TL;DR - Quick Answer
Lenders calculate director income differently - some use salary only, others include dividends, and specialists may use net profit or retained earnings. The right lender choice can mean £100,000+ difference in borrowing capacity. Understanding which calculation method suits your accounts is crucial.
Key Points
- Income calculation methods vary significantly between lenders
- Salary plus dividends is the most common mainstream approach
- Specialist lenders may use net profit for higher borrowing
- Shareholding percentage may affect income calculations
- Retained profits can be used by some specialist lenders
- Accountant-certified projections accepted by some lenders
Lender Examples
How different lenders approach this scenario
| Lender Type | Accepts | Notes |
|---|---|---|
| High Street - Basic | Salary only | Very restrictive for tax-efficient directors |
| High Street - Better | Salary + dividends | Average of last 2-3 years |
| Building Societies | Salary + dividends | May use latest year if increasing |
| Specialist Lenders | Net profit or salary + dividends | Whichever is higher |
| Private Banks | Net profit + retained | Maximum flexibility, higher min loan |
Frequently Asked Questions
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