Can lenders count company profit, not just my director wage?

It is a common situation for company directors: you pay yourself a modest wage for tax or cash flow reasons and leave the rest of the profit in the business. Then a lender assesses you only on the drawn wage, and your borrowing power looks far lower than your real income. Some lenders handle this differently.

The problem with assessing only the wage

If a lender counts only the salary a director draws, a profitable business can look like a low income borrower, because much of the income is sitting as profit in the company rather than being paid out. For directors who deliberately retain profit, this can badly understate their true capacity.

Some lenders count retained profit

To address this, some lenders will look through to the company net profit and count the director share of that profit toward their personal borrowing capacity, in addition to or instead of the drawn wage. The logic is that, as the owner, that profit is effectively available to the director.

It depends on your ownership

This approach generally depends on you owning the company, or a substantial share of it, because the lender is attributing the profit to you as owner. The treatment can differ depending on whether you are the sole owner or share ownership with others, and lenders set their own rules on this.

It varies between lenders

Whether a lender counts company profit, and how it does so, varies. Some are comfortable looking through to net profit, others stick more closely to the drawn wage. The same director can therefore be assessed very differently at different lenders, which is why the choice of lender matters here.

The financials need to support it

Counting company profit relies on clear financials showing the net profit and your ownership. Up to date company tax returns and financial statements, prepared by your accountant, are what allow a lender to apply this approach. Without clear evidence of the profit, a lender cannot count it.

Add backs can apply here too

As with personal self employed income, lenders may also add back certain non cash or one off expenses within the company net profit, such as depreciation, which can further refine the income figure. The combination of counting company profit and applying sensible add backs can make a real difference.

Match the structure to the right lender

Because this depends on your company structure, your ownership and the lender policy, the useful step is to match your situation to a lender that assesses it favourably. A broker who works with company directors can identify those lenders, usually at no cost to you, while your accountant prepares the financials. This is general information, not advice.