Difference Between a Business and Personal Loan

tksnota
tksnota Posts: 76
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Hi

I’m in the process of defaulting my loans but I had one loan that I’m confused


This fund institution is marketing itself to provide loan to be used for company not personal. So I  took out this loan to be used for a company’s capex but I want someone to tell me what kind of loan it is. 

The company is Enterprise Loan Fund Ltd - T/A GC Business Finance (GCBF) http://www.businessfinance.growthco.uk/ . The loan is under my name not the company and no collateral. 


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  • retiredbanker1
    retiredbanker1 Posts: 309
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    404 website error - cannot be found.

    A business loan is same as a personal loan in that they lend you money and you agree to repay in x instalments.

    If you are a sole trader and did not put up any security for the loan - if the worse happens and you are made bankrupt they become unsecured creditors.
  • tksnota
    tksnota Posts: 76
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    404 website error - cannot be found.

    A business loan is same as a personal loan in that they lend you money and you agree to repay in x instalments.

    If you are a sole trader and did not put up any security for the loan - if the worse happens and you are made bankrupt they become unsecured creditors.
    Please use this https://businessfinance.growthco.uk/

    I facilitated the loan for this company wherein the directors submitted their details including myself showing other streams of income plus house with mortgage.

    The company is still operating but it is my own money I’m paying for the loan. But I’m having a hard time paying it 

    I just want to make sure that no collateral. How do I ask it from this lender?

    if it became an unsecured loan then it will be treated like a personal loan without any guarantees. Is that right?


  • molerat
    molerat Posts: 31,520
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    I facilitated the loan for this company wherein the directors submitted their details including myself showing other streams of income plus house with mortgage.

    Who's name is on the loan paperwork ?  Did you or the other directors put up personal guarantees ?


  • tksnota
    tksnota Posts: 76
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    The loan is split under 2 directors not with the company and one of them is with me. I’m paying the loan via my own money

    I don’t know what a personal guarantee. How do I determine it?
  • molerat
    molerat Posts: 31,520
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    edited 7 January at 5:54PM
    So the loan is in the names of you and X and Y, all being jointly liable, with only you paying.  Why are you the only one paying ?  The personal guarantee is not relevant as it is you, and the other directors, who have personally taken out the loan and not the company. It is used where the loan is in the name of the company but the directors personally guarantee it and are liable if the company defaults / becomes insolvent.  All would be detailed in the loan paperwork. If you default on the payments the loan co will chase all 3 named borrowers.
  • tksnota
    tksnota Posts: 76
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    molerat said:
    So the loan is in the names of you and X and Y, all being jointly liable, with only you paying.  Why are you the only one paying ?  The personal guarantee is not relevant as it is you, and the other directors, who have personally taken out the loan and not the company. It is used where the loan is in the name of the company but the directors personally guarantee it and are liable if the company defaults / becomes insolvent.  All would be detailed in the loan paperwork. If you default on the payments the loan co will chase all 3 named borrowers.
    Thanks for the clarification. To give more context the total business loan taken is £10k. £5k is being paid by the one director while the other one I’m paying it. I’m not a director only a shareholder but there are 3 directors in the company.

    I have a few questions 

    1. You are saying that the loan is not a personal guarantee. Will it be classified as a personal loan because I’m being chased by the financial institution for the 2 missed payments?

    2. if i paid my £5k while the other director defaulted, will i still be pursued even I’m just a share holder and paid my dues completely?

    3. it is only one director and me that took out the loan so please advise why are the 2 other directors will be chased in case of default.
  • molerat
    molerat Posts: 31,520
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    edited 8 January at 12:29AM
    You said
    The loan is split under 2 directors not with the company and one of them is with me.

    So the assumption was there were 3 parties named on the loan.

    If you and another took the loan out personally then you are both personally liable, your status is irrelevant, whoever signed the loan is liable. If the payments stop then both or either one of you will be chased, likely the one that has more assets will be the one they chase hardest.  You do not have a share, you are likely both equally and separately liable for the whole amount.


  • tksnota
    tksnota Posts: 76
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    molerat said:
    You said
    The loan is split under 2 directors not with the company and one of them is with me.

    So the assumption was there were 3 parties named on the loan.

    If you and another took the loan out personally then you are both personally liable, your status is irrelevant, whoever signed the loan is liable. If the payments stop then both or either one of you will be chased, likely the one that has more assets will be the one they chase hardest.  You do not have a share, you are likely both equally and separately liable for the whole amount.


    Hi

    This is the screenshot of the loan agreement contract that I had with GC Business Finance.

    The terms are very similar with my other personal loans that have defaulted.

    Can someone advise me if the terms confirm that this loan is a personal one not a guarantee so I can default it and set up a DMP otherwise I might be forced to pay this loan.


  • molerat
    molerat Posts: 31,520
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    edited 9 January at 10:54AM
    That really doesn't show anything of real importance, the most important page will be the first one that states who the parties to the loan are.  That will be the deciding factor on who they can chase for the loan.  Being a personal loan or having a personal guarantee make little to no difference on debt enforcement.
  • tksnota
    tksnota Posts: 76
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    It is only me who can be chased for this loan as what I read from the contract no one else

    I want it to be defaulted but I read if it considered as guaranteed loan to the business then it might not be easy to do a dmp

    can someone advise
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