ACCOUNTANTS LETTERS & DECLARATIONS
No matter what your bank manager tells you, they CAN approve your loan without us signing their declaration. We’ve seen it with our own eyes on many occasions.
What are they?
When you apply for finance, banks have limited ways to verify your income. If you are an employee, they primarily use pay slips, group certificates, and tax returns and largely those cannot be manipulated (as you are are not in control of the info on your pay slips, someone else prepares them). If you are a business, this is different. All figures come from you and you have opportunity to manipulate those to obtain a greater level of finance than you would otherwise get.
Banks know this, so they often want a declaration or letter from your accountant stating that what you are declaraing is accurate.
This isn’t limited to just confirming income levels, and typically we get asked to sign things like:
- That past income is representitive of what your future income will be;
- That you will use an asset for a business purpose;
- That the loan is for a business purpose;
- That you have sought independent financial advice; and
- That you have the capacity to repay the proposed loan.
Why are they a problem?
In a nut shell, most of the time what the bank want us to sign off on is a declaration that a future event will be true, and we can’t know that:
- We don’t know if your future trading will be similar to past trading;
- We don’t know that the car you are buying will actually be a fleet vehicle and won’t be used by yourself;
- We don’t know how your loan monies will be used;
- We don’t know if you have sought financial advice (unless you have sought it from us); and
- We don’t know what all your personal expenses actually are to decide whether or not you can actually repay your loan (and aside it is actually illegal for us to state that your can)
In all the above scenarios, the only verification we have is your word – which is exactly the same verification the bank has. This begs the question, why do they need our signature if we have no extra information?
The bank is looking to hold us liable should any part of the loan application be incorrect, or if the future projections the bank use turn out to be incorrect.
Unfortunately we don’t have a crystal ball. When a bank says they won’t give you a loan unless we sign their declaration, they are essentially saying that they don’t trust you are truthful, so are looking for us to guarantee that what you are saying is correct.
What can we sign off on?
We are more than happy to sign off on “factual information” (basically historical data that we can verify). That your income last year was $x, that your YTD figures are $x, and so on. Basically if we can verify that something is accurate, we are happy to sign off on it. As soon as the bank ask us to predict the future, we are out.
But… we will need to do our investigations. We will take our time to ensure that what we are signing off on is accurate and we will invoice you an amount commensurate with the time we take in making that declaration and the level of risk that we are accepting by signing the declaration.
Almost always the bank’s template will not be acceptable, because their templates are designed to push the risk of you not paying your loan on to us. Their business is to take a risk in loaning money – they charge interest and (sometimes) excessive fees to compensate them for taking that risk – as you can hopefully understand, it’s not acceptable for the bank to push any of that risk on to us.
We have our own templates, our own wording that is designed to limit the risk to our business, and we have to stick to those. We are happy to collborate with you and your bank as to the exact wording, but we cannot allow our licences, our reputation, our qualifications, and our families livlihoods to be at risk.
No matter what your bank manager tells you, they CAN approve your loan without us signing their declaration. We’ve seen it with our own eyes on many occasions. Don’t let them tell you otherwise, and don’t let them bully you and hold your loan to ransom because the bank doesn’t want to accept the risks of their own business.
If your bank won't help you?
Dump them… We have multiple contacts that can assist you in obtaining the finance that you need. Just let us know and we can put you in touch with someone that actually wants to help you.