Misselling of a business loan

ilkley11

I started a (franchise) business in 2005 and took out a substantial loan to buy equipment in a leasehold shop. 6 months later my 'business banker' contacted me to have a chat. He tried to sell me a remortgage on my house and various insurances, when he had no luck he moved on to expanding the business talking about 'clusters' of shops. My accounts weren't breaking any records but the upshot was I was lent the same amount of money again as the first loan to set up a 2nd shop. I needed to put down a deposit but it was suggested that I could cover half of the deposit by increasing my overdraft, to be paid for from the profits of the 2nd shop.
The 2nd shop never took off and the whole business had to be closed down at the end of 2008. I was only able to do this because I managed to remortgage my house (with the same bank of course) as I (very very luckily) managed to get a job when the business failed.

Has anyone got any experience of this? Does anyone think I have a case of misselling against the bank? I have just read the Lending Code for micro-enterprises....Treat customer fairly?, Lend money responsibly?, assessing if you can afford to borrow?
I have got all documentation bank statements etc and of course it is only the 2nd loan which is in dispute.

zppp

ilkley11 wrote: »

I started a (franchise) business in 2005 and took out a substantial loan to buy equipment in a leasehold shop. 6 months later my 'business banker' contacted me to have a chat. He tried to sell me a remortgage on my house and various insurances, when he had no luck he moved on to expanding the business talking about 'clusters' of shops. My accounts weren't breaking any records but the upshot was I was lent the same amount of money again as the first loan to set up a 2nd shop. I needed to put down a deposit but it was suggested that I could cover half of the deposit by increasing my overdraft, to be paid for from the profits of the 2nd shop.
The 2nd shop never took off and the whole business had to be closed down at the end of 2008. I was only able to do this because I managed to remortgage my house (with the same bank of course) as I (very very luckily) managed to get a job when the business failed.

Has anyone got any experience of this? Does anyone think I have a case of misselling against the bank? I have just read the Lending Code for micro-enterprises....Treat customer fairly?, Lend money responsibly?, assessing if you can afford to borrow?
I have got all documentation bank statements etc and of course it is only the 2nd loan which is in dispute.

Do you have evidence that they didn't assess the affordability of your loan?

Thrugelmir

Did you prepare a business plan to ascertain the viability of a second shop?

ilkley11

Business plans were submitted based on what the first shop had achieved. The problem was, given the demand for business premises at the time, decisions were rushed. Surely a resposible bank should have said slow down give things a couple of years to override the enthusiasm of a new business?

My business manager actually told me that he had never seen a business plan come anywhere near expectations!

lawrie28

Sorry, you took the money, you opened the second shop. If you didn't want to expend the business, then you wouldn't have. Just because they approached you for a loan does not mean they mis sold it to you.

If you couldn't have afforded it, thye would not have leant it to you, and I am sure they would have based the affordability calculation on the income the second location was to generate.

I know that it sounds harsh, but the best thing to do is put it behind you and move on, you sound liek you have come out it a lot better than some.

Common_Sense_2

YOu drew up a business plan, the business plan did not succeed. That is not the banks fault.

Freddie_Snowbits

ilkley11 wrote: »

Business plans were submitted based on what the first shop had achieved. The problem was, given the demand for business premises at the time, decisions were rushed. Surely a resposible bank should have said slow down give things a couple of years to override the enthusiasm of a new business?

My business manager actually told me that he had never seen a business plan come anywhere near expectations!

One gathers you have answered your own question and due dilligence on your part was negligent. As it is clearly a business transaction.

Alas for those naughty banks, just like you, would you complain if your plans had actually been bettered. If the answer is no, there is your answer.

ilkley11

If my business plan had been to buy 10 buy to let flats and I borrowed £1.5m on interest only, with a 5% deposit from me....the repayment being on the rental yield and the fact that house prices never fall...the banks then turn around and say we want capital and interest repaid, I go bust and the banks write off the money?

Everything done on a business plan...due dilligence followed...all affordable on 2005/7 figures on house prices etc??

So 'Common Sense' it's not the bank's fault?

I am currently paying what I owe, this all happened a number of years ago, but the 'little man' is now paying for the banks' mistakes.

ILW

ilkley11 wrote: »

I am currently paying what I owe, this all happened a number of years ago, but the 'little man' is now paying for the banks' mistakes.

Sorry, but you cannot blame others, in the end "the little man" just made a poor business decision which did not pay off. It's what running a business is all about. High risk with possible high rewards.

lawrie28

ilkley11 wrote: »

If my business plan had been to buy 10 buy to let flats and I borrowed £1.5m on interest only, with a 5% deposit from me....the repayment being on the rental yield and the fact that house prices never fall...the banks then turn around and say we want capital and interest repaid, I go bust and the banks write off the money?

Everything done on a business plan...due dilligence followed...all affordable on 2005/7 figures on house prices etc??

So 'Common Sense' it's not the bank's fault?

I am currently paying what I owe, this all happened a number of years ago, but the 'little man' is now paying for the banks' mistakes.

Can you explain this post? as it makes little sense to me.

Are you saying that the banks will have written off the £1.5m debt in the example above? Well they will have the property as security, and would have also asked for some other security from the business invovled. This is because they would have used a written down asset value for their LTV calculations, and would have needed some more security, most likely other property, from the people looking to buy the 10 flats. So when it went bust, the bank should have lost nothing, as it should have the 10 flats plus what was offered for security.

I guess this is what happened in your instance, you provided some kind of guarantee and have had to remortgage to settle with the bank.

Just because things were rushed does not mean the bank is at fault. Many business deals are done in a rush because of tight deadlines, that is business. I bet at the time you were glad that the bank could process things so fast so you could get everything done you wanted.

Usuing your logic, every consumer in the country that is struggling to make repayments on credit cards that they were offered by banks would be able to write these off, as they can't afford them.