Lending/Finance on a new business

[Fieldsy]

Hi,

Firstly a little bit of background. I've been building houses with my wife for the last few years. Basically, building, living, selling and then moving on. I had a stable job whilst continuing the builds and have got to a position where we are happy in our final house. These have been self builds, and my wife and myself have project managed the builds and used our own contractors from the point of demolishing the existing building to the point of completion of the new build.

I have now handed in my notice on my old employment, and would like to progress with a business in refurbishment of existing properties. We have just finished our first husband/wife refurb to test the water and see how we got on.

The project has gone well, and a local agent has commented on how well we have done, and the property is currently on the market. I did find that the conversion, even though it was only general decor, new bathroom, kitchen, heating etc....took about 3 months on my own, working every day.

I have now since spoken to a good friend of mine, who has dabbled in some refurbishment, and we have decided between us that we would like to join forces and start a business venture in refurbishmnents.

We have been advised that the best option is a Ltd company????......only from a very short meeting I had with a local accountant.

What my, intended, partner and I are not quite sure about is financing the purchase and proposed selling of a property as a company.

1) Firstly as a Ltd company,can we buy a freehold property, using the business name as purchasers.

2) My wife and myself have obviously used residential mortgages to fund our previous projects, but as a ltd company with my intended partner, what would be our options to obtain capital to purchase a residential property.

3) We are not sure if our personal properties would be required for collateral to borrow, as we were of the understanding that with a ltd company personal assets are not at risk?.

4) To borrow capital to purchase a property as a ltd company, will banks. building societies lend against the intended property and see the intended property as securityon their loan/mortgage, in other words, not classing our residential homes as security.

5) As a ltd company, would the bank/building society require us to borrow money as a mortgage or loan.


As you can see, I am rather confused as to what avenues we would need to take in order to finance the purchase of a property as a ltd company, as I have only ever borrowed on a personal basis with a normal residential mortage.


This is something we are obviously very excited about,and although it tends to be the trend at the moment, we feel given the previous experience I have had in the building of new homes, and the time I have (not working at present), all my interest will be put into the project, but my partner and myself would just like a push in the right direction to advise us of the capital/financial options.

We ideally, don't want to walk straight into a bank/building society armed with very little or no information with regards to our options.

Thank you for any immediate advice you could give us, and appreciate any information you can provide.

Thanks very much

regards

Paul

[www.infoebookstore.co.uk]

Unfortunately I cannot help with your specific questions, I just wanted to say good luck with it all. I am really jealous as it is something I have always wanted to have the balls to do.

I hope someone here can assist you.

James

[tkessex]

I think you're incredibly brave moving into the development industry when the housing market is in decline (there are few areas in the UK where prices have stabilised - Coventry and Birmingham being examples of workable locations due to ongoing re-generation) but you seem to have enough experience to be able to identify where the risks lie.

With regard to your questions, the following may prove useful:

Business Mortgages

I would also encourage you to visit the Business Banking websites for all of the high-street banks, as they will undoubtedly have options available for people in your situation. Much like personal/residential mortgages, the loan will be secured on the property you buy, with most banks generally loaning up to 70% of the current market value.

It would be advisable to check with a solicitor, but I would have thought that the properties would have to be registered to the business so that they can be included as assets in your accounts.

[eequals]

I hope the following helps:

Question 1: You would be expected to buy the properties through the company as they would be regarded as business assets.

Question2: You can obtain business mortgages for property in exactly the same way as you would if you were making a personal purchase. You could not expect to get the same sort of offers however such as 'low start'.

Question 3: As a new business it is more than likely that your personal properties would be required as collateral as well as the company's property assets.

Question 4: See the answer above. In the current climate I would say that it is pretty inevitable.

Question 5: I would guess that in the early days it would be mortgages. Once you have more of a track record, that could change to a more flexible loan arrangement.

In short because you would be running your property speculations as a business it is the busines itself that should be liable for the finance and hold the assets in turn.

I wish you luck. With the market heading South as it is, opportunities should arise but as in all things your timing is going to be crucial.

Joe