2 min read
Drawings reduce visible headroom
Money you take as salary or drawings is cash leaving the company. A lender assessing affordability looks at what is left after reasonable director pay. A large, recent increase can shrink that headroom just before you apply.
Reasonable versus excessive
A sensible salary is expected and factored in normally. Stripping the company of cash right before borrowing, then relying on the loan to refill it, reads poorly. Keeping drawings proportionate to profit strengthens the cash-flow case.
Applying
Keep pay reasonable, show the resulting cash flow, and apply online.
Frequently asked questions
Does paying myself more hurt my company's loan chances?
It can, if it leaves the company short of cash to service the loan. Reasonable pay is expected; a large increase just before applying weakens affordability.
How do lenders treat director salary in affordability?
They look at cash flow after reasonable director remuneration. Proportionate pay is factored in normally; excessive drawings that thin the company are a concern.
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