Why Changing Company Directors Can Derail Your Borrowing Plans

If you’re self-employed, chances are you’ve got a company structure that’s been ticking away in the background while you focus on running your business. But when it comes time to borrow - whether for your next home, an investment property, or even refinancing - the details of that structure suddenly matter a lot.

One detail that can catch you unaware? Changes to directors or shareholders.

Think carefully into the future before making any changes

Why it matters to banks

When banks assess a loan for a business owner, they don’t just look at income and expenses. They check ASIC to see who is legally in control of the company. The ones responsible for running the business, signing off on expenses, and carrying the risk.

So, if you’ve had recent changes - even something as short as a few weeks - lenders ask questions.

• Who was running the business when these financials were produced?

• Is the company stable, or is there conflict behind the scenes?

• Could there be undisclosed risk if control changed hands?

To you, it may look like a small paperwork shuffle. To a bank’s credit team, it can look like instability.

Why director changes can hurt your loan application

• Continuity: Lenders want a clear line between the business income in your tax returns and you as the decision maker.

• Delays: Even if there’s nothing suspicious, a change nearly always means the bank will ask questions, slowing down your approval.

• Fewer options: Many lenders have black-and-white rules that mean they’ll decline an application if they see recent director changes.

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A real-life example

I recently worked with clients who were seeking a $2m pre-approval. Business financials were strong, an unencumbered property to offer as additional security, and everything looked in order. Until I found on ASIC that, for a six-week period earlier this year, one of the applicants had stepped down as director and a family member had stepped in, due to personal reasons. The business itself never changed hands, and the financials were consistent.

To most big banks, though, this six week change was too much.

But with the right explanation and accountant support, there are lenders who will see the bigger picture. In this case, solutions were found, and the clients are proceeding.

If you’re self-employed

• Avoid changes before borrowing: If you know you’ll be seeking lending in the next year or two, ideally keep your company structure steady in the lead-up.

• If it's unavoidable: Document everything and ask your accountant for a letter confirming continuity of trading and ownership.

• Talk to your broker early: Not all lenders treat these situations the same way. A good broker will know where to place your application so you don't reach a dead end.

  
  

Conclusion

Life happens. Relationships, health, family - they can all affect businesses. The important thing is understanding how lenders will interpret those changes and planning ahead so your borrowing doesn’t stall.

If you’re self-employed and thinking about a loan, get in touch before making company changes. It’s one of those small details that can save you a very big headache.

*Not financial advice. Always discuss any major business or financial changes with your accountant