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Can you get business funding if you’re not a homeowner?

It’s a question we ask a lot when people apply for finance: "Are you a homeowner?". For good reason though, and it’s possibly not as daunting a question as you may think. Finance for non-homeowners is often still available for Directors who aren’t UK homeowners or don’t want to provide a personal guarantee.

During the process of applying for a business loan, there's a certain amount of information we (as an intermediary) need to supply to our lenders, in order to paint a clear picture of your business. Not only this, we need this information to be able to match you to the best possible finance provider for your situation and requirements – to know what they expect from your application.

Why do lenders want homeowners?

As most traditional loans and finance platforms require security to help minimise the risk for the lender, it's often a requirement that a check is done on the company Directors. This gives the lender a good idea about you and your business – if you have a good history of directorship then this shouldn’t be a problem for you.

For the loans deemed as higher-risk, or harder to secure, lenders will often use personal guarantees which look at you as an individual as a way of securing the loan. Being a homeowner in these circumstances means that you'll have had a significant amount of checks performed on you already, and therefore would have a higher probability of meeting lender criteria.

This is a question which is very commonly asked by both lenders and intermediaries. Contrary to popular belief, this is usually not asked with the intention of taking your home as security for a loan. Remember to keep your eyes open and always ask questions when this comes up during future finance applications.

More lenders, more options

With so many alternative lenders in the market, we're seeing more and more appetite to lend to what mainstream lenders might call ‘risky’ businesses. Lenders are now creating a plethora of products that use different forms of security, and many offer larger unsecured business loans than the banks – and this is great news for small, growing businesses.

Essentially, this means that for those businesses who’ve been rejected in the past, there could still be hope, as these alternative lenders now spend more time searching for alternative security.

Is finance available without risking my home?

This all depends on what you need and how your business stacks up, and it's probably worth speaking to a specialist who can guide you in the right direction.

Your business needs to have either strong assets in the background or a very strong trading history and balance sheet. These factors will all work in your favour when choosing a lender, by lowering their risk — giving them the confidence to finance your business without added security.

A list of positives for these lenders include:

  • Profitable business
  • At least a static turnover
  • High net-worth
  • Quality customers
  • Good invoice finance debtors
  • Year-on-year growth

Obtaining finance without a personal guarantee is a complex process, and if you don’t fully understand if you’re getting the right deal, the best option for you would be to speak to an intermediary. The reason behind this is that intermediaries (like Funding Options) have access to a wide array of lenders and can pinpoint the best-suited match for your business.

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