Cashflow, CCJs and the self-employed

This is reflected in the growth of self-employment, which increased from 3.3 million people (12.0% of the labour force) in 2001 to 4.8 million (15.1% of the labour force) in 2017, according to the ONS, and has consistently remained at around this level since.

This is a significant percentage of the working population for whom cashflow can be variable. On the whole, salaried employees can be sure that they will receive a regular income each month and while there is the potential that their role might be made redundant or that their employer will go out of business, these events tend to be the exception, rather than the norm and are often accompanied by a financial settlement to soften the blow.

For the self-employed, however, income varies depending on both the success of their business or demand for their services and how promptly they are paid. Late settlement of invoices is a common grievance of the self-employed and can have a significant impact on cash flow, which can consequently impact their ability to meet regular commitments and ultimately negatively impact their credit record.

In the mortgage market, we spend a lot of time talking about changing employment patterns and the role that lenders and brokers have in making suitable options available to the growing band of self-employed workers. This doesn’t just mean how lenders underwrite self-employed income, but also their ability to look beyond a credit score and make decisions based on the whole of someone’s financial circumstances, because those circumstances can be subject to different dynamics than traditionally employed workers.

For example, a self-employed worker might earn a large annual income, but if they have consistently been paid late throughout the year and their cash flow has been put under strain, then they may also have missed payments or even CCJs on their credit file. This does not necessarily mean that that they are unwilling or unable to service their credit commitments in the future. They have just experienced a set of unfortunate circumstances.

At Pepper Money, we grew our self-employed lending by 87% in 2018. Nearly a fifth of these were completed on our Pepper 6 to Pepper 24 products. Pepper 6-24 products are suitable for clients who have had CCJs and defaults in the last 2 years – as long as they are a minimum of 6 months old.

With the growth of self-employment being a prominent characteristic of the UK economy in recent years, this may lead to an increase in the number of self-employed clients too.

So when you’re working with self-employed clients, remember, it is easier than ever to find a product for them even if they have had CCJs or defaults over 6 months ago.