Small Business loan/backstop loan desperate advice needed

We would be grateful for any advice given please.  My husband owns a 50% share of a property worth £400,000 which has no mortgage on it, together with a field worth £150,000.  Although he is rich in property, we have no actual funds and scrape by each month.  He has registered a business and looking to start up his own small business.  What we cant seem to get help with is how to to get a business loan with the field used as collateral against the loan, or a loan that could be secured on the land and until the business had an income, then pay it back.  He needs to buy the machinery to start the business and would need to borrow £75,000 for this.  He has never been able to obtain a personal loan as his house is jointly owned with his father who is over 70 years old although we are in the process of having the title split on the house so that his half will be owned outright 100% with its own title number, which may help matters.  However we have never understood why, when he owned over a 20 acre land and woodland, why this could not be used against any borrowing. We don't know where to start with it all.  Any advice would be really appreciated!  Our credit score isnt great but we thought that if you owned assets which could be used against a loan as security, then it would be easy to obtain >!


  • Annisele
    Annisele Posts: 4,827 Forumite
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    Lenders don't just take into account security; they also take into account whether prospective borrowers have enough income to support the loan. If the lender fails to take that into account, they'll be in trouble for irresponsible lending.
    If people have assets but no income at all, the usual way of using the assets to fund a new venture is to sell the asset rather than borrow against it.
    I am a little confused by the title split on the house. Do you mean you're splitting into into flats, so there's going to be a freehold and two leaseholders for two flats? Or do you mean something else? If the house is physically one house, if you split the title without physically splitting up the house you could just be making more complicated problems.
  • Hiya.  Thanks for your reply.  That,s what we were worried about.  It just seems a shame we don't have a penny to scratch our a**s with but sat on assets that are practically useless to us when we really need it.  No the house is owned 50/50 between my husband and his father under one title even though its two separate dwellings.  Its one big farmhouse. So we need to register my husband's share under his own title number so that it is his solely and his father's side is his solely.  If that makes sense?
  • Annisele
    Annisele Posts: 4,827 Forumite
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    Have you taken advice on the title split? It's very likely fine, but it is theoretically possible to make things worse by doing that (eg if you split the title but don't split the physical house - so you have only one front door, one electricity supply, one kitchen etc).
    Any chance that your husband could hire the machinery he needs?
    Could you sell part of the field? Or even the whole field, if you're not going to need it for the business?
    If you have some income, you might still be able to borrow something secured on the property. But that does depend on what you mean by a not great credit score. Sometimes when people say that, they mean they once paid a bill late four years ago. Other times they mean they're undischarged bankrupts. Usually they're in the midde ground, but that's quite a big place.
  • Hiya.  Yes we have taken advice on the split and it has been recommended.  The house is one big farmhouse split in to two different dwellings so each has its own front door, own bathroom, own kitchen, electricity supply etc.
    Yes hiring is an option and has been suggested and we may have to go down that road.
    We are unwilling to sell the field as its part of the family farm and is used for other purposes.  

    Yes my husband does work full time so does have an income but currently furloughed which is why it was a good moment to start up by himself. He has never been bankrupt or had any CCjs or anything just a few late payments etc.  
  • Lomast
    Lomast Posts: 847 Forumite
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    Banks dislike collateral that is not normal property they normally have to take specialist advice on valuations, how easy it would be to liquidate etc.
    There are specialists that will loan against land might be worth speaking to high end pawnbrokers depending on how long you need the money for
  • bris
    bris Posts: 10,548 Forumite
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    edited 1 July 2020 at 4:42PM
    You have no real income to pay the loan back so you are high risk. It has already been said but equity isn't the only reason to lend money. 

    Banks don't want to call in loans and take peoples property, its not a good look for them so they need to see a way that you can make the payments.

    The business isn't running so has no history and main stream lenders will avoid it.

    The sub prime market may be an option, a financial adviser can help you look at this sector but it's expensive, very expensive so the business would be under pressure from day one.

    Why do you need the land, if it's worth 150k and you own it outright just sell it.
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