Self-employed battle for bonds
PROOF OF INCOME SA has in the last decade seen a big rise in the number of selfemployed people, says Rob Lawrence, National Manager for Rawson Finance. These entrepreneurs operate either as sole proprietors, through registered close corporations (CC) or Pty (Ltd) companies. “In the case of sole proprietors, they and their operation are one entity. On the other hand, where they form a CC or a company, they are independent of their operation. However whichever way they work, they will structure their accounts to make them as tax efficient as possible.” While this is usually good for the entrepreneur in many respects, in others, says Lawrence, it can be a problem especially when it comes to obtaining bond finance. In the old days, prior to the National Credit Act, the banks would accept a Letter of Earnings from a reputable accountant, especially a qualified CA, as sufficient proof of income for a bond application. “Now, however, one of the things on which the National Credit Act places great emphasis is that banks must have indisputable proof of income. If they have acted without this they run the risk of being charged with reckless lending.” Proving income is relatively easy if the bond applicant is a salaried employee, says Lawrence.