Why can't banks treat the self employed better?

europa16

My husband is having a problem getting a personal loan because he's self employed.
We have approached our bank, who initially said yes, but have now back-tracked because his "taxable" income is significantly lower than what he stated.
His income before tax and "expenses" is just under £20k but because we've claimed tax deductible expenses (car, petrol, insurance, etc) his income looks a lot worse than it actually is (11k). I have done his accounts for the last 5 years because his last accountant wasn't very good.
He works in the construction industry and has done for the last 14 yrs, the last 3 of those with 1 company.
My problem is, if he was on PAYE the bank wouldn't have taken the expenses into account, only his take home pay, after tax. He still would have had to pay for the car, petrol, insurance, etc out of his own pocket. Oh, and they've taken the car into account twice as he put down the HP as additional outgoings :cool:
Why is it banks and building societies are so short sighted with this, when there are several million self employed people in this country??
Has anyone else come across this problem before? It is so annoying that we have to pay high APRs for the same product, or securing a loan against the house:mad:

Thanks

jonesMUFCforever

Does your husband have a business account and/or personal account?

A lot of self employed just use personal accounts and at times like this you can see the disadvantages.
If he has audited accounts going back 3 years I see no reason why a business manager would not give him a business loan.
I assume that he has no history of late payments or defaults otherwise the above is not true of course.

europa16

Thanks for your reply.

My husband only has a personal account with Nationwide, and it is this that all his income is paid into. The account provides everything he needs, and also offers a good interest rate on the overdraft he currently has. He also uses his card abroad, so this account has another plus to it.

He's not used an accountant for the last 5 years. I've done the self assessment for him every year since, and he's not had a problem getting a credit card or a car on HP.

His credit rating is good - payments on time, not overstretched financially, etc, so this isn't the problem. All they have said is "affordability" is the issue because of the low tax return figure.

It's just the car, which we use as a tax deductible expense, which has made the figures look far worse than what they really are. If he was in normal employment, I am sure the bank wouldn't take petrol, insurance, repairs, etc into account before offering a loan. This is something I have currently put to them, but I don't know if I'll get a reply any time soon :cool:

Emmzi

In answer to the header question - not debating the rights or wrongs, just an explanation from my point of view, as a former bank lender

Self employed people tended to (not ALWAYS, just were MORE LIKELY TO)

- go bust more and leave you with bad debts.
- not always have a grip on their finances and over estimate earnings for bank and under estimate to taxman - the truth was out there somewhere but who knew where?
- not be honest if the business was struggling - hang in there in hope of the next big job, which didn't always arrive; borrow more with no known way of repaying it while this cycle continued
- be dependent on one or two big customers, and if they went bust, there was trouble
- not have a cushion of redundancy payment if it all went wrong
- be harder to insure against unemployment
- be more likely to have problems when they hadn't put enough aside for the taxman.

Generally, self employed is higher risk and APRs etc may be weighted to reflect this.

If he were employed and had excessive travel expenses, the employing company would generally refund these.

Won't so;lve your problem, just putting it from a lender's perspective.