commercial loan approval now being withheld because of decline in pub trade?

Salah79

New Member
Messages
5
I had a loan approved by one of the banks and had signed approval docuemnts and exchanged legal documents with the banks solicitors. I was awaiting drawdown which was to be done before April 30th. We signed approval on March 9th and we had been exchanging documents since then via solicitors. I got a call today to tell me that the bank was not proceeding with loan due to Pubs being in lockdown. However I had partial payments made to Builders on the strength of the approval and now feel a bit betrayed if the bank had indicated problems I may not have made these payments but as recently as last week no problems were been indicated. I do realize that the Pub Sector is going to be hit hard but I am left in no mans lad with this. Is there anything I can do ?
 

Brendan Burgess

Founder
Messages
40,245
Hi Salah

This is unfortunate but understandable.

They might be doing you a favour. You will find it very difficult to meet your mortgage repayments.

Have you exchanged contracts for the purchase?

Brendan
 

elcato

Moderator
Messages
3,385
They might be doing you a favour. You will find it very difficult to meet your mortgage repayments.
While this is likely to be true it's cold comfort for the OP if she has paid a substantial 'deposit' to a builder who now can't do the work and will probably stall on any repayment. Fine if it's a couple of hindred but could be more.
OP - Have you contacted the builder or has he contacted you ? I would give it a few weeks to see how things pan out but that would have to be the first port of call after that.
 

Salah79

New Member
Messages
5
Just to explain this a bit more - I have bought the building and carried out significant renovations using my own funds. The loan is to meet costs for the final 4-6 weeks work to allow it to open. I am realistic in terms of business post COVID but feel that even if the business will not perform to pre-COVID levels I will meet loan repayments. Without this loan work has been agreed with tradesmen, part completed and we are in no mans land. I do feel somewhat abandoned by the bank as if I had not gotten Loan approval I would not have proceeded with renovation.
 

Gordon Gekko

Frequent Poster
Messages
4,136
Sorry to hear that. Surely this is a case where one of the Government schemes might be of assistance? From memory there’s a Credit Guarantee Scheme and other State mechanisms for when people are refused credit. There are also specific Covid-19-related supports. I’d take a look at those if I were you.
 

Salah79

New Member
Messages
5
No not a commercial mortgage, it is a commercial loan with the deeds of the property being used. Loan was for 25% of total cost so this is a bit of killer. The old adage handing you an umbrella in sunshine.
 

MrEarl

Frequent Poster
Messages
1,905
Hello,

Am I correct in understanding that :

You have signed the loan agreement

Legal work has been completed, to provide security for the loan

You had meet all pre-conditions to loan drawdown

You are within any term documented, for latest date of drawdown for the loan

You entered into a financial contract with a third party, on the back of the loan facility being provided to your Bank

The pub was trading successfully, and generating sufficient profits and free cashflow to service the loan, before the current construction / renovation works commenced and the subsequent impact of Covid-19 on your business

Aside from Covid - 19, there is nothing else to cause a person to be concerned that your business could not return to achieving at least the previous level of financial success.

You need to contact the CEO of the relevant Bank directly, with a detailed message of the circumstances and asking for immediate action. You'll get a response and some positive engagement much faster, then of you go through the complaints process etc.
 

Salah79

New Member
Messages
5
Hi
We have signed loan agreement. Our solicitor has completed all documentation from our end and we have signed documentation with him. The bank are saying their solicitor will not sign documents to complete the process.

I was not trading but the pub had been trading well prior to our purchase. We developed a business plan which the bank was happy with and even with reduced turnover we would meet bank payments.

thanks for your help
 
Last edited:

SBarrett

Frequent Poster
Messages
3,340
What is your solicitor saying about it? Isn't this where they prove their worth instead of you having to look for free advice online?
 

Leo

Moderator
Messages
11,074
The bank are saying their solicitor will not sign documents to complete the process.
If that is the case, there is no binding contract, and there's likely very little you can do. You signed the bank docs on March 9th, at what point was the payments to the builder's made?
 

MrEarl

Frequent Poster
Messages
1,905
Hi
We have signed loan agreement. Our solicitor has completed all documentation from our end and we have signed documentation with him. The bank are saying their solicitor will not sign documents to complete the process.

I was not trading but the pub had been trading well prior to our purchase. We developed a business plan which the bank was happy with and even with reduced turnover we would meet bank payments.

thanks for your help

Okay, so the Bank have instructed their solicitor not to finalise the security.

Get your solicitor to get a formal response from the solicitor acting from the Bank. You want to know why they are refusing to complete the assigned task in black and white, and if they've been told to defer action for a period of time, or cancel the transaction completely.

Get your solicitor to examine the Bank loan agreement, to include their standard terms and conditions, to see if they have a "force majeure" clause, or similar, in their paperwork, which essentially allows them to withdraw from the transaction.

Depending on the outcome, it may still be appropriate to try and apply pressure, through the Bank's CEO, but much depends on the circumstances.

The Banks are all holding back on commercial transactions, where they believe that there is a genuine risk of default, if the loan proceeds. In most cases, the deals are simply being delayed, in the hopes that businesses will be back open in a few months time, and we can all just mark this period down to an extraordinary and exceptional financial period. However, I'm also hearing that some lenders (particularly the non Bank commercial lenders), are taking the opportunity to withdraw from deals completely.

It seems that you went ahead and signed contracts and engaged a builder, before you had your funding arrangements finalised. Is that the case? If that's the case, then the opportunity to hold the Bank responsible for the financial commitment that you made to your builder, is gone.

Gordon quite rightly mentioned the SBCI facilities and in particular the Credit Guarantee Scheme. This is typically used where a Bank wants to lend the money, but isn't happy with the security on offer, for example. I don't think it's going to be the solution to your current problem, to be honest.

Unless your are in a position to show that the Bank confirmed that you were clear to use the loan funds, before you made your financial commitments to the builder, then you don't have any real leverage over the Bank. In that instance, forget the CEO, your approach will have to be :

* direct contact with the lender, to see if the loan is deferred, or cancelled.

* submitting an appeal to the Bank, appealing the decision to delay or cancel the loan.

* assuming the appeal is declined, you can then also approach the independent Credit Review Office, and ask them to consider your circumstance and what's happened.

* you could also submit a formal complaint to the Bank, but it's unlikely to achieve anything and certainly, little of real substance.
 
Last edited:

Salah79

New Member
Messages
5
Thanks for all that, we had approval and signed the contract with the bank. While our solicitor has completed our legal end I presume formal approval is on the the bit thats with the banks solicitors, that their solicitor has yet to sign which is a get out for them. But all your information has been brilliant. Thanks again.
 
Last edited:

Gordon Gekko

Frequent Poster
Messages
4,136
The Working Capital Loan Scheme and the Future Growth Loan Scheme are the two COVID-related packages. Best of luck.
 

MrEarl

Frequent Poster
Messages
1,905
The Working Capital Loan Scheme and the Future Growth Loan Scheme are the two COVID-related packages. Best of luck.
Both have their uses, but both will require a complete new loan application and prior to that, an approval code for eligibility, so the first step is a brief initial application through the SBCI's website. Each are subject to certain eligibility criteria.

However, the Covid - 19 loan probably won't be of assistance here, given its limited to a 3-year term. The Growth Loan on the other hand, is available for periods of up to 10-years.

Despite what is being said publically, Banks are being very selective in the new commercial business that they are writting at the moment. They are inundated with requests for payment holidays and additional working capital requirements from their existing customers, while their credit teams are gone into "its easier to just say no" mode, with regards to anything that might be negatively impacted, by the current crisis (save for proposals relating to the likes of the medical sector, food supply etc.)
 
Last edited:

Bronte

Frequent Poster
Messages
13,811
Would the OP not be better of not getting a loan now given there isn’t a hope in hells chance of income for weeks.
 
Top