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Pepper Money’s commitment to helping people succeed is the centre of all we do. Our partnership with you makes it possible to bring various options to those Australians who have unique circumstances and deserve a shot at making their goals a reality.
The strength of the Pepper Money business, our proven track record, and the trust we have built with our brokers and aggregator partners, gives us the confidence to know we can continue to capitalise on the agility of our whole business to respond to market conditions and extend and grow with new solutions, new products, partnerships, channels, and markets.
I want to thank you for your ongoing support and trust in Pepper Money. Without our valued brokers and partners, we would not have been able to help over 530,000-plus Australians with a loan option that works for them.
Self-employed professionals make a big contribution to society. They’re the tradies fixing leaky roofs, the plumbers removing stubborn drain clogs, the accountants combing through tax returns for every possible deduction, and the driving instructors desperately clinging onto the grab handle as their learner driver attempts their first-ever manual hill start.
As of June 2024, 62.5 per cent (1.66 million) of Australia’s 2.66 million trading businesses were self-employed, according to the most recent data from the Australian Small Business and Family Enterprise Ombudsman (ASBFEO). The growing gig economy and rising appeal of entrepreneurship have led many to explore the freedom of being their own boss. But if there is a downside to this flexibility and independence, it’s the unknowns and intangibles, especially when it comes to income and how to show this to get a loan. It’s important to demonstrate a reasonably steady flow of income for servicing with the lender. But for many self-employed professionals, earnings can be sporadic and subject to seasonal trends.
The growing dominance of non-bank lenders, such as Pepper Money, which are willing to take an open-minded approach to this segment has given many self-employed borrowers much-needed lending assistance. Borrowers who would have otherwise been shut out from the traditional banking market have now found a pathway to buy or refinance their home, invest in their own business, or fund a major purchase.
Current interest rates, inflation, supply chain issues, the cost-of-living crisis and labour shortages have all placed pressure on small-business owners, making access to flexible financing more critical than ever
– Barry Saoud, general manager, mortgages and commercial, Pepper Money
Mortgage and finance brokers – in many instances, self-employed professionals themselves – play an important role in keeping the door to finance open for this segment.
Supply and demand
Barry Saoud, Pepper Money’s general manager, mortgages and commercial, says he’s observed a recent surge in the number of self-employed borrowers turning to non-bank lenders amid tightened serviceability requirements from traditional banks.
“Demand for self-employed loans has remained strong, and in many cases, has grown in response to economic conditions and borrower needs,” Saoud tells The Adviser.
“Current interest rates, inflation, supply chain issues, the cost-of-living crisis and labour shortages have all placed pressure on small-business owners, making access to flexible financing more critical than ever.”
Self-employed borrowers currently make up 40 per cent of Pepper Money’s customers, according to Saoud, with one in three applications utilising an alternative documentation (alt-doc) solution.
“In the last 10 years, Pepper Money has helped over 76,600 self-employed borrowers with a home, commercial real estate, car, personal or a self-managed super fund loan,” Saoud says.
“This highlights the increasing reliance on specialist lenders who offer alternative income verification methods to accommodate the unique financial circumstances of self- employed individuals.”
Flexibility comes first
Part of what makes mortgage and finance brokers such a valuable partner to self-employed borrowers – likely already time-poor – is their expertise and ability to sift through complex financial situations to present bespoke solutions for individual customers.
In many cases, finding solutions that accommodate a borrower’s unique circumstances is often just as important as securing the lowest rate possible on a loan.
“Mainstream lenders often require two years of financial records, apply strict servicing buffers, or don’t offer alternative income verification methods, making it tough for self-employed borrowers to secure finance,” Saoud says.
Pepper Money, for example, offers self-employed borrowers alt-doc options including simplified income verification such as one or two years’ financials, six months’ business bank statements, six months’ business activity statements, or an accountant’s letter. Self-employed borrowers can also access increased loan amounts and loan-to-value (LVR) limits, expanded options for vacant land lending, and extensive debt consolidation options including ATO debt.
“We understand that self-employed Australians come from all walks of life,” Saoud says.
“Our home, commercial real estate, and asset finance loan options for self-employed customers could help your clients get ahead. We can give your client the flexibility to apply for a loan with just six months of Australian business number (ABN) activity.”
What’s next?
Looking forward, Saoud expects the self-employed market to continue to grow, driven by an increasing number of freelancers, sole traders, and entrepreneurs joining the workforce.
As more Australians embrace self-employment full time or as a side hustle, he says the need for tailored lending solutions will rise, providing an opportunity for lenders and brokers who service this segment.
“The non-bank lending sector is expected to continue evolving to meet the needs of non-conforming borrowers, such as self-employed individuals,” Saoud says.
“We anticipate that alt-doc lending will become even more critical, as borrowers seek flexible, streamlined processes that accommodate their unique income structures.”
Saoud also encourages brokers to explore cross-selling opportunities, such as financing for expansion, asset purchases, or refinancing.
“Our diverse range of verification options, coupled with our flexible service, sets us apart in the market. We’re also making it easier than ever with digital and streamlined processes to reduce the time and effort it takes to complete the application. This means quicker turnaround times and less hassle for your clients,” Saoud says.
“If you’re unfamiliar with self-employed lending but you have a deal on your desk, all you have to do is call your Pepper Money BDM and workshop the deal.”
Against this backdrop, Saoud expects non-bank lenders and brokers to continue to play a key role in keeping the door open to solutions for this segment.
“We’re here to support you and your clients by continually refining our products, policies, and processes to meet the strong demand,” Saoud says.
“By expanding loan options, enhancing verification flexibility, and providing strong broker support, we aim to ensure that self-employed borrowers have access to the finance they need to grow their businesses and secure their financial futures.”
