Business owners often underestimate how much they can borrow because they assume lenders only care about income physically drawn from the business. Directors who take low PAYE salaries or minimal dividends—for tax efficiency, cash-flow planning or reinvestment—frequently believe this reduces their mortgage options. But in 2025, lenders have shifted decisively away from relying on “drawings” and now use profit-based underwriting to assess true affordability.
This misunderstanding is common and damaging. Many directors who run profitable companies assume they cannot buy or remortgage high-value properties because their SA302s or tax returns show modest income. Yet when the business is profitable, stable and well-managed, lenders often take a far broader view. Profit, retained earnings, liquidity, and the firm’s overall financial resilience are far more important than the specific figure a director chooses to take out of the company.
This shift mirrors wider trends in the market. As more entrepreneurs purchase through SPVs and restructure portfolios—topics explored in blogs such as
SPVs vs. Trading Companies: What Landlords Must Know in 2025—lenders have become increasingly familiar with the gap between personal drawings and actual earning power. A similar theme appears in
Mortgages for Self-Employed Borrowers in 2025, where many lenders assess business income rather than personal extracts.
Profit-based lending is now central to director mortgages, and understanding it can dramatically change what is possible.
Market Context in 2025
In 2025, lenders face a more regulated, risk-sensitive environment. Affordability checks remain rigorous, but underwriting has become more adaptable—especially for entrepreneurs. While high-street banks still rely heavily on payslips, SA302s and declared dividends, specialist lenders and private banks have embraced profit-centric assessments.
This reflects the reality that modern businesses often retain profit for reinvestment, tax planning or strategic growth. Directors taking low drawings is not a sign of financial weakness—it's often a hallmark of a well-run, cash-conscious company. Lenders who understand this evaluate income using the company’s accounts, not just the director’s personal tax planning decisions.
As a result, two directors who draw identical incomes may have dramatically different borrowing capacity depending on company profit, balance sheet strength and long-term performance. Lenders are increasingly comfortable using business accounts as the primary source of truth for affordability.
Why Drawings Don’t Reflect True Borrowing Power
Director drawings are simply a choice. They are not a reflection of income potential.
Most tax-efficient structures encourage directors to take low salaries and modest dividends. Some directors draw even less during growth periods or while building retained earnings. If lenders relied solely on drawings, almost all successful small-business owners would appear to earn very little.
Profit-based lending fixes this. Lenders assess:
- How much profit the company actually generates
- How much of that profit could reasonably be withdrawn
- Whether the business can sustain higher drawings without stress
This approach aligns far better with economic reality. A director drawing £30,000 annually may run a business generating £300,000 net profit. Underdrawing does not limit their affordability—profit does.
When structured correctly, profit-based assessments often unlock borrowing that is two, three or even four times higher than drawing-based assessments suggest.
How Profit-Based Mortgage Assessments Work
Lenders adopting profit-based underwriting look beyond personal tax documentation. They analyse company accounts and assess the sustainable earning power available to the director. The process typically includes several layers of evaluation.
Net Profit as the Core Income Indicator
Net profit before tax is often the foundation of profit-based affordability. It provides an objective view of the company’s capacity to generate income, regardless of how that income is distributed.
If a company generates £200,000 annual net profit but the director draws only £40,000, lenders see £200,000 as the more realistic marker of affordability—provided doing so is sustainable.
Retained Earnings as a Measure of Financial Strength
Retained earnings signal discipline and resilience. They show that the business does not need to distribute all profit to support the director personally. This bolsters the case that profit can be drawn safely to service a mortgage.
Cash Position and Liquidity
Lenders evaluate the company’s cash reserves and how efficiently cash flows through the business. Strong liquidity gives lenders confidence that the business can support the director’s mortgage obligations even during quieter trading periods.
Adjustments to Profit
Sophisticated lenders adjust reported profit to paint a true picture of earning capacity. This can include:
- Removing one-off or extraordinary costs
- Adding back non-cash charges like depreciation
- Normalising earnings across years for consistency
These adjustments frequently increase the usable income figure.
Company Stability and Trend Analysis
Lenders study multi-year trends, looking for:
- Consistent or rising profit
- Stable margins
- Low operational volatility
A stable, profitable business supports much stronger borrowing.
When the Latest Year Counts More
Some lenders, especially those specialising in director mortgages, are willing to use the
latest year of profit only when:
- The business is growing quickly
- Profit has materially increased
- The latest year better reflects current operations
This can transform borrowing power for fast-scaling companies.
Why High-Street Banks Often Fail Business Owners
A first-time director applicant often approaches their existing bank and receives a surprisingly low borrowing figure—or even a decline. This usually happens because mass-market lenders are built for employees, not entrepreneurs.
Their systems default to:
- Salary
- Dividends
- Stated income on SA302
They rarely consider:
- Net profit
- Retained earnings
- Loan account balances
- Adjusted profit
- Liquidity
- Corporate stability
This is why so many directors wrongly assume they “cannot borrow much”. They have been assessed using the wrong framework.
Specialist lenders and private banks, by contrast, build their assessments around business performance—not just personal drawings. For more on how private banks differ, see
Private Bank Mortgages Explained: Benefits and Drawbacks.
Common Challenges Directors Face When Applying
Business owners often present their finances in ways that make underwriting harder. Common issues include:
- Submitting tax returns without full accounts
- Not explaining why drawings are low
- Presenting multiple companies without consolidation
- Not highlighting adjustments or normalised profit
- Approaching mainstream lenders unsuited for complex income
None of these challenges relate to income—they relate to presentation. With proper packaging, most are easily overcome.
Strategies to Maximise Borrowing Power in 2025
The most successful director mortgage applications follow a clear strategy built around profit, structure and transparency.
Focus on the Most Recent Accounts
If profit has grown materially, lenders willing to assess the latest year only can offer dramatically higher borrowing.
Prepare Accountant-Certified Income Statements
These can clarify:
- Normalised profit
- EBITDA
- Adjusted drawings potential
Lenders rely heavily on professionally certified figures.
Clarify Retained Earnings and Liquidity
A narrative explaining why profits have been retained—and how they support future drawings—significantly strengthens an application.
Consolidate Multi-Company Structures
If income flows through several entities, presenting consolidated profit and group cash position ensures lenders see the full picture.
Choose the Right Lender
The difference between the wrong lender and the right one is often hundreds of thousands of pounds in borrowing capacity. Profit-based lending is not universal, so lender selection is critical.
Hypothetical Scenario
A director running a consultancy draws £35,000 salary and £20,000 dividends, giving a declared personal income of £55,000. Yet the company generates £180,000 net profit annually, holds £250,000 in retained earnings, and has strong cash reserves.
A high-street lender may base affordability on the £55,000, restricting them to modest borrowing. A profit-based lender will base affordability on the business’s £180,000 net profit—transforming borrowing power and making high-value property purchases feasible.
This scenario is common across nearly every entrepreneurial sector.
Outlook for 2025 and Beyond
The move towards profit-based underwriting reflects a wider shift in the mortgage market. Lenders have recognised that the traditional approach—salary and dividends only—is incompatible with modern business structures. Directors increasingly use tax planning, SPVs, retained earnings and multi-entity arrangements that make drawings an unreliable measure of their true financial position.
In 2025 and beyond, directors who understand how lenders view profit will be far better positioned to secure the financing they genuinely qualify for.
How Willow Private Finance Can Help
Willow Private Finance specialises in mortgages for directors, business owners and entrepreneurs with complex income. The firm understands how to structure profit-based cases, present retained earnings, normalise profit, consolidate multi-entity structures and identify lenders who embrace non-traditional income profiles.
Whether working with specialist lenders comfortable with latest-year profit, or private banks assessing EBITDA and wider asset positions, Willow ensures applications reflect the real financial strength of the individual—not the artificially low income shown on a tax return.
Frequently Asked Questions
Q1: Do lenders really look at profit instead of drawings?
Yes. Many lenders now assess net profit and retained earnings as the primary indicators of affordability rather than salary or dividends.
Q2: Can using my latest year of profit help me borrow more?
Often yes. Several lenders accept the latest year alone where it reflects the current performance of a growing business.
Q3: Will lenders accept adjusted or normalised profit?
Many specialist lenders accept accountant-certified adjustments that provide a more accurate reflection of earning power.
Q4: Are retained earnings important?
Retained earnings demonstrate financial resilience and can significantly improve affordability assessments for directors.
Q5: Do high-street lenders offer profit-based assessments?
Most do not. Specialist lenders and private banks are typically required for profit-based underwriting.
Q6: Does low dividend income limit my borrowing?
Not if assessed correctly. Low dividends are a tax planning choice, not a measure of true income.
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