Shares in the UK's third-largest buy-to-let mortgage lender, Paragon, have lost nearly 40% after the firm said it faced funding problems.
Credit market turmoil has hit Paragon's business plan
Paragon said the recent turmoil in the global credit markets had hit its normal sources of finance.
As a result, it said it could launch a £280m rights issue if it failed to find other financing by the end of February.
Paragon's shares have already fallen by 70% this year on fears it might not be able to raise sufficient funds.
Having dipped by about 47% in morning trade, Paragon's shares closed down 38.8%, 79.25p,at 125p.
Paragon raises its funding largely through securitisation, under which it bundles up its loans and sells them on.
However, since the recent credit crisis, triggered by problems in the US sub-prime mortgage market, the securitisation market has dried up.
Northern Rock has been the most high-profile UK victim of this so far, but Paragon is also having problems.
The buy-to-let lender also has a £280m corporate lending facility due for repayment in February, but Paragon said the terms being offered by banks to renew it were "not attractive", so it was considering using a rights issue to raise the money.
The rights issue would be underwritten by UBS, the firm said. However, it said underwriting of the issue was conditional on several factors.
"Such conditionality gives rise to a material uncertainty related to events or conditions, which may cast significant doubt on the group's ability to continue as a going concern," Paragon said.
Paragon's comments came as it reported record profits of £91m for the year to the end of September, up nearly 10% on the previous year.
However, in discussing the outlook, the firm said: "The present travails of the credit market coinciding with the expiry of our syndicated credit facilities have created uncertainties over the group's future funding in the near term.
"The prospects of the group in the current year will depend substantially on the reopening of the securitised funding markets to enable the group to return to normal levels of writing new business."
It said that if it was unable to find new sources of financing, it would have to "scale back new lending activities significantly and manage costs accordingly".
The firm added it was cutting 60 jobs from its Epsom office.