Self employed 11m and want to borrow more

miss_moody12

My partner was promoted to director and given 25% shares back in May 2023, hes has been with this company over 8 years and it is well established. 

We are looking to remortgage and want to borrow more but we are having no luck in finding any lenders willing to take us on, frustratingly i know its because hes only been classed as self-employed  for 11 months, and most lenders want 1 year or 2 but just wondering if anyone else has managed to be successful in this situation for the sake of 20 something days accounts?

ACG

Some lenders will accept up to 30% as still employed. 
Other lenders may take a view on the situation. 

Speak to a broker, there should be options. 

DullGreyGuy

Legally he isn't self employed but appreciate that as a director/shareholder you are treated somewhat similarly.  Whilst he's only been a director for 11 months he has continuous employment for over 8 years so they cannot just dismiss him and as the company has been trading over 8 years then he can give the 3 years of company accounts required. 

This sounds a simple one for a half decent broker to solve for you but appreciate a telephone tied agent may just come with a computer says no response. 

ACG

DullGreyGuy said:

Legally he isn't self employed but appreciate that as a director/shareholder you are treated somewhat similarly.  Whilst he's only been a director for 11 months he has continuous employment for over 8 years so they cannot just dismiss him and as the company has been trading over 8 years then he can give the 3 years of company accounts required. 

This sounds a simple one for a half decent broker to solve for you but appreciate a telephone tied agent may just come with a computer says no response. 

Its not quite as simple as that - why is he now a shareholder? Is it going down the pan and the other owner/owners wanted to reduce their risk? Is it still being run as it was previously? etc etc. 

But you are right, it should be possible to overcome.

Hoenir

What's the rush?  If the accounts to the 31st May 2024 are going to finalised a few days into June ( a feat few trading companies manage to achieve). Then surely providing up todate financial information can only be beneficial and enhance the application. 

MWT

miss_moody12 said:

... and given 25% shares back in May 2023...

I'd hope he is taking some tax advice as well as there are few tax efficient ways to 'give' someone 25% of a company unless it is in a very poor state...

miss_moody12

DullGreyGuy said:

Legally he isn't self employed but appreciate that as a director/shareholder you are treated somewhat similarly.  Whilst he's only been a director for 11 months he has continuous employment for over 8 years so they cannot just dismiss him and as the company has been trading over 8 years then he can give the 3 years of company accounts required. 

This sounds a simple one for a half decent broker to solve for you but appreciate a telephone tied agent may just come with a computer says no response. 

The company accounts is a good shout actually! I will speak with my broker thank you ☺️ 

miss_moody12

Hoenir said:

What's the rush?  If the accounts to the 31st May 2024 are going to finalised a few days into June ( a feat few trading companies manage to achieve). Then surely providing up todate financial information can only be beneficial and enhance the application. 

No real rush, we are just in a discussion in regards to the tax years as he has technically only been classed as self employed 11 months of the 22/23 tax year and most lenders want a full 12 months.

As for the companies accounts i will mention this to our broker

miss_moody12

ACG said:

DullGreyGuy said:

Legally he isn't self employed but appreciate that as a director/shareholder you are treated somewhat similarly.  Whilst he's only been a director for 11 months he has continuous employment for over 8 years so they cannot just dismiss him and as the company has been trading over 8 years then he can give the 3 years of company accounts required. 

This sounds a simple one for a half decent broker to solve for you but appreciate a telephone tied agent may just come with a computer says no response. 

Its not quite as simple as that - why is he now a shareholder? Is it going down the pan and the other owner/owners wanted to reduce their risk? Is it still being run as it was previously? etc etc. 

But you are right, it should be possible to overcome.

It is a family business and he will take over eventually, nothing going down the pan hah maybe i should have put that in my original post!

miss_moody12

MWT said:

miss_moody12 said:

... and given 25% shares back in May 2023...

I'd hope he is taking some tax advice as well as there are few tax efficient ways to 'give' someone 25% of a company unless it is in a very poor state...

I should have said it is a family business in my original post, company is in good state and well established, im also an accountant so gave my input before everything went forward but have never dealt with anything mortgage related as i am business and not practice. 

DullGreyGuy

ACG said:

DullGreyGuy said:

Legally he isn't self employed but appreciate that as a director/shareholder you are treated somewhat similarly.  Whilst he's only been a director for 11 months he has continuous employment for over 8 years so they cannot just dismiss him and as the company has been trading over 8 years then he can give the 3 years of company accounts required. 

This sounds a simple one for a half decent broker to solve for you but appreciate a telephone tied agent may just come with a computer says no response. 

Its not quite as simple as that - why is he now a shareholder? Is it going down the pan and the other owner/owners wanted to reduce their risk? Is it still being run as it was previously? etc etc. 

But you are right, it should be possible to overcome.

By definition the shareholder's liability is limited, does what it says on the tin there. Personal guarantees of shareholders/directors are obviously a separate matter but you typically won't automatically take on such liabilities simply by being given equity. 

Obviously we now know its a family business with succession planning of the OP taking over the whole business in time but even in other circumstances I've seen/known a business thats doing well but that being mainly down to one person's skills/efforts that equity is given to that person to further incentivise their efforts in a more long term way than simple commission will achieve. 

Clearly companies can go downhill quickly, but presumably mortgage lenders are aware of this as it's as much an issue for employees as directors and have their own mechanisms of making enquiries. At least with a director they can ask more of the company's accountant etc (at least our lender did) whereas for an employee they're limited to public record.