It has been a challenging year for people the world over. Many businesses didn’t make it through, and many of the ones that did have faced incredible stress and financial hardship. This means there has been a surge in applications for grants, finance, and external support to help with cash flow.
Yet despite the intrepid efforts of British business owners, banks and mortgage lenders are treating many like they are bankrupt – with many refusing mortgages to those that have accepted support. Metro Bank, for example, said any customers who have taken out an SEISS grant will need a deposit of 20% or more. At Santander, a deposit of 25% is the minimum for those who are self-employed.
Data from the Small Business Finance Markets Report shows that in 2020-2021, 45% of SMEs applied for external financial support in 2020, compared to 13% in 2019, and 31% of businesses used grants up from just 2% in 2019. This seems inevitable considering the economic difficulties faced, and the attractive support available, yet as banks are using this to forecast future business success and stability, it is affecting their ability to purchase a home. Considering the rise in property prices this year, and the end of the stamp duty holiday, it will be harder than ever for those entrepreneurs and business owners to purchase a home.
David Hannah, principal consultant at Cornerstone Tax, discusses this move by British lenders: “It seems wholly unfair that those who have taken the brunt of the difficulties faced over the last year, and subsequently were offered potentially attractive credit and loans to help with cash flow, should then be punished for doing so. This not only unfairly targets business owners and home-owners-to-be, but also does away with the Government support measures such as the 95% guaranteed mortgage that were designed to help those looking to get onto the property ladder.
After the 2008 financial crash, the banks and mortgage lenders asked the public for financial support. Come 2021, it seems they have forgotten the tax payers’ generosity – and they must do more to support the business owners and entrepreneurs that are the backbone of the British economy.”