Personal business loan default - advice needed!

[francisg]

Hi,

I received a business loan of £25K to start a business in late 2014. Since then the business has failed to take off and I am unable to make repayments.

I have not made any repayments for nearly 3 months and have spoken to the loan provider who have advised that I will get a default notice soon and my debt will then be passed to their DCA.

I am totally broke at the moment and cannot afford repayments. I also have an HMRC debt of around £1200, money owing to family member (£1000) and a student loan to repay (£23000).

My only option at the moment that I put to the lender is a F&F settlement of £4800 (scrounged from family members). They refused but said they would consider 50% as F&F.

What is my best option now? I'm thinking that my best and only option is to hold out and keep going back to them (DCA or original lender) with my original offer of £4800 F&F settlement.

I'm not going to be paying back £25K + 6% interest any time soon and surely they will see that.

I should also mention that the original lender has a copy of my income/outgoings spreadsheet so can see for themselves I have literally nothing left at the end of the month (in fact I keep slipping further into my overdraft at the moment).


Anyway, all advice much appreciated from you wonderful people!

[Debt Camel]

Re: Personal business loan default - advice needed!

do you have a house with equity?

[francisg]

Re: Personal business loan default - advice needed!

No. No assets at all.

[Debt Camel]

Re: Personal business loan default - advice needed!

Then I think you should seriously consider going bankrupt and getting this over with. It will also get rid of the HMRC debt. And your overdraft. Time for a clean start!

You may still need some support from family, eg to pay bankruptcy fees and possibly to act as a guarantor if you have problems renting. But not £4800.

[francisg]

Re: Personal business loan default - advice needed!

Thanks for the response. Do you not think I have any chance with negotiating a full and final settlement? I've read some stories of people paying back 20% of the total value of the loan given the right circumstances?

The loan was delivered via the startup loans co which is backed by the government. I've also read that the government expect to wipe off 40% of these loans due to failed ventures. Surely the loan provider will understand that this was a high risk loan as it was supplied to fund a new business venture?

Many thanks for your input & advice.

[Debt Camel]

Re: Personal business loan default - advice needed!

Yes, at some point they will accept this offer. But not one that low this soon. See http://debtcamel.co.uk/full-final-settlement-rejected/. From the lenders point of view, this is much too soon to give up hope that your finances will improve.

If you want to go for a full & final settlement, I suggest you sit back and make token £1 a month payments for a year, supplying the creditor and any subsequent debt collectors with an income & expenditure sheet . Then try again.

But HMRC will not wait or accept token payments. And your credit rating is going to be wrecked for 6 years even if you get a F&F accepted in a year or two.

I was suggesting bankruptcy as a practical way forward that can be done now, will take care of the tax debt and won't mean you have to beg/borrrow so much money from family.

[francisg]

Re: Personal business loan default - advice needed!

Ok. Well I currently haven't paid anything for 3 months so they've passed it to a DCA who I haven't heard from yet. Do you think it's a better idea to offer token payments of £1 rather than nothing at all? Shall I wait to hear from the DCA and offer them the payments or offer the lender themselves the token payments (if it's not too late to)?

I'd be totally willing to look into bankruptcy. Is it really as simple as paying £700ish in fees? After 6 years will my credit rating return to normal (not that that would matter too much if it got me out of this situation)?

Sorry for all the questions, you've been a great help thus far and I can't thank you enough.

[Debt Camel]

Re: Personal business loan default - advice needed!

If you want to go the F&F settlement route, yes I would offer token payments, backed up by an income & expenditure sheet proving you can't afford any more. This is part of the "softening up" process for your next F&F offer: rather than appear uncooperative, in which case they don't know if you are a "cant pay" or a "wont pay", you prove that you are genuinely broke, Offer it to the DCA when they get in contact.

If you are willing to look at bankruptcy, then you have a pile of research to do. My Guide to Bankruptcy is a good place to start: http://debtcamel.co.uk/debt-options/...to-bankruptcy/. That looks at how you go bankrupt, important things you should think about and also what happens to your credit rating and will you ever be able to get a mortgage afterwards.

I'm not saying you should go bankrupt, but it is a serious option for you. I see too many clients who have struggled on with a huge debt, possibly from a house repossession or a business failure, who would have been better to have bitten the bullet much earlier and accepted they can't repay the debt.

In the end it will may come down to how well off your relative is who could give you the money for a F&F. If they are well off and would like to help you out of the mess your business failure has landed you in. then why not?

[francisg]

Re: Personal business loan default - advice needed!

Thanks for this! I will check out the link you sent and will offer token payments when the DCA get in touch.

[francisg]

Re: Personal business loan default - advice needed!

There's something worth mentioning that could complicate matters [MENTION=19893]Deb[/MENTION]tCamel. I'm a company director and I know you can't be a company director when bankrupt. Is resigning as a director all I'd need to do to go bankrupt?

[Debt Camel]

Re: Personal business loan default - advice needed!

I always suggest people talk to Business Debtline about this situation https://www.businessdebtline.org/. It normally is simple, but if it is actually "your company" there is the question of who will run it when you aren't doing so...

They would also be good people to talk to about the bankruptcy decision in general.

[francisg]

Re: Personal business loan default - advice needed!

Hi. I have spoken with Business Debtline and it seems going bankrupt will have too many negative side effects on my co-directors and the business that they still run. The business isn't turning over any money (hence me being in this situation).

Do you have any advice on what's best to do next?

I'm 3 months in arrears on the loan and get chased monthly about it. My main question is that if I offer token payments, is it less likely that they'll be willing to accept a F&F settlement of 20% the original debt further down the line? The main issue with not paying token amounts now is that they will not freeze the interest.

Many thanks!