Self-employed borrowers are disproportionately represented in private credit. Not because private lending targets them, but because the bank assessment model is built around a pattern of income that self-employment does not produce: two payslips, an employer's letter, and a consistent PAYG history. Profitable businesses with irregular income, recent structure changes, or retained earnings sitting in a company account do not fit that template, even when the underlying financial position is strong.
Why banks are harder for self-employed borrowers
The bank serviceability calculator starts from taxable income. Self-employed borrowers who minimise tax through deductions, depreciation, trust distributions, or retained corporate earnings frequently show lower taxable income than their business actually generates. The bank's calculator sees a number that does not reflect reality.
Banks also apply consistent documentation requirements across their whole book: two years of personal tax returns, two years of business tax returns, and ideally consistent profit across both years. A business that had a strong year followed by a one-off write-down, or one that restructured from a partnership to a company, creates inconsistency in the numbers that the bank policy does not handle well.
None of this means the borrower is a credit risk. It means the borrower does not fit the bank's template. Private credit starts from a different question.
What private credit lenders assess instead
Private credit files are assessed on four things: the security, the equity position, the exit, and the capacity to service or capitalise interest. Income documentation is part of the picture but it is not the gate it is at a bank.
The security question: what is the property, where is it, what is it worth, and what is the existing debt against it? The lender assesses the security on its own merits.
The equity question: what is the combined LVR (existing debt plus the proposed loan, divided by the property value)? A strong equity position gives the lender recovery options that serviceability analysis alone does not provide. A borrower who owns a property worth $1.5 million with $400,000 of existing debt has a very different risk profile from one who owns a $1.5 million property with $1.2 million of existing debt, regardless of income.
The exit question: how does the borrower repay the facility? A bridging loan exits through a property sale or a refinance. A working capital loan exits through a business receivable or an asset sale. The exit must be documented at submission. This is the lens the credit team applies to self-employed files: not "can they service month to month," but "what is the clear event that repays the loan."
The exit is the key metric
For a self-employed borrower, the exit question is often cleaner than the income question. The exit on a bridging loan is a sale contract or a refinance term sheet. The exit on a working capital loan might be a signed receivable, a contract for sale of a business asset, or a confirmed refinance. These are documented events, not forward projections of irregular income.
A self-employed borrower with a signed sale contract on a property, clear title, and adequate equity does not need to prove two years of personal tax returns to access bridging finance. The exit stands on its own. Credit assess the exit (is it real, is it on a realistic timeline, what is the fallback if it slips) rather than extrapolating income across the loan term.
Capitalised interest and cash flow
Self-employed borrowers often have lumpy cash flow. Private credit addresses this through capitalised interest: the lender adds the accrued interest to the loan balance each month rather than requiring a monthly payment. The borrower pays principal plus all capitalised interest in full at the exit event. No monthly serviceability is required during the term.
This structure is standard on bridging files and common on short-dated working capital facilities. It removes the monthly cash flow pressure entirely and is assessed on LVR at entry, not on monthly servicing capacity. The total loan balance at exit (principal plus capitalised interest) must still sit within the LVR policy for the security.
Where the borrower's cash flow supports it, monthly serviced interest is available and is usually sharper on price than capitalised interest. The broker and borrower should model both structures against the borrower's known cash flow pattern.
Files that work and files that do not
Self-employed files that work in private credit share three characteristics: adequate equity in the security (typically 25% or more at entry after accounting for the proposed loan), a documented exit that is credibly achievable inside the facility term, and a security property that the lender can value and sell if the exit fails.
Files that do not work in private credit are not about employment status. They fail on the same things that fail for any borrower: LVR that leaves no equity buffer, an exit that relies on events outside the borrower's control and undocumented in writing, or security that is illiquid and hard to value. A self-employed borrower who owns a rural property with 90% LVR and no documented exit is a difficult file, not because they are self-employed but because the credit case does not hold.
What to prepare for a private credit application
The documentation a self-employed borrower needs for a private credit application is different from a bank file. The key items:
- Security details. Property address, recent comparable sales for value support, existing mortgage statement, and current title search.
- Exit evidence. A signed sale contract (for a bridging exit), a refinance term sheet (for a refinance bridge), or a documented receivable (for working capital). The exit must be in writing.
- Borrower entity. Company search, trust deed (where the borrower holds property in a trust), director IDs, and any relevant ABN and ACN details.
- Purpose statement. A short file note explaining the purpose of the loan, the exit, and the timeline. Private credit teams read file notes; they are not processing a checklist.
- Income evidence (as available). The last 1 to 2 years of business financials or BAS statements, where they support the file. They are not always required but they are never unhelpful.
How Archer Wealth approaches self-employed files
Archer Wealth writes business and investment loans through accredited mortgage brokers (AFSL 548263). Files are assessed by the credit team on the security, the equity, and the exit. Self-employed borrowers are common on our book and assessed commercially, not against bank serviceability templates.
Indicative terms on a clean self-employed bridging file come back the same business day. For working capital files with a documented exit and adequate equity, a formal credit decision typically follows within 2 to 3 business days of a complete application. Submit a scenario through an accredited broker for same-day indicative feedback.