Whether you are applying for a home loan, a business loan or other types of financing, your bank will often request a letter from your accountant. Banks will then use this letter to verify that the information you are declaring is accurate and figures have not been manipulated to obtain a greater level of finance. Primarily the letter will confirm income levels and provide assurance to the finance or loan you are requesting.
Typically, in an Accountants letter we CAN provide:
- Confirmation that any ATO debts are in payment arrangements
- Confirmation that tax returns have been lodged and are simply pending processing
- Provide an explanation of the business structure
- State that a particular entity is not trading and has no liabilities.
There are things that we CANNOT provide, such as:
- Whether your business is solvent and will remain solvent
- Confirmation of your future earnings
- Your ability to service a loan
- That an asset (such as a motor vehicle) will be used predominantly for business purposes when there’s no evidence to suggest that it will be.
There are several legal implications that are associated with these letters. For an accountant preparing these types of letters, a high degree of caution is needed to ensure banks cannot 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. If we provide a letter, it will be based on facts or historical data, we cannot provide future predictions or make judgment on the matter. This is to ensure, as an accountant we adhere to all regulations of our professional body. There is also the insurance side of this whereby providing judgment or predications it is not covered by Professional Indemnity policies offered to accountants.
Although legally, we are not allowed to give opinions on your sufficient earnings or debts, an accountants letter will support your application in providing factual/historic information which is why we will assist our clients in the process and provide a supporting letter whenever it is deemed that we can.