Five credit defaults. One business ambition. £124,000 funded by Somo.
When a business owner needed to consolidate existing debt and invest in software development, a challenging credit history could have stood in the way. But Somo took a closer look, delivering a £124,000 second charge loan to help support the next stage of the borrower's business plans.
The Challenge
A London-based business owner approached Somo through Ajar Financial Consultants, seeking to raise capital against their residential property.
The borrower needed funding to repay an existing business overdraft and support the development of new software, including plans for an app.
However, the application presented several challenges:
Five recent credit defaults, resulting in a Tier 3 credit classification.
The proposed security was the borrower's main residence.
An existing first charge mortgage with Halifax.
A requirement to raise capital for business purposes without disturbing the existing mortgage.
Despite the borrower's credit history, there were positive factors to consider, including no mortgage arrears and significant equity in the property.
The Solution
Somo's underwriting team assessed the application through its Valuation Only™ product, taking a practical, asset-led approach to the borrower's circumstances.
Rather than allowing the credit defaults to determine the outcome, the team considered the available equity, the underlying security and the proposed business use of funds.
The security was a two-bedroom Victorian conversion in Ealing, London, independently valued at £425,000.
With an existing first charge balance of approximately £81,500, Somo was able to provide a £124,000 second charge facility, with consent obtained from the first charge lender.
The 12-month facility provided the borrower with the capital needed to address existing business commitments and progress their development plans, with refinancing identified as the primary exit strategy.
The Outcome
Somo successfully completed the £124,000 second charge loan, enabling the borrower to access equity in their home for business purposes despite their recent credit defaults.
The case demonstrates how a flexible approach to underwriting can help brokers find solutions for clients whose circumstances may fall outside conventional lending criteria.
Joe Cash, Senior Underwriter, Somo
"Credit history is only one part of the picture. This borrower had experienced difficulties, but there was substantial equity in the property and a clear business purpose for the funding. By looking at the overall security and circumstances, we were able to structure a second charge solution that supported the borrower's plans. It's exactly why we consider every credit status at Somo."
Client has bad credit?
If you've got a client with less than perfect credit, speak Somo. We'll assess their case on the value of the property, not their credit profile.
