Another Celebrity Chef in the Stew

Trollfever

Thrugelmir wrote: »

Agreed.

However they were [strike]asked [/strike] told (?) to take over HBOS.

....................................

Alan_M_2

Thrugelmir wrote: »

Why should the banks take all the risk?

As you say "Why do they want or need more security? Why do they require any directors gaurantees, therefore negating the whole reason for a Ltd company?"

If its a success the rewards go to the shareholders of the Company, if it fails we the taxpayers foot the bill.

Its all become too easy to borrow money and speculate to accumalate.

Borrowing = £250,000 with request for short term extension to £450,000

Security = £400,000

How much risk is present?

An exposure to £50,000 for circa 4 months less the value of the business less £400,000 of security on property.

Why bother operating Limited companies then negate it with personal guarantees?

That would be as dumb as asking a banker to be accountable for their actions...how ridiculous would that be?:rolleyes:

lesley1960

Alan_M wrote: »

All my funding is secured, and as a result of this thread I watched working lunch on Iplayer to see exactly what AWT said:-

Firstly he was a director of a Limited company AWT Ltd.

This Limited company owned and operated 6 restaurants all bought with profits from previous resuatrants as they'd grown. 5 of the 6 were running at a profit.

LloydsTSB had charges on these properties amounting to in excess of £400,000.

AWT Ltd outstanding borrowing was £250,000, they wanted to extend a further £200,000 to allow the 6 units to continue trading.

Why do they want or need more security? Why do they require any directors gaurantees, therefore negating the whole reason for a Ltd company?

The situation I'm in is the same, LloydsTSB have secured all the borrowing my Ltd company has on property, they have in the region 140% of our facilities covered....then two weeks ago they told us they required more security, a debenture on the company and personal garuantees for us to continue our existing position, they wanted 200% security on our lending...If we were not prepared to offer this then our facilities are withdrawn....

Of course I'm not prepared to do this, no one in their right mind would agree to this.

What they are saying is, We want all our money back and we want it now, we don't care what it does to your business but we're not allowed to say that becasue the goverment have told us to lend more.....so we'll ask for ridiculous amounts of securitisation that no one in their right mind would accept....oh and you have a month.

Looking through most of the venemous replies on this thread I'd hazard a guess that many of you don't run businesses and don't have the first idea of why you'd set up a Ltd company to start with.

AWT Ltd is another example of a profitable viable business being destroyed by a bank in a state of panic.

Because the directors of a Ltd company can walk away from the company debts and the banks would have ro realise assets quickly ,and when a quick sale is required those assets will only raise a fraction of their 'worth'

And I am a director of a ltd company , I can see the banks point of view , if a company needs a money injection just to keep it afloat the very real chance is that you are only prolonging its eventual demise

Thrugelmir

Alan_M wrote: »

Borrowing = £250,000 with request for short term extension to £450,000

Security = £400,000

How much risk is present?

An exposure to £50,000 for circa 4 months less the value of the business less £400,000 of security on property.

Why bother operating Limited companies then negate it with personal guarantees?

That would be as dumb as asking a banker to be accountable for their actions...how ridiculous would that be?:rolleyes:

I doubt if the Company owns any freehold property. The only security would be be movable fixtures and fittings. In the current climate with restaurants closing every week the businesses themselves would have little value as brands.

I thought it interesting that AWT raised £250,000 of private equity to buy 3 of the businessess. Yet apparently only needed £200,000 to keep the whole operation going. Suggests that the Group didn't have the money to pay their rent / VAT / payroll taxes.

Alan_M_2

Thrugelmir wrote: »

I doubt if the Company owns any freehold property. The only security would be be movable fixtures and fittings. In the current climate with restaurants closing every week the businesses themselves would have little value as brands.

I thought it interesting that AWT raised £250,000 of private equity to buy 3 of the businessess. Yet apparently only needed £200,000 to keep the whole operation going. Suggests that the Group didn't have the money to pay their rent / VAT / payroll taxes.

Quite possibly, I guess without sight of the operating accounts all we can do is guess and take him at face value.

Alan_M_2

lesley1960 wrote: »

Because the directors of a Ltd company can walk away from the company debts and the banks would have ro realise assets quickly ,and when a quick sale is required those assets will only raise a fraction of their 'worth'

And I am a director of a ltd company , I can see the banks point of view , if a company needs a money injection just to keep it afloat the very real chance is that you are only prolonging its eventual demise

Shame the banks have different rules for themselves don't you think......

Sir_Humphrey

You may ask 'why should banks take a risk?' Well, they should not take silly risks as they did over the last 15 years. However, a bank that does not lend to a viable business has no useful function. T*ts on a Bull is how the FT described them a few weeks ago.

Kev09

Doozergirl wrote: »

You need cashflow though. If you are offering credit terms to your customers then you need to finance that plus the new stock to keep you going. Cashflow is incredibly important to the success of any business.

I actually agree with you Doozergirl cashflow is very important so if you are borrowing because of poor cashflow then you have a problem, there might be an exception in a few industries but generally speaking stuff like running costs, stock, wages etc are not things you should be borrowing for and if you are your business is in trouble!

Kev09

Alan_M wrote: »

An entire level of finance exists for this very purpose, it's called stock finanace funnily enough.

Do you really think any retailler you walk into pays for all the stock on it's shelves up front? Of course it doesn't, it's financed, even if it's on credit with the supplier, credit costs would be built into the wholesael price and so will the cost of credit insurance.

If this form of stock finanace didn't exist, practically every retail park would close overnight.

I wasn't talking about 30 days credit or anything like that! of course I buy stock on credit but I don't go borrowing from banks for cashflow, future stock is financed by current sales, hence I run a business that the only debt it has are directors loans! perhaps thats why im not on here crying about how I cannot get any finance and incidentally if your business is so great why don't you sign the personal guarantees the bank wants!

I can speculate it is because you would quite happily take the big wages then when you go bust! leave everyone else with the debt (incidentally people have done this to me) then start up again!!!

Conrad

Alan

I can give you the view from commercial lenders currently, indeed I've been trying to arrange commercial finance for a number of clients of late.

The biggest issue right now is declining bricks and mortar value.
AWT offered £400k security, but I will pretty much guarantee that valuation is pie in the sky.

I'm finding London commercial valuations are comming in up to 50% lower than the supposed peak values, which is shocking to clients, but not to me.

The driving force behind this rapid vaporisation of commercial value is finance famine.

Even my highest charging 'do anything' commercial lenders are limiting LTVs to 50% in return for 18% variable rates.