest in a swathe of moves that aim to better support small-business owners/self-employed borrowers in recent weeks.
The federal government revealed earlier this month that it was extending the responsible lending obligation (RLO) exemption for small business finance until 2026 to “allow small businesses to continue to have access to the credit they need, when they need it”, while major bank CBA announced last week that it had broadened its self-employed policy in a bid to help more self-employed individuals secure a property.
[Related: Government extends responsible lending exemption for SME finance]
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