Accounts read properly, not skimmed.
Sole traders, company directors and contractors. Some lenders use your salary plus dividends, others use your share of net profit, and a few will work from a single year of accounts. Knowing which is which changes what you can borrow considerably.
How lenders read your income
There is no single definition of self-employed income. The same person can be offered noticeably different amounts depending on which method the lender uses.
- Usual requirement
- Two years of accounts, though some accept one
- Sole traders
- Net profit, normally averaged or latest year
- Directors
- Salary and dividends, or share of net profit
- Contractors
- Often a multiple of the day rate
Sole traders and partnerships
Assessed on net profit from your tax calculations. Most want two years and will either average them or use the latest, which matters a great deal if you are growing.
Limited company directors
Most lenders use salary plus dividends. A smaller group will use your share of the company's net profit instead, which usually helps if you leave money in the business.
Contractors
Many lenders will work from your day rate rather than your accounts, typically the rate times five days times somewhere around 46 weeks. Often far more generous than the accounts route.
How we build the case
Gather the evidence
Usually two years of finalised accounts, your SA302 tax calculations and tax year overviews, and recent business bank statements.
Work out which income basis suits you
Retained profit, averaging or latest year, day rate. We calculate what each gives you before approaching anybody.
Match you to lenders that read it that way
This is the whole job. The right lender for a growing company is rarely the right one for a steady one.
Package it so the underwriter sees the picture
A short explanation of a dip or a one-off cost, sent up front, prevents most declines.
Self-Employed, answered
- How many years of accounts do I need? Two is the usual answer. Some lenders will consider one full year, particularly for contractors or where you were doing the same work employed beforehand.
- What documents will you ask for? Finalised accounts, SA302 tax calculations and tax year overviews for the same years, and typically three months of business and personal bank statements.
- Can I use retained profit? With some lenders, yes. If your company makes a good profit and you only draw a small salary and dividend, this can change what you can borrow substantially.
- My last year was down. Does that end it? No. Some lenders use the latest year, some average, some will listen to an explanation for a one-off. That is exactly the situation where the choice of lender matters.
- I have only just gone self-employed. It is harder inside the first year, and for some lenders impossible. If you were employed doing the same thing before, that helps. Talk to us before you assume the answer is no.
Some lenders will work from a single year of accounts. Plenty of brokers will tell you that you need three.
If somebody else has already turned you down on the basis of your accounts, that is usually worth a second conversation.
Request assistancePeople asking about this usually ask about these
Ask us about self-employed
Tell us where you are up to and an adviser will come back to you. The answers below just save us a phone call working it out.
- One of the five advisers on Eastfield Road, not a call centre.
- Usually the same working day.
- No obligation, and nothing to sign at the end of it.
Would rather talk now? Call 01733 602 033.
Been told no before?
Send us your figures. We will tell you honestly whether it is placeable and who is likely to do it.