The situation
A director plans to move home after the company invested in staff and equipment. The latest accounts show lower profit than the previous year, while management figures suggest recovery. Personal drawings have remained steady because the business held reserves.
What makes this more involved?
Maintaining drawings from reserves does not demonstrate that current earnings support the same level indefinitely. An explanation of exceptional expenditure may help understanding, but it does not mean a lender will add it back or disregard the lower year.
How I would approach it
Explain the difference
Ask the accountant to distinguish recurring costs, genuine one-off expenditure and accounting adjustments. Reconcile the explanation with the filed accounts.
Check the recovery evidence
Review current management information, bank activity and confirmed work. Separate completed revenue from sales forecasts or an unsigned pipeline.
Compare realistic borrowing levels
Research how lenders assess the profit trend, ownership and drawings. Model a reduced income figure and the household’s ability to retain a buffer.
What could change the plan?
Can last year’s higher profit simply be used?
It cannot be selected just because it supports more borrowing. The latest position and the lender’s income methodology must be represented accurately.
Would taking a larger dividend solve it?
A withdrawal does not create recurring profit. Its legality, tax effect and impact on business cash need separate advice.
What this would establish
Decide whether the proposed borrowing can be supported by the business’s current position, including the possibility of borrowing less or waiting for stronger evidence.
Do management accounts guarantee a higher income assessment?
No. They provide context, but each lender decides what evidence and income calculation it accepts.
Link to this answerEducational content reviewed 9 October 2026. Individual advice requires an assessment. Lender and policy criteria can change.
Further reading: HSBC Intermediaries: packaging requirements. These references provide background information; they do not indicate acceptance of this example.