Smallish loan required - so many options!

unexploded

Hi there, I hope someone can offer some advice.

I've been running a small business for over four years now, turning a humble profit. I've put all my own money in, looked at loans before and decided we'll just do everything we can off our own backs. So far, so good.

However, we've noticed a bit of a niche and a huge potential customer base from our parents' business that we can target. I think we need to act sharpish to reap the maximum. To take advantage of this, we need some sort of loan to purchase equipment. At the moment, we're interested in two machines, one of which is around £2,500, the other is around £11,000. We're happy to go ahead with the cheaper option first, build this new venture and purchase the second at a later date.

I can't put any more money in now, and have looked at various options. Our bank has offered us loans, though it has to be guaranteed personally. I have good credit, as does my business, and will have no issue paying off a loan should anything go wrong. My issue with it is that I'm a limited company and therefore it seems to me that being limited these days doesn't mean anything anymore, in terms of guarantees.

I've looked at start up loans, and again looks as if I can obtain these without issue, but they are guaranteed personally.

The other options I've looked at is finance, business credit cards, or just buy it on a personal credit card on 0% as a start up cost (I'm already a creditor, still owed by my company, so what's another couple of grand?).

I've looked at manufacturing grants too, and I spoke to someone who to be honest was pretty rude, and said our industry wasn't considered manufacturing (we print, and people I've spoken to, including start up loan organisations, consider that as manufacturing).

Just wondered if anyone has been in a similar situation, or if anyone could recommend a particular route? Or should I get over the fact that banks don't trust companies anymore to guarantee loans and just bite their hands off?

InsideInsurance

"Limited" is in relation to the shareholders liability. Banks normally want Directors to act as a guarantor for a loan.

The "problem" is the fact the companies liability is limited, you can easily fold the company and run away with the money and the bank then has a devils own job getting it back hence it wanting personal guarantees. If your company had been run for longer or more successful (4 years, small profit but still in debt) then they may consider not needing the guarantee.

If the grants route is a non-starter then a loan seems your only option and accept that you have to show faith in your idea no with cash but by a guarantee

unexploded

Hi InsideInsurance, thanks for the reply, much appreciated.

paddyrg

You could also look at lendingcircle whose amateur investors seem hell-bent on financing just about any loan application at suicidal rates

Brassedoff

If you were my client I would suggest you look at lease purchase. Banks, lending circles or VC's and leasing companies all want PG's now. There is no way round it.

What you have to look at is how you can maximise the most cot efficient way of purchasing. The Capital Allowances from the main pool in HMRC's definition is only 18%,

Lending circles want £1,000 to be introduced to the circle or circulate the proposition. Then the rates are around 10% with up to 60% equity + a Personal Guarantee.

Your bank will charge you 3-5% over base and will need some figures from you.

Leasing is currently running at very competitive rates at the minute. The big benefit of leasing is the relief. The tax gain under a lease agreement can be far more beneficial to a profit making organisation than any other method of acquiring goods. When equipment is leased, the rental charge is fully offset against the system users' business profits, reducing their level of tax.

When equipment is purchased outright, the capital expenditure (after AIA*) is written down over a number of years providing much slower tax offset. For example, a 3 year lease term can save more in tax offset than the finance charge itself!

Finally, you can apply for one of the Governments Enterprise Guarantee Loans, but in all my time, I have never known anyone to get one through. There are a lot of costs such as business plan etc, but call me a sceptic, but the banks can give you a rate a lot lower than they themselves provide through the Enterprise scheme, or they can say no and then suddenly offer you the money with them.

I hope I have helped, if so, say thanks

bris

The banks now see ltd companies as a greater risk because they can just fold and pay nothing back. Personal guarantees are common practice, the way the banks see it is why should they give you money if your not prepared to share the risk, it's the reckless lending that got them and us all in the mess we are in now.

Brassedoff

So you are not aware of the implementation of the amended 2006 Act and how it is common practice to go after Directors personally now. I know of 3 currently just in my network. Scary stuff

bris

Brassedoff wrote: »

So you are not aware of the implementation of the amended 2006 Act and how it is common practice to go after Directors personally now. I know of 3 currently just in my network. Scary stuff

It's certainly not common practice, a company director is not and never has been liable for company debts.

It is possible to chase a company director personally if that director is abusing the system to run up debts they have no intention of paying, this can also be classed as fraud but in most cases it's hard to prove.

Brassedoff

bris wrote: »

It's certainly not common practice, a company director is not and never has been liable for company debts.

It is possible to chase a company director personally if that director is abusing the system to run up debts they have no intention of paying, this can also be classed as fraud but in most cases it's hard to prove.

:rotfl:I am sorry, but you clearly do not know anything about business, or blissfully work in ignorance. need to go and read up. Since the change in the 2006 Act. As for "company director is not and never has been liable for company debts." Where on earth have you been?

I know of many cases, i know of one presently, but then I have been trained in business law and operate businesses.

Run a company incompetently and the OR will now start nailing you to the wall.

Don't be fooled by the belief that many people have about directors only being responsible for £1! That's a fantasy world.

InsideInsurance

bris wrote: »

It's certainly not common practice, a company director is not and never has been liable for company debts.

But they do have duties as a director of a limited company and if they fail to discharge them correctly then they create a personal liability to shareholders/ creditors etc.

If it is common practice or not I cannot comment but it is wrong to say that someone can intentionally miss manage an organisation and walk away from it with no repercussions. There is a massive increase in the number of SMEs buying D&O insurance to defend against such allegations.