Your business is growing and you are converting your sole proprietorship, known in Dutch as an eenmanszaak, into a private limited company, or bv. Meanwhile, you want to buy a home in Eindhoven or increase your existing mortgage. Do you have to wait another three years? And will the lender only consider the salary you pay yourself?
A new bv does not automatically erase your business history. However, it changes how your income appears in the financial statements. At Homeloan, I bring together the results of your sole proprietorship and your bv so that your mortgage application reflects what your business actually earns.
Does your bv need three years of trading history for a mortgage?
No, this is not a universal requirement. If you continue the same business under a different legal structure, earlier years can remain relevant. The continuity of the business activities matters, rather than just the incorporation date of the bv.
Converting a sole proprietorship into a bv is different from starting an entirely new business. For example, an independent consultant may continue doing the same work for the same clients, but invoice through a bv instead. The documents need to demonstrate the connection between the old and new business.
The assessment therefore includes figures from before and after the conversion. The transfer of the activities and any changes in ownership, financing or business operations are also relevant.
From sole proprietor profits to a salary from your bv
For a sole proprietorship, business profit is an important starting point. The amount you transfer to your personal bank account each month is not the same as your qualifying income for a mortgage. Personal drawings do not change the profit.
As a director and major shareholder of a bv, you receive a salary. Profits may also remain in the company or be distributed as dividends. The assessment therefore goes beyond your payslip. The financial health of your bv and its results over several years also matter.
Two useful terms are:
- Liquidity: does your business have sufficient resources to meet its short-term obligations?
- Solvency: how much of the business is financed by equity, and how much of a financial buffer does it have?
High turnover alone says little about your mortgage options. Costs, debts and the ability to keep paying your income are just as important.
Can business profit count alongside your salary?
Yes, several lenders can include part of the business profit in addition to your salary. The amount depends on factors such as your ownership share, the results and the financial capacity of the company. Lenders do not all use the same calculation.
Entering only your salary into a mortgage calculator may therefore give an incomplete picture. However, simply adding together your salary, the full profit and the dividends you received is not correct either. These amounts can come from the same underlying earnings.
Example: why you cannot simply add salary and dividends together
Suppose your bv pays you a gross annual salary of €60,000. After accounting for the salary costs, €40,000 of profit remains before corporate income tax. You also receive €15,000 in dividends from available reserves.
Your qualifying income is not automatically €115,000. A dividend is a distribution of profit or reserves and does not automatically constitute a third, independent source of income. The income assessor determines how much of the salary and business results can count as sustainable income, without counting the same profit twice.
This is an illustrative example explaining the distinction. It is not a calculation of an accepted qualifying income or a maximum mortgage.
Paying dividends before your mortgage application
A dividend payment makes money available to you personally, but does not create new profit. Nor does it automatically increase your annual qualifying income.
The required decisions and checks must take place before a dividend is paid. After the distribution, the bv must still be able to pay its debts as they fall due. The board is responsible for approving the distribution.
If you want to use dividends as your own contribution towards a property purchase, I consider the mortgage and proposed distribution together. Your accountant or tax adviser assesses the tax implications. This helps avoid a situation where you make more money available personally while weakening the financial position of your business.
Your director’s current account: who owes whom?
A director’s current account, known as rekening-courant in Dutch, records amounts owed between you and your bv. If the company pays a personal expense for you, you may owe that money to the company. If you have paid business expenses personally, the company may owe money to you instead.
The direction of the debt matters for a mortgage. Money you owe to your bv is not additional income. During the income assessment, this position can lead to adjustments to the balance sheet. Any personal repayment obligations also need to be considered in the mortgage assessment. A current-account debt does not automatically mean rejection, but it can affect the outcome.
A longer-term loan from your bv also requires commercial terms, including arrangements for interest and repayment. Recording an amount as a current-account balance does not, by itself, make it a temporary advance.
Using dividends to settle a debt is not a solution in every situation. A responsible distribution must be possible, and the related taxes must be accounted for. Have this assessed before relying on it to finance your home.
A holding company and an operating company: the whole business matters
If you have a holding company above your operating company, a payslip from the holding company alone does not give the full picture. The funds your holding company uses to pay your salary may come from the operating company.
The relevant companies and the money flowing between them are therefore included in the assessment. Management fees, intercompany loans and shareholdings need to be considered together. The same money must not be counted again as earning capacity in different companies.
Which documents do you need after the conversion?
Prepare documents covering both the sole proprietorship and the new structure. Depending on your circumstances, these may include:
- Annual financial statements and personal income tax returns for previous years.
- The latest annual financial statements and corporate income tax returns for the bv and any holding company.
- Recent payslips and annual salary statements.
- The opening balance sheet and documents relating to the conversion.
- An overview of the company structure and your shareholdings.
- Current interim figures and details of current-account balances, loans and dividends.
The final document list depends on the lender and the party assessing your income. For an NHG mortgage, business income is established through an Inkomensverklaring Ondernemer, an entrepreneur’s income statement, issued by an accepted income assessment specialist. An income statement may also be required for a mortgage without NHG.
Mortgage advice for business owners in Eindhoven
Are you moving to a bv structure and planning to buy a home in Eindhoven, Veldhoven or the surrounding area? Discuss both plans early. I can then establish which information is needed and which lenders suit your business circumstances.
At Homeloan, you receive personal advice from me, Niels de Jong. I turn your business circumstances into a clear mortgage process and coordinate with your accountant and income assessor where needed. You are welcome at the Lichttoren in Eindhoven or online.
Read more about how much cash you need to buy a home and the mortgage process at Homeloan.
Frequently asked questions
Can I get a mortgage if my bv is only one year old?
This may be possible. A recently incorporated bv is not the same as a short business history. When you continue the same business, earlier activities and financial results are also assessed.
Is a payslip from my own bv enough?
No, it does not complete the business income assessment. The lender also needs to know whether your company can continue to support your income.
Do I need to pay dividends for business profits to count?
Not always. Some lenders can include profits retained in the company, subject to their requirements. Paying dividends in advance is therefore not automatically necessary or beneficial.
Can I borrow more by increasing my salary?
A higher salary does not automatically mean a higher accepted qualifying income. The business must be able to sustain the salary, and the increase must be supported by the assessment of its financial results.
Is a director’s current-account debt always a problem?
Not automatically. Its size, background and treatment matter, alongside the financial position of the business and your personal obligations.
Can I get advice before the conversion into a bv is completed?
Yes. If you also have plans to buy a home, discussing the proposed conversion in advance is useful. Bring your recent financial figures and your accountant’s plans.