Secured loan advice (is it the best option?) - £10k required

Zach

Dear Forum,

Firstly here are the vital stats!

- Aged 30

- Salary £38k per year, net £2k per month due to pension (I am an emergency services worker with larger than normal pension contributions)

- Credit history is poor, I have 3 defaults, which are all now shown as satisifed or partially satisfied (within the last year) and one defaulted credit card of around £800 and loking to settle soonish.

- One secured vehicle loan of £10k - less than £1500 now remains on the balance

- Home owner, with property worth £185k and a Mortgage with Satander/Abbey of £132K remaining.

- Overdraft of £900, which is virtually permanent

I am a 30 year old married male with two young children under 5.

I am looking to start a social care business that will be regulated by a government body. The reason why I am telling you this is that because with most businesses, you wait for it to grow or develop and may even incur losses. This business venture is provider based and already will have clients from startup and likely to be bringing net profits of £30k in its first
year.

I need start up money and have absolutely no capital to do so. I require £10k and feel that a secured loan against my home is the only way. What is the forum's opinion on this, bearing in mind my credit history?

The intention is to pay off the loan within 24 months so I am mindful of early settlement charges. Which lenders are good in this regard?

Can anybody recommend any borkers or lenders to turn to?

What other options are suggested?

Thanking you all in advance.

somethingcorporate

Very unlikely this will happen if you have a poor credit history with recent defaults, nothing to put down and live in your overdraft.

The best you can hope for is put together a good business plan and take it to a bank to discuss your options.

Whilst you do say that most business make a loss in the first year I bet most new businesses do not FORECAST a loss in the first year. You've a forecast for profit and nothing more at the moment.

zxspeccy

With any business development loan the bank will be looking at the ability to make the repayments. I am assuming you have put together a business plan and a cash flow forecast to back up you two year repayment plan. Also as this is a new business the fact there is no historical accounts to show the previous performance may make the bank more wary about lending. As for the security then the lender would hold a second mortgage over the property, and there would be charges levied to ensure this 2nd mortgage is sufficient to cover the borrowing (security charges, valuation fees, legal costs). That said the bank should only lend if they feel you can comfortably make the repayments, and not on the reliability of the security on offer.

Are you the sole mortgagee/owner of the property? If not then any other people on the mortgage/deeds will need to agree to extra borrowing and ideally would need to take independent legal advice to ensure they know what they are getting themselves into. If the business fails then even a bank that only hold a second mortgage can enforce the property sale to get their money back. The banks do not like doing this as potentially making a family homeless is not good PR for them. Enforcing security is usually only done by the banks as a last resort, and with business lending they prefer this to be from assets of the business and not personal assets.

Ideally most banks like start up business to take some of the risk themselves, which means an up front cash injection from your own savings. That way the banks then spreads the risk and it make you look more prepared if you have saved up to partially fund the business venture.

Good luck with the business but I don’t think putting up you house a security will make any difference on whether the bank agree then lending. They will agree this purely on you business plan, cash flow forecasts and your business aptitude, security is secondary to this. However I fear your poor credit record will go against you, so don't be too surprised if it is a no.

CLAPTON

I have no idea what 'provider based ' means in terms of business venture.


You won't be able to increase your mortgage on the basis of starting a business.
The fact you are permanently in your overdraft and a history of defaults will make the mortgage lender question your ability to make increased payments.

Zach

somethingcorporate - thanks for the reply and I will take on board your advice of approaching a bank with a business plan.

zxspeccy - thank you for taking the time to write a response. I am the sole mortgage / owner of my property. I am effectively looking for a personal loan secured against my home and had not considered approaching a lender with a business plan. Something I will now definitely consider.

CLAPTON - Thank you for your response. I am not looking for an increase on my mortgage but a personal loan to start setup a business.

The reason why I commented about the profitability of the venture is that I am not fussed whether the personal loan is over 5, 10 or 15 years as long as I am not stung by high early repayment charges. I also mentioned it becuase I am aware that my credit history is poor and I would be prepared to go with a high interest secured loan as long as early repayment was possible without horrendous charges.

I understand the risk attached to the home but will continue my own employment and my wife will also be resuming work within the next 6 months.

Zach

Can anybody recommend any bad credit lenders who are not complete cowboys for the purposes of a secured loan?

I do not mind if the interest rates are high as long as the early repayment penalty is reasonable.