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Small business is fertile ground for intermediaries

  • 01/08/2000
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Small business owners are largely unaware of the range of mortgage products available to them, repre...

Small business owners are largely unaware of the range of mortgage products available to them, representing a business opportunity for mortgage advisers, according to research carried out by Verso.

The survey, conducted from a sample of 200 small businesses in the UK, revealed that 51% of business owners are not aware that business capital raised by remortgaging their home would be charged at a lower interest rate than other types of commercial loans, and almost every respondent expressed the opinion that remortgaging would put their home at risk.

In addition, almost half those surveyed do not regard it as important for mortgage borrowing to be kept within a reasonable proportion – around 75%- of the property’s value.

Furthermore, the survey showed that some 76% of small business proprietors are not familiar with the self-certification option for mortgages and 81% had not considered remortgaging their existing residential property to raise capital for business investments.

Significantly, the research also shows that 77% of small business owners would consult an independent financial adviser before raising capital on their homes.

Eddie Smith, director of business development at Verso, says that with more than three million self-employed people in the UK, this represents huge potential for intermediaries.

He said: “Small business proprietors are unclear about the fact that capital raising via a residential mortgage can often cost two or three percentage points less than most other types of business loan.

“Brokers need to be aware of the high level of misunderstanding in the core market for self-certification mortgages. They have a pivotal role in educating self-employed applicants about the sort of mortgage products that have been designed with them in mind.”

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