Exciting Opportunity & Massive Risks - Opinions please

Sweetrevenge

Hi Everyone,

I've juggled with these potentially life-changing decisions for a few days and I'm still not clear on the best way to approach it.

The situation is this:

Self and OH want to open a small business. It will take a loan of approx £150k to start up and establish. It should make a profit of about £50k in the first year, if our figures are right.

We are renting. This affects my credit score - I've had no loans or used credit for several years, so with a couple of outstanding minor debts, my credit score needs improving.

i am about to benefit from an Estate, not as an inheritance, but as a gift from the beneficiaries. Said beneficiaries would like to see my children benefit at the end of my life.

With a substantial deposit, we are more likely to get a mortgage, credit score would improve and our house could? be used as security for business loan, however this could all be lost if the business fails/bank pulls out.

So do we approach the mortgage company first and commit this gift as a deposit, approach the business lenders first, or put it straight into a pension which business lenders can't take away?

Any thoughts?

thanks

DCFC79

Yes your credit score may improve but who provides the creit score ?

Theres 3 credit agencies out there who provide credit reports.

Lenders look at the history.

Sweetrevenge

DCFC79 wrote: »

Yes your credit score may improve but who provides the creit score ?

Theres 3 credit agencies out there who provide credit reports.

Lenders look at the history.

I'm not sure what you're advising - what would you do in my shoes?

Pixie5740

What DCFD79 is saying is that there is no such thing as a universal credit score. No lender uses a credit score generated by the credit reference agencies and the credit reference agencies don't lend money so who gives a flying fig how they rate you. I rented for years and had absolutely no issues obtaining credit.

If you want to start a business why all this faffing about with property and pensions? Use the money you will be gifted to help start up the business and take your business plan to some banks to secure the rest of the required funding.

Sweetrevenge

Pixie5740 wrote: »

What DCFD79 is saying is that there is no such thing as a universal credit score. No lender uses a credit score generated by the credit reference agencies and the credit reference agencies don't lend money so who gives a flying fig how they rate you. I rented for years and had absolutely no issues obtaining credit.

If you want to start a business why all this faffing about with property and pensions? Use the money you will be gifted to help start up the business and take your business plan to some banks to secure the rest of the required funding.

Hi Pixie,

I guess its because the people gifting me the money have expressed their worries that there could be nothing left for my children if the business fails, and I'm worried about whether we'd get a mortgage or a bank loan for the business if my credit score is less than ideal.

Your straightforward view is much appreciated - I'm definitely in a spiral of worry, which is why I decided to post.

Sweetrevenge

... and I used the wrong terminology. My credit history is less than ideal - I have a disputed debt with RBS which is nearly 6 years old, and a CCJ which I'm about to settle when the gift comes in.

cajef

So you want to use the money that is being given to you for the benefit of your children in a business that may fail and they would get nothing?

GazNicki

How old is the CCJ? If the CCJ is towards the end of the 6 year period, and the balance is substantial, It may be best to let it ride rather than use up your potential business funds.

You need a solid business plan. If you have that, and you have your projected profit/loss, including market research, then you can hit the banks for a business loan. You don need to invest your funding as 100% capital for the business loan, but it could help.

The business plan is crucial in getting investment from the banks or any lender. Even if you had 90% of the money, nobody would lend to you without a solid business plan.

Herzlos

£150k is a huge loan to get a business started, especially with an outstanding CCJ. I'd use the money to try and borrow less, you might need it as a deposit / to show you have a stake in the business.

Sure, you may lose the lot if the business fails, but that's largely the risk of starting a business. If you want to play it safe, put the money towards a mortgage and start the business much smaller.

DCFC79

Sweetrevenge wrote: »

I'm not sure what you're advising - what would you do in my shoes?

If you really interested in starting a business then start one but make sure your business plan is good.

Pixie5740

Using the money to buy a house won't necessarily help your children nor will putting the money in a pension. Property is a highly illiquid asset and you might not be in a position to access the equity at a time when your children may need it. Not to mention that if, way off the future, you require care in your old age, the equity from the house will be used to fund that meaning your children would inherit diddly squat. With pensions the money is locked away until retirement so again you may not be able to access the money when your children need it. You will probably need the pension when your retire to live off so again it won't help your children.

The people voting you the money need to decide ultimately who it is they want to have the money, you or your children. If it's your children then they should gift it directly to them because there's no guarantee that whatever you use the money for will one day benefit your children. If it's you they want to gift the money to then a home or a new business (provided you've planned and researched properly and are prepared to accept the risk) are as good a things as any to spend the money on. You could always choose to gift some of the money to your children.