Business loan sharks

kitty162

This is a long one I’m afraid! Can anyone advise on business loan sharks? We took a loan out back in February 2020. I don’t want to say who with as they’ve already been identified as unscrupulous! Our loan was for £20k to enable us to get going however, a short time later COVID hit. We are in the entertainment field so up to today we have not made a single penny! When we got to July of last year we started to panic as the loan was secured against our house. We knew it was a long way off to us getting any income and rather than lose our home we decided to take out an equity loan to pay off the business loan. When I requested a settlement amount on the business loan I was told it would be £37,455 as we’d have to make all the payments for the 5 year term of the loan! We had been told no penalties originally! What choice did we have? Pay it or lose our home! We know we’ve been very naive and the consequences of all this go on and on and on! What I want to know relates to a paragraph in the original paperwork that says “our rep will need to make a list of your business equipment to refinance on the secured refinance agreement as discussed, this agreement is not a business loan, the agreement is a tax efficient refinance agreement for business purposes only and does not have an official interest rate.” All the items listed belonged to us personally not to the business. Is any of this legal? Do we have any recourse? Thanks to anyone who can advise. I’m mentally in a very dark place right now with no light whatsoever.

Grumpy_chap

I understand that "front loaded" loans are generally not permitted, and that is what you describe.  Not sure exactly the rules for business loans, and all the symantics of words saying not a loan but refinancing.

What exactly does the paperwork say?

funkycredit

I'd be talking to a solicitor, not asking users on here! You'll get an initial consultation for free. This isn't small-fry; it's big bucks so get professional help ASAP - good luck. Hope you sort it. 

Thrugelmir

Business lending is unregulated. Hopefully you read the contract, obtained advice,  before signing it. 

Personal guarantees unfortunately are a fact of life. As the lender needs security for the money advanced. In the same way mortgage lenders require adequate equity in a property. 

GeordieGeorge

What does your loan agreement say about early repayment?

kitty162

It says “you are not penalised for early settlement and you can settle the agreement at any point during the agreed term with no additional penalties. To calculate your settlement figure simply add together all your remaining payments outstanding including the compulsory notice period and security fee.” We naively misunderstood this. I realise we signed the agreement, but I wanted to find out if what they do is legal.

ThisnotThat

kitty162 said:

It says “you are not penalised for early settlement and you can settle the agreement at any point during the agreed term with no additional penalties. To calculate your settlement figure simply add together all your remaining payments outstanding including the compulsory notice period and security fee.” We naively misunderstood this. I realise we signed the agreement, but I wanted to find out if what they do is legal.

I can't see why it isn't. The same rules that apply to consumer lending (and consumers in general I suppose) don't apply to businesses.  Businesses are expected to understand what they're signing (or pay for the advice of someone who does.)

But realistically you'd be far better off speaking to a solicitor than an internet forum, there's too much on the line to rely on people's (generally) unqualified opinions.

SeanG79

The loan is non-regulated business loan.

As per your post "To calculate your settlement figure simply add together all your remaining payments outstanding including the compulsory notice period and security fee." - That is exactly the settlement figure that they gave you.

Is the business a Limited Company or a Sole Trader/Partnership?