New business-bank wants to secure loan against the house eek!

princessamy86

Hi all
Just wanted to get your thoughts on this:
OH is trying to set up a business with his redundancy money, working it all out looked like him and his partners needed to borrow £20,000 from the bank, on top of the £12,000 they have managed to raise between them. They went this morning and were told the only way they can borrow the money is to secure £10,000 of it against our house. I'm VERY unwilling to allow this, the equity in the house is all mine and I just don't want to take the risk. Does anyone know of any banks which have a more relaxed criteria? They saw alliance and leicester this morning, I'm just wondering if there are any other avenues than securing it on the house?
Any suggestions appreciated.

Horace

What business is he in? Instead of approaching a bank - how about Business Angels instead as they invest money especially if you have matched the amount and the business is a viable prospect. Have no contact details for Business Angels but they can be googled.

I can see why the bank have asked that the debt be secured against the house - its a risky business lending money these days especially to start ups.

princessamy86

I do see why they have asked for the money to be secured, it's in the licensing trade-they will be running a bar/nightclub. I looked at business angels but OH and co are unwilling to give away a portion of the business under those terms. I don't want to be unsupportive of him but I just don't think I can let them borrow against the house (the other 2 rent, so where's their risk?!?)

Caroline73_2

princessamy86 wrote: »

I do see why they have asked for the money to be secured, it's in the licensing trade-they will be running a bar/nightclub. I looked at business angels but OH and co are unwilling to give away a portion of the business under those terms. I don't want to be unsupportive of him but I just don't think I can let them borrow against the house (the other 2 rent, so where's their risk?!?)

they are willing to risk your house but not give up part of their business? Not fair on you is it?

Like you say the other two don't have any risk. Is the £12k an equal split between them? I think they should be looking at other options in fairness to you personally.

DCodd

I am assuming that you have a joint mortgage with your OH but the equity is yours?

Could they not go down the route of an unsecured personal loan of £6500.00 each and not put you in this dreadfull position?

You will have no control over the way your OH partners spend this money or conduct their business. I would personally stay well clear. Support your OH in his business efforts for sure but not with your equity!

I wish them luck with their venture everyone needs help when starting a business but you need a house and home more!!!!

slipp_digby

First rule of business for me is keep business and personal assets entirely seperate. I assume that they intend or have set up a limited company as the vehicle for the business. This is to limit liability in case it goes wrong.

There are so many hard luck cases who made a bad decision and put all their eggs in one basket, please dont be one of them.

If the business goes tits up, the last thing you will want is the worry of you home being at risk as well. Just imagine the stress this would put you and your partner and your relationship under.

While the banks view point seem harsh lending to start up business is always a risky business. Even 3 years ago when I started up (in more bouyant times) it was impossible to get loans at sensible rates, or without it being secured.

How many partner(s) - think you post suggests at least 3? It's probably easier to for each partner to personally borrow £4,000 through unsecured loans as a previous poster correctly suggests - they then lend the money to the company and an entry is made in the directors account - so it can be re-paid hopefully when the business is making profit.

A bank is unlikely to be a good source of a loan for this. If they want to start a business and PERSONALLY reap 100% of the rewards if it is successful, then THEY should take 100% of the risk PERSONALLY.

princessamy86

Thanks to all who have replied, I totally agree that it is unfair for them to ask me to use the equity as security. I originally thought that personal loans would be the best way, however with OH and one other partner having been made redundant I think they will struggle to get a loan. The third partner has a terrible credit rating so he won't be able to do that either. Just not sure what other avenues are open to them! I'd love them to be able to do it, OH has no qualifications and has been working in a factory for last 10 years, he's really going to struggle to find anything else. Anyone know anywhere else they could get some money from?

DCodd

They could try for a Government Grant.

http://www.businesslink.gov.uk/bdotg/action/gsd?tc=000KW0240113680

Not sure of the rules etc. But maybe worth a try??

princessamy86

Thanks DCodd, we have looked into that and there's nothing available in our area unfortunately!

Savvy_Sue

princessamy86 wrote: »

I do see why they have asked for the money to be secured, it's in the licensing trade-they will be running a bar/nightclub. I looked at business angels but OH and co are unwilling to give away a portion of the business under those terms. I don't want to be unsupportive of him but I just don't think I can let them borrow against the house (the other 2 rent, so where's their risk?!?)

It's quite simple. They are unwilling to give away a portion of their business. You are unwilling to give away the equity in your home. Their choice. They have one. They just don't like it.

princessamy86

I appreciate what you're saying savvysue, do you think they should just forget the whole idea then?