The Challenge

The company directors had liquidated a company and found themselves with Personal Guarantees in excess of £60,000 held with a major UK bank. The director could not remember signing a guarantee for the business account overdraft and loan of £20,000 and in any event £40,000 was a Business Loan and with a Government Guarantee if the company went into liquidation.

Despite the directors objections, the bank asserted that they were entitled to hold personal guarantees as well as the EFG and so pressed ahead and was asking how the money was to be repaid. To make matters worse the company director’s wife had signed for the Business Loan and it was discovered at the bottom of the Business Loan a line had been written in that the directors would ‘jointly and severally’ guarantee the Business Loan.

Unfortunately, the directors had not availed themselves of personal guarantee insurance.

The Solution

We asked to see all correspondence and relevant documentation despite the director’s assurance he had been through everything with the bank and there was ‘no point’ in going through them again. Nevertheless we persisted and finally received all the relevant documentation. We obtained a letter of authority allowing us to negotiate on behalf of the clients and within 5 working days we had agreement from the bank that the directors actual liability was in fact solely the £20,000 and not the Business Loan. The directors gave us a budget of £550pm and expected a five year term. In fact, we subsequently agreed a seven year term with a monthly payment of £238pm and option to repay earlier with no interest added.

Simply obtaining a clear understanding of all the facts enabled us to point out the relevant rules to the bank covering EFG Business Loans and they dropped the action almost immediately.