As mainstream banks tighten their credit policies, non-bank lenders in Australia are reporting a surge in demand for alt doc, or alternative income verification loans – particularly among self-employed borrowers who don’t fit the standard mould.
"Alt doc lending is what the non-banks are known for; it's what we do day in and day out," Aaron Taylor, head of non-standard lending at non-bank Bluestone, told Australian Broker.
"More and more brokers are interested in these [non-standard lending] products," he said. "With these sorts of products, the non-banks are starting to really thrive."
Alt doc products rely on recent business activity statements, bank statements or an accountant’s declaration in lieu of two years’ worth of financial statements. For self-employed clients juggling multiple roles or entities, this is not only more accessible – it's faster. And for self-employed borrowers, alt docs typically mean using a self-employed income declaration alongside an accountant’s verification or BAS statements.
It's not hard to see why the appetite for this type of lending is surging in Australia, thanks in part to the nation's growing self-employed population, as well as larger non-resident and expat communities, and increased regulatory scrutiny from the Australian Taxation Office (ATO). At the same time, traditional banks have toughened their criteria, making it increasingly difficult for anyone without a conventional paycheck to secure a loan.
Non-banks have taken note of the momentum. In the case of Bluestone, the non-bank's alt doc volume surged 260% in 2024 alone – and a staggering 39-fold increase since 2019. It’s now one of Bluestone’s most in-demand products.
Over at Sydney-based non-bank lender Finstreet, Darren Liu, co-founder and managing director, also said there's a growing demand for alt doc lending.
"Brokers see it as an alternative option," he said, explaining that borrowers often default to alt doc lending after being turned away from traditional lenders because of serviceability issues, property types or complex ownership structures.
“First, the customers try with the banks, but the banks oftentimes wouldn't do those transactions," Liu said. "So then the borrower comes to us for a solution.”
Taylor summed up alt doc lending – or alternative ways to verify income – as, "how can I look at the same customer that a bank does, but differently? How can we look at more recent income through business activity statements, or business bank statements, and verify their income in a different way than a bank would look at and potentially say no to?"
And, as the broker channel evolves and becomes increasingly competitive, Taylor pointed out that brokers will need to adapt in order to stay relevant in a saturated market.
"There's a growing need for brokers to better diversify their product range and make sure they're relevant in the customers' [financial] life cycle," Taylor said. "You can't just be a transaction broker anymore. You need to be able to bring a full suite service offering."
That means knowing what questions to ask clients, understanding non-standard lending, and being able to say “yes” when traditional lenders say “no," Taylor said.
Matthew Porch, head of distribution at commercial lending firm Aquamore Finance, said alt doc lending is a “strong product” for the company, one that not only offers more flexibility – but also ensures quicker turnaround.
“Speed to market is very, very important for us,” he said, adding that clients who may have good credit, but lack up-to-date financials, often fall outside the eligibility requirements for traditional lenders.
“Being self-employed, obviously you wear a lot of hats," Porch said. "There could be a number of entities within their business, and it can get a bit messy from an income perspective. If a client went to a bank, they would need to provide two years of profit and loss and balance sheets. Which on the face of it, sounds like an easy task. But being self employed, it can take months to get your financial statements in order. So our alt doc approach makes everybody's life a bit easier. It's just a lot easier and a lot faster.”
Aquamore's alt doc process includes an accountant's declaration, which allows clients to consolidate all their income on one piece of paper.
Porch added that strong relationships with lenders in this space is key for brokers.
"My advice to brokers would be to steer away from the headline rate considerations and focus on the fact that this is a solution for your client in the short-to-medium term," he said.
