What are your finance options if you have been Self employed for a few months and need to raise money
Niche Advice has access to many different types of Finance options. If you have only been self employed for a few months getting a standard mortgage using your income will be very difficult and would need to very good prior experience in the same field. For a standard Mortgage we now have access to many lenders that will accept 1 years accounts up to 90% loan to value. The mortgage rules are however considerably more relaxed on second mortgages.
If you are unfamiliar with second mortgages they sit on top of your current mortgage (often referred to as a secured loan) and normally enable you to release money for any legal purpose. This would include money to clear credit taken out to start your business or indeed business expansion.
The rates on second mortgages are likely to be higher than the main one you already but are likely to be lower than the rates on overdrafts and credit cards. Plus they are often seen as a longer term Finance options for larger loans.
Case scenario: Self employed painter and decorator
Bob was bold and left his previous school maintenance job to start his own painting and decorating firm. His bravery to take the plunge was in the knowledge he had a couple of good contracts lined up. This income is now reflected in his business bank statements, and his Accountant is willing to write a reference with his projected earnings in the first year.
Bob needs to upgrade his van to one with added security as he recently had his current vehicle broken into and he lost all his equipment as a result.
As well as money to replace the stolen tools and buy a new van; he wants to invest in scaffolding rather than hiring it all the time as this is eating unnecessarily into his profit. He needs to raise £25,000 to £35,000. His credit rating is not perfect so the personal loans he applied for online were rejected.
There are a number of second charge mortgage lenders that could help Bob secure the money. These lenders however are not usually open to customers directly so he would need to speak to a Mortgage Broker, such as Niche Advice, to gain access to better Finance options.
Niche Advice offers appropriate Finance options to clients who have been recently become self employed. To find out if we can help you, please complete the online enquiry form under the Contact section on this website or call T: 020 7993 2044.
You are consolidating your existing financial commitments, you should therefore be aware that whilst this may mean you will make short term savings, over the long term, you may end up paying more. This is because you may be extending the period of the loan. You are also transferring previously unsecured debts to a mortgage which is secured on your home. The reason you want to consolidate your existing debts is to reduce your monthly outgoings.
Please also be made aware Lenders tend not to look favourably on applicants that have a repeated history of debt consolidation so future finance for this reason may be hard to obtain.
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines.