Difficulty of obtaining a business overdraft with Santander

theburningcat

I have a small ltd.

Year 1: £10k turnover, £4k loss (£4k paid to me for tax efficiency)
Year 2: period ended about 4 months ago, accounts in preparation, marginally better than Y1
Year 3: turnover averages about £3k/month so far, good margin but most is paid to me

In this industry, Xmas is a quiet period but so far Jan has been very quiet too and assuming the absolute worst case scenario, it may be difficult to pay everything due this month. Going forward it would be good to have some flexibility anyway.

The business has never had credit but the account has never been overdrawn. My personal credit file is good as far as I know, and I have income from elsewhere. I also have reasonably high usage of a personal OD and CC with Santander - both are interest free so I intend to use them until this period ends. Happy to sign a PG.

Can anyone speak for the chance of getting a business OD from Santander for around £500-£1000?

Rappa

theburningcat wrote: »

I have a small ltd.

Year 1: £10k turnover, £4k loss (£4k paid to me for tax efficiency)
Year 2: period ended about 4 months ago, accounts in preparation, marginally better than Y1
Year 3: turnover averages about £3k/month so far, good margin but most is paid to me

In this industry, Xmas is a quiet period but so far Jan has been very quiet too and assuming the absolute worst case scenario, it may be difficult to pay everything due this month. Going forward it would be good to have some flexibility anyway.

The business has never had credit but the account has never been overdrawn. My personal credit file is good as far as I know, and I have income from elsewhere. I also have reasonably high usage of a personal OD and CC with Santander - both are interest free so I intend to use them until this period ends. Happy to sign a PG.

Can anyone speak for the chance of getting a business OD from Santander for around £500-£1000?

For such a small amount of money, if you are having difficulty securing a commercial loan for the company, then why not lend the company the money yourself? (especially as you say you are prepared to give a personal guarantee anyway)

If you've not got the money available, then consider borrowing it in your own name - perhaps even on a 0% credit card deal?

Pennywise

Just reduce the amount you're drawing yourself (as you say most is paid to you anyway). Get a personal overdraft to cover or use your credit card if it's only short term. At the end of the day, you need an overdraft to finance money you're drawing, so it's not really a business purpose anyway and business overdrafts are always going to be more expensive, not least because they usually charge an arrangement fee. But, your company should have money in it's bank for it's corporation tax as such tax isn't paid until 9 months after each year, so you should have the tax saved for on profits made last year that you can temporarily tap into.

paddyrg

You may also find it prudent to carry some working capital in the business instead of thinking in terms of expensive credit. You are likely to find that any overdraft does require not just a personal guarantee and significant interest rates, but also an arrangement fee (in the order of £100 ish when I investigated), and that needs rearranging each year (so gets expensive fast). Far better for you to leave some money in the company each month and draw down what you need (not what you can), for a stretch.