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

Savvy_Sue

I don't know enough about the Business Angels scheme to comment. But if it's a lifetime dream etc etc etc then I'd do anything, pretty much, to achieve it. If that meant doing it on slightly different terms while saving like mad to do it on my own terms, I'd do it.

If it just seems like a good idea at the time - oh look, we've got this redundancy money, why don't we set up a nightclub? - then yes, I'd encourage any partner of mine to forget the whole thing. But then I'm a very cautious, cold water kind of person who doesn't see the point of nightclubs. And would be able to see all the potential pitfalls, the licensing nightmares, the sudden changes in the law which can catch you out, the increases in the cost of drinks and the 'less money in our pocket' feeling in the economy, the changes to employment legislation which mean your staffing budget is suddenly shot to pieces, the over enthusiastic bouncers, the raids by the police for drugs, the stabbings, the shootings ... Do I watch too much TV, maybe?

If your OH WANTS to get some qualifications then now might be a good time to do so, btw.

princessamy86

We can't afford for him not to work, I've got another year left at uni so it would be difficult to afford for him to get qualifications. It's not a lifelong dream, tbh I don't think he has one of those (unless you can count not working and playing around with fishtanks!). One partner is already a bouncer, so on that front we're ok. It's not a big place where we live, stabbings in town centre are very rare and definitely no shootings!! It's good to have another perspective, I have been very cautious when looking through their plans and I don't think they have underestimated anything. We're staffing just with wives and girlfriends at the moment, so any changes to costs won't apply until they've been up and running a while and now whether or not it will work. I just don't know what to do!

Edinburghlass_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?!?)

When you say running a bar/nightclub I take it they aren't actually buying it so not only will you be at the mercy of any lender but also the brewery or whoever actually owns the business, think very, very carefully.

princessamy86

Not at the mercy of a brewery, they are leasing the premises from a private landlord. We've managed to negotiate the rent down to something affordable, just haggling lease terms down with the letting agency at the moment.

DCodd

The Federation of Small Businesses (FSB) have a website with a forum like this one that you can register for free to post questions on there.

There may be someone there who might have some helpfull tips.

http://www.fsb.org.uk/discuss/default.asp

princessamy86

Thanks DCodd I'll give it a try.

Horace

Also you could try asking questions on this site https://www.venturenavigator.co.uk - its free to register and ask questions and its government funded for business advice.

Not wanting to put a damper on things, but is the licensing trade the right way to go especially when pubs and nightclubs are closing down left right and centre? Maybe if they all trained to do security then they could set up a business doing that and offer themselves as bouncers etc.

A word of warning though, if one partner has a poor credit rating then it would be best if you OH and the other partner don't go into business with him, steer well clear. A poor credit rating can be due to overspending when you have limited funds to pay, if he can do this in his personal life then he can do this in the business as well so stay well clear.

princessamy86

Thanks Horace, I'll have a look at that site. They should be ok in that trade in our city, it's very much at the student end of town and the uni is huge and ever expanding, so I'm not too worried on that front. Bad credit rating partner is brother in law, the debts are from 5 years ago when he was still with his previous girlfriend, but he's never run anything up since and I think we can write it off as being young and stupid.

whatatwit

Banks wanting to secure lending is not a new thing.

When I bought my business 7 years ago, I was putting up 50% on a well established leasehold business and my bank loan was secured on our property.

It would appear to be common practice when leases are being bought.

I hope it works out for you...maybe if you do secure the loan on your house, you should get something legal drawn up between the partners as to how that loan will take priority over salaries/drawings and the persoanl liabilities if the business fails.

Savvy_Sue

princessamy86 wrote: »

They should be ok in that trade in our city, it's very much at the student end of town and the uni is huge and ever expanding, so I'm not too worried on that front.

Just remember that income from a student population will be seasonal, tailing off in the summer, and it may take time to build up again each autumn. I am sure places go in and out of fashion. Probably a very obvious point that you've already considered, but it may mean that you are very quiet until September / October, and that needs to be factored in to your cashflow.