Self employed overdraft or loan?

flipper_72

My husband bought a franchise 11 years ago, he borrowed £40k off the bank a couple of £k off parents and we paid the rest ourselves out of my redundancy money. Fast forward 11 years, the debt to family is all paid, he has been “paying” us a monthly amount which has increased steadily but is not a massive amount.

 I recently found out that instead of a loan, the bank gave him an overdraft facility and there is still £32k of it. I have now asked him about fees etc and he is oblivious to what they are. I can see that his rates are 4% above base rate which probably isn’t so terrible but my concern is it not really reducing. Would you recommend that he (we) continues with the overdraft and take less out of the business account to reduce it or apply for a loan so that it is paid off over a set period?

I have paid off debt for him in the past so want him to do it himself this time , I feel that a loan would be a better option but would like some other opinions. He is in the process of changing accountants so I will ask him to discuss with them as well.

Thank you 

Savvy_Sue

I'd have to ask: with an overdraft of that size after 11 years, not significantly reducing ATM, is the business actually profitable? I'd want to run that question past the new accountant. 

I can't say what the best route would be. How many years until your DH plans to retire? Does that concentrate his mind at all?

Jeremy535897

Did he not take out a bounce back loan during the pandemic to get some of it paid off?

flipper_72

Savvy_Sue said:

I'd have to ask: with an overdraft of that size after 11 years, not significantly reducing ATM, is the business actually profitable? I'd want to run that question past the new accountant. 

I can't say what the best route would be. How many years until your DH plans to retire? Does that concentrate his mind at all?

His accounts show approximately £30k profit per year for the last five years, the amount transferred to the personal account is the take home of an employed person earning £25k, his car is I believe personal rather than business which accounts for the balance. So yes reasonably profitable but retirement is on my mind, not for another 10 years but we still need to be planning (or at least I do!).

flipper_72

Jeremy535897 said:

Did he not take out a bounce back loan during the pandemic to get some of it paid off?

I think he took the first one because business collapsed but not the others.

 I admit I have left him to run the business himself, I am wishing I maybe got involved earlier but I can’t change that only plan for what to do now.

Jeremy535897

There was only one bounce back loan. I think you are talking about grants. It's a pity as he could have got rid of the overdraft for much cheaper finance.