(Guest Post) The Banks that Like to Say No

You will struggle to repeat that glorious feeling you had when starting your own business (okay, holding your new born being the exception).   It is exciting, liberating, daunting and, after time, the most obvious thing you were destined to do and you kick yourself sometimes for not doing it sooner. I know I do.   

You will have run the gauntlet of emotion, the back slaps, the fist bumps the chest slams all inter mingled with wrung hands, sleepless nights and slumped shoulders. But what a journey eh? 

The satisfaction you get when the money starts to dribble in, your first recruit, the first office. You feel that you are now well on the way and nothing can stop you ……well…..that is until you want to get a mortgage. 

Then you are a leper. Phone calls aren’t returned by people who don’t care with the answer you don’t want to hear. You have worked hard to get here and the natural thing to do is enjoy the spoils of your labour and buy a home. You were the first to put your money in the business when it started and the last to take it out lest there wasn’t enough to pay your staff. And now when you want some help yourself there is very little to be found. 

There are 5.4 million private sector businesses and 99.9% of them are small to medium SME’s. We help to employ 15.6 million people and collectively turnover £1.8trn. Hello? Where is our bailout thank you very much?  Well there isn’t one I am afraid.  In this post credit crunch lending environment the banks are very much “risk OFF” and if they do locate the ON switch ever again I will be mightily surprised. 

The high street banks are geared for high street lending. By that I mean they are a conveyer belt operation and in order to try and control the quality they want amid the volume they receive they need everyone to look, smell and taste as vanilla as possible. Well, take a smell of yourself Mr Business Owner and by sheer virtue of your hard work, I guarantee you won’t smell of vanilla – more blood, sweat and tears I would suggest.  

Running a business can be succinctly explained in two words – “Cash Flow.”  You either have it or you don’t and your job as the owner is to seek the former and avoid the latter at all cost. This may mean that you limit your personal income in the early years to keep the wheels turning. Even once established you may still decide to limit your salary and dividend income to below £40k and avoid paying personal tax (oh by the way, Osborne shot that particular golden goose in the head last year in case you didn’t know?) 

Finding a mortgage when you are self-employed, a limited company owner or a shareholder with more than 20% of the shares is becoming increasing difficult and quite technical. There are no short cuts trust me, this is my industry.  I recently needed to get a mortgage and it took me 12 months and I had to compromise along the way.  

However, Adam has asked me to include some positives! There ARE lending options available to you albeit heavily laden with caveats. Whether it is Investec hunting for the next Steve Jobs or Richard Branson, Kensington who can look at you with 1 years accounts or Clydesdale Bank who will work on the profit of the business as opposed to your personal drawings there IS hope. 

But before you start window shopping for the dream house first speak with a specialist advisor who can tell you quickly and confidently whether you are in with or chance. The worst case scenario is we may tell you to get back to work and get your head down for another year. Either way you will at least know what your options are and sometimes that is half the battle itself
 
Martin Stewart, Director at London Money has been a top of the tree Mortgage Broker for over 20 years.  When he isn’t bashing the world and trying to be funny as @LondonMoneyFS on Twitter, he is actually giving people practical and real advice with their mortgages.  I asked him to give a real account of how hard it is for Business Owners to get the right mortgages and I always stress to clients in this situation that they seek the help of an expert, it can make a huge difference.