Business O/D - any advice anyone?

[Soir]

Good morning all, I know many of you have businesses and just wish to pick your brains for a moment - any advice would be warmly appreciated.

I am in the process of starting a business with a colleague and need to borrow around £80-£100k. I have been told it is best to take this in the form of a business overdraft? (as we hope to not use all funds and only pay interest on the amount we use, yet be able to use all funds if needed. Nor to we wish to pursue an investor). The account will be used mainly to pay wages and overheads/offices (no stock)& to receive client payments.

Can anyone recommend a good bank and any advice on how these things work (typical rates/charges/proceedure & how long it usually takes to get one etc). We both have capital in our homes, no bad credit history & have been employed for over 10 years.

Many thanks
Soir

[Ian J]

In general all of the clearing banks are as good ( or bad ) as each other so it's best to approach your personal bankers first as at least they will have some knowledge of you.

The speed of offer will depend on the seniority of the person that you speak to but it shouldn't be more than a few weeks and that will include time for the bank to take security over your houses if necessary.

What is it that you will be doing ?

[Soir]

Hi Ian

Many thanks for the reply. The area of business will be mobile phones (in the form of telesales, so no 'shop' or stock required).

Best regards

[Soir]

Hi Ian

Banks have told me for a new start up business they will only offer a maximum of 50% & we have to fund the rest.

Would you suggest either 1) Secured personal loan 2) further advance (currently mortgage lender) - I've been told if choosing one of these options not to tell them it is for a business, but for investment or car upgrade or something?

We cannot remortgage to to redemption penalties.

Many thanks

[Ian J]

It isn't my area of expertise but much would depend on your projections and how quickly you feel that you could repay the loan.

The bank putting up a similar amount to yourself is about par for the course but if you feel that you can repay the amounts reasonably quickly ( say 5 years ) you may be able to persuade a bank to put up the whole amount secured against both of your properties

[inbakumar]

Originally Posted by Soir

Banks have told me for a new start up business they will only offer a maximum of 50% & we have to fund the rest.

Would you suggest either 1) Secured personal loan 2) further advance (currently mortgage lender) - I've been told if choosing one of these options not to tell them it is for a business, but for investment or car upgrade or something?

We cannot remortgage to to redemption penalties.

It is a pity that you cannot remortgage because of redemption penalties. Otherwise a flexible mortgage that allows you to drawdown funds when you required them would have been ideal.

I also understand why banks would be reluctant to give you more than 50% of the loan. You will be entering into a highly competitive industry and offering your homes as security for the loan. If things go wrong, the last thing the banks want to do is to re-possess the house and put your family on the street. It is bad PR!.

This leaves you to look at secured home loans. It is true most home loan lenders don't like to lend money for starting-up a business (i-e commercial purposes) but there are some lenders who would. Most secured loan lenders like home improvements as a reason because it increases the value of the home .

I suggest you take a secured home loan to raise the funds but also setup a savings account (or a few if necessary) to keep the funds. This way, you will recoup some of the interest payments to the lender back through interest from savings account(s).

If interested, I can help you with getting a competitive secured loan .

Good luck with your venture.

Regards,