Alternative document lending continues to gain traction at non-bank lender Bluestone Home Loans.
The specialty lending, or alt doc lending for short, requires fewer documents to verify borrowers' income and often has a faster approval time than a deposit-taking bank, therefore reaching a larger pool of potential borrowers, said Aaron Taylor (pictured above), head of non-standard lending at Bluestone.
It's not hard to see why then that the appetite for this type of lending is surging, thanks in part to the nation's growing self-employed population, as well as larger non-resident and expat communities, higher rates and increased regulatory scrutiny from the Australian Taxation Office. In addition, many traditional banks have turned up the dial on their lending criteria, wary of lending to anyone without a standard paycheck. The result has meant it's harder than ever to borrow money.
"The traditional lending criteria can be a major roadblock for self-employed borrowers," Taylor told Australian Broker. But his firm is moving in to fill the void – and creating opportunities for brokers along the way.
Bluestone's alt doc loan volume surged 260% in 2024, and has increased 39-fold since 2019.
Tony MacRae, chief commercial officer at Bluestone Home Loans, previously told Australian Broker that roughly 60% of Bluestone's home loan lending is to individuals who fall under the self-employed umbrella.
"Self-employed [financing] is an underserved market and a real opportunity," MacRae said.
Taylor added: "We make it much easier through simple documentation and innovations that will come in the future, using AI to instantly verify. The major lenders ask for significantly more documents and decisions on credit score."
In addition to home loans, alt doc loans can be used to consolidate debts, including personal, business, commercial and tax obligations. Or, loans can be used as a way for a borrower to get cash for business or commercial use.
Brokers can submit an accountant's letter, six months of the borrower’s business activity statements, or six months of bank statements on behalf of their client for approval purposes. Whereas most traditional banks require lodged tax returns or financial statements, in addition to sometimes requiring bank statements as far back as 18 to 30 months ago, Taylor said.
"Compare that to an alt doc product where we're using the most recent six months of statements and you can see a big disparity in what we can offer our customers," he said. "And oftentimes, tax returns or financial statements may not be ready, or complete, or could be outdated, not showing the current performance or income for the customer or their business.
"Alt doc lending focuses on the customers current [financial] position, rather than previous tax years," Taylor said. "The key words being 'current' and 'recent': recent business activity statements, or recent bank statements, or a recent accountant's letter to confirm [the borrower's] current income.”
Moreover, Taylor said Bluestone's approval turnaround times are typically one to two business days. But brokers are generally given a response within two to four business hours from application submission, with conditional approval given within 24 to 48 hours.
Brokers should be aware that this type of specialty lending often comes with higher interest rates than traditional home loans. "But should focus on the outcome for the customer," Taylor said. "Brokers who can provide alt doc solutions will grow their businesses by being able to offer customer solutions that the customers can't get directly from the mainstream banks."
