Business recovery// secured loan on a private property

[Stuart2022]

Hello all
In 2019 I was about to be made redundant and my employer was going to start insolvency proceedings. However, I bought the company shares in lieu of redundancy and was able to inject enough cash in order to stabilise the company to the point where creditors would actually talk to us about sensible repayment plans. Of course, I could have walked away, set my own company from scratch and probably have made a fair bit of money by now- but "doing the right thing" got in the way.

Cut a long story short, we survived Corona, partly thanks to BBLs, but early 2022 was pretty poor for us. However, in the past six months we have really become busy and quite profitable, although the company still has significant debts.

I have inherited a residential property in the meantime and I have looked at securing a loan against it to provide turnaround funds and also funds for expanding the business going forward, as we really seem to have fallen on our feet as our competitors have stumbled from theirs.

However, the company naturally has a pretty poor credit rating and its past performance is really not of the level of the size of loan I am looking for- certainly a non-secured loan would be a no-no. I had asked several brokers and they assured me that anything is possible and that there are lenders who will be prepared to loan on the strength of the secured asset, rather than the strength of your business past/ projection- but they don't seem to be achieving anything.

My question is whether such lenders actually exist or will be up against the same problem no matter which broker I go through. I know the obvious answer is to sell the property, but I am really trying to avoid doing that unless I absolutely have to. Likewise I do not want to wind the company up and start again- although that was an option a few years back, I am now associated with it and it would damage my reputation and make it difficult to move forward with suppliers etc.

NB I did search the forums before and found several similar threads, but nothing that quite answered what I wanted to know.

Any suggestions would be appreciated.
TIA
Stuart

 

[Mark T Jones]

There are lenders who will do it frankly I'd avoid them

Any reputable lender will want to see a clear plan and purpose for the money - recovery might constitute a purpose, but only if accompanied by a realistic/researched/comprehensive recovery plan.

On the odd occasion I take property security for a fit out deal, I also insist that they take legal advice (to protect all of us)

There is a lender who appears on threads here - not for good reasons - who might be less thorough

 

[Stuart2022]

Hello Mark
Thanks for the comments. I have refrained from going into too much detail about my position and plans as I am not really comfortable doing so in view of mentioning the negatives- sod's law dictates if I do that then my/ the company's identity would be recognised.

I have been in my industry for getting on for 30 years and I know it well. I know exactly what I am doing in terms of recovering it, but the problem I'm finding is that as soon as they see the credit history under the previous Director, it's a no-no.

Even if it goes against your recommendations, could you show me where I could find the name of this non-recommended company. To be frank, I am looking at the risks and rewards objectively. I will never get another chance like this so I am prepared to take a calculated gamble; I do not mean this in a flippant way but if I lose the gamble then I lose the gamble and will stack shelves in Tesco.

Thanks
Stuart

 

[Gyumri]

I have inherited a residential property in the meantime and I have looked at securing a loan against it to provide turnaround funds and also funds for expanding the business

The mortgage will presumably be in your name so won't have anything to do with the company. A buy to let mortgage may be possible?

 

[UK Contractor Accountant]

B2L funds is the way to go - that's assuming you are going/can let it out.

There are plenty of mortgage brokers that can sort this for you.

 

[ChrisCallaghan]

Hello Stuart,

Though I appreciate that you understandably wish to avoid insolvency, my own advice would be to explore insolvency options in conjunction with the funding options you are exploring. Though you seem fully aware of the risks, its seems a shame to put your own property on the line to secure funding for this company, after you have already purchased shares to bail the company out in the past. Most insolvency options can lead to the restructuring of the business, rather than its end. Such options could mean that if you still wished to raise capital, secured against your property, all of that capital could be used to expand and grow, rather than going towards historic debt. Given the company's low credit rating, it may time to consider a fresh start?

Myself (and any of the regular insolvency advisors here on UKBF) would be happy to give you a no obligation, free and confidential consultation on what insolvency options are available.

To answer your question on funding, the short answer is yes. There are certainly lenders out there who will provide funding to struggling companies, where the director is willing to offer up a personal property as security. Most prefer to see the borrower (i.e. your company) is demonstrably able to honour the loan without having the security called upon, and will still wish to have comprehensive info before agreeing a lend.... but with the property as security you will be able to find a facility. If you have not done so already, it may even be worth exploring a Recovery Loan (RLS - https://www.british-business-bank.co.uk/ourpartners/recovery-loan-scheme/)

Though you mentioned you are already speaking with brokers, I will message you the details of a broker who has helped out my clients in this position in the past with secured loans. I will also message you the details of a different broker who currently works with lenders who provide RLS loans.

Get in back in touch if I can be of any help advising on the available restructuring and insolvency options.

 

[Frank Wessely]

Hi Stuart2022

An option for you could be to look at whether the company’s credit rating can be improved. (In essence 95% of companies are incorrectly rated.)

Doing so can make a significant difference as to how the business is perceived by potential lenders. It can be a fairly swift “risk free” process so it would be worthwhile considering this before deciding how to structure a loan but it will be necessary to target the appropriate rating agencies.

If you would like to know more about this, just call on the mobile number below or send me an email to [email protected]

Thanks.

 

[Stuart2022]

Thank you all very much for the advice; certainly there are things to think on before I reply further.

Somehow the World seems a less lonely place since I found this forum. I've read many threads now and replied to a couple of them.

I come from an operations/ engineering background and I am not too bad at this (and happy to share any advice I can) but the issues of law and process of administering a business have been a very steep learning curve for me.

Thanks again
Stuart

 

[ChrisCallaghan]

@Stuart2022 however you proceed I wish you the best of luck with everything.

Just as a final idea to add to your considerations, depending on your company's creditor profile, one option could be to explore a Company Voluntary Arrangement (CVA). Though these are hard to achieve at the moment, if successfully set up a CVA would consolidate the company's debts in a more manageable and affordable repayment arrangement. For a brief summary of this process please see the below link:

Restructuring and Insolvency

With the prospect of insolvency, you may be faced with decisions or situations you’ve never encountered before.‍ Having someone in your corner who knows you and your business, as well as your obligations, can be a major asset. As insolvency practitioners, we can explore your options and discuss...

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