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Are borrowers raising funds to support their businesses?

Journalist: John Fitzsimons, Freelance

ended 24. January 2023

Morning brokers. Apparently, the number of businesses on the brink of going bust has risen by a third over the last year, according to Begbies Traynor. I'd love to hear what your experiences of this have been with your mortgage clients. Have you seen business-owning clients increasing their borrowing in order to support their businesses? What is the market like for borrowers who want to raise funds for this purpose? And has your advice process for business-owning clients changed at all over the last year? Any and all thoughts very welcome on this one!

6 responses from the Newspage community

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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
We’ve bad business owners roads finance for this small company’s, but I wouldn’t recommend it on a mortgage. Although your business might be your baby, you’re putting your house on the line when there could be more suitable alternatives. That said, emotions rule the roost with some business owners and we are seeing an increase in this type of lending when alternatives have been developed exhausted.
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Justin Moy
Managing Director at EHF Mortgages
Most High Street mortgage lenders don't allow for much, if any, business borrowing - this has probably been hidden over the years under 'Home Improvements', so it is not necessarily a new reason to borrow, but the scale of it is obviously significant at the moment. Smaller lenders and specialist secured loan providers do offer this as an opportunity to borrow, at higher rates admittedly. Increasing the home mortgage, and spreading the cost over a longer term, does help out in the short term, but remember that you may be swapping unsecured facilities to a secured debt, and missed payments can lead to major issues even if the main mortgage is still paid on time. But many businesses having no choice at the moment, with added gloom on the horizon, where will this stop for company owners?
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Imran Hussain
Director at Harmony Financial Services
I have personally not seen any enquiries or heard from brokers within my circle that have had clients contact them to raise funds for their business as this can be a high-risk move as clients could potentially not only lose their business but also their homes so possibly why it's never recommended especially as there is typically commercial funding available strictly for business use.
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Mark Hosker
Mortgage Adviser at Cyborg Finance
We have not seen an increase in business-owning clients increasing their borrowing to support their businesses. This can be a risky move and could lead to financial hardship if the business doesn't perform as expected. It is quite dangerous to access gap funding in this way, and we always advise caution when it comes to using personal assets, such as their home, to fund business investments. Instead, we recommend exploring alternative options. It's important for business owners seek professional advice before making any major financial decisions.

We have seen business owners closing their offices and building garden work-from-home spaces as a way to adapt to the new remote work environment.
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Austyn Johnson
Founder at Mortgages For Actors
As we deal with mortgage prospects for businesses, we have to assess if the business is going to stay profitable for a good many years. If it's not, they won't get the mortgage they require. Unsecured funding may be a different story though! It's worth remembering too, that 2020-2021 was one of the highest recorded years for new startups - now we are getting back to the norm, it may be that these startups didn't work out as well as hoped, were 'that year' relevant or maybe they just aren't needed now due to employment being easier found.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Mortgage lenders have always disliked borrowers raising funds for business purposes, many of them simply will not allow it and the only way forward is to speak to their commercial lending teams. However, this means higher rates, higher fees and less favorable terms for the borrower. Even those lenders that do allow customers to raise mortgages for business use would expect this to be for positive purposes; market expansion, capital expenditure to fuel growth, etc. Those looking to borrow against their homes due to tax liabilities, shore up a period of poor performance, or other negative drivers are really going to struggle.