Bank loan - - Against a company

If it's just a general bank loan to be used for variety of items then it's usual that the bank would get personal guarantees from the owner/directors against the loan, i.e. they are liable if company doesn't pay. If its a HP or Lease the the asset is itself security for the finance as it's owned by the lender until paid for.

And yes, before you ask, giving personal guarantees dilutes the whole idea of limited liability. BUt banks don't give money for nothing. If the promoter of the company has something to lose then the bank feel they might be more careful with the funds.

If the loan is unsecured, then the lender stands in line with other unsecured creditors. ( in other words usually gets nothing ) so you don't often find lenders doing that.
 
It would be for 50K ish and the 2 guys have a valid business plan done and were told by the bank last week that they might take our life assurance on the 2 lads as security? does this make sense?
 
jimmyd said:
It would be for 50K ish and the 2 guys have a valid business plan done and were told by the bank last week that they might take our life assurance on the 2 lads as security? does this make sense?
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Life assurance on their lives covers the loan if they died. But if they defaulted what security has the bank? If the bank is happy with just that and nothing else, well thats their decision. I'd make sure they read ( and had an accountant or solicitor read ) the paperwork first though for peace of mind so they know what they are signing.
 
Ya ive told them that and they have also arranged an accouant to do a business plan for them to present to the bank. I found it strange that for 50K the bank would not want security.
If the bank does not want security and the company goes down is that the banks lost?
 
The banks may not want security but they may want a guarantee. I applied and got a €65k business loan recently with no security needed, i.e., I did not have a lean taken from the bank against any asset worth €65 or need €65K in an account they had control over. I did, however, have to guarantee the loan personally and take out life assurance. Perhaps some confusion here between security and guarantee? The latter, which has been previously mentioned, would be the least the banks would look for imo.
 
Oh so they will more than likely have to guarantee the loan personally between them. Thats important information for them.
 
jimmyd said:
Oh so they will more than likely have to guarantee the loan personally between them. Thats important information for them.
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I mentioned that in my original post :-

If it's just a general bank loan to be used for variety of items then it's usual that the bank would get personal guarantees from the owner/directors against the loan, i.e. they are liable if company doesn't pay.
 
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