Overdrafts

[sone]

We have been running our business for about two and a half years now, with turnover toward 2.5m last year and a good chance of 3+ this year.
To date we have managed to trade without overdraft but it looks like soon I'm going to go and see the bank manager about an overdraft to help with the cash flow.
Question is what do the banks think is a fair percentage of turnover for overdraft facility, what personal guarantees will they require and would any liability be shared equally between myself and my business partner or because I am financially better set up than him on a personal basis chase me for any debt more vigorously.
Thoughts appreciated.

Cheers

Steve

[Muzzlehatch]

- Have you been overdrawn with them before (either planned or unplanned)? If so, the way you managed that will be very important
- You should be able to get about 1 month's t/o as the o/d limit to start with
- They will need to be satisfied that you will have the cashflow to manage it, so be prepared for them to do a bit of due diligence
- You will almost certainly have to provide a personal guarantee (mine was about 30% of our o/d limit)
- They will charge a setup fee (probably over £1k)

Once it's set up, make sure you send them a weekly or fortnightly summary of the major chunks of cash that you are expecting in (i.e. how much and from which clients). Even if they don't ask for it, the communication will work wonders for you in future if the poo hits the fan and you need a favour.

[Original Poster]

I think it depends who you bank with as well, our business A/C is with HSBC and they do not even offer an overdraft facility until 12 months in.

[maser_spyder]

Or if they're like our bank, they'll give you the runaround for six months, by which time you don't need the money any more.

[oedo]

Depending on your banks credit policy they may also look for any guarantees to be collateralised and possibly granting of a bond & floating charge / debenture.

As a ball park arrangement fees are currently about 1.5% for commercial lending here (BoS). Margins vary too much depending on how secured the borrowing is and the trade sector to bother quoting.

[sone]

Lloyd's is our bank and we are in the construction sector. Never been overdrawn personally or in the business, not that counts for bugger all these days!.
We have a healthy order book and a retention book of 50k plus so we might be able throw that in the mix.

[anonymous-user]

It will be key here to be able to show how the overdraft will be used. Provide a cash flow forecast and any confirmation you have of future orders/work in progress.

An overdraft should swing from a creditor to debtor basis, if you obtain an overdraft and use it in this way it will put you in. Good position for future increases.

Given your sector you may face an uphill start-particulary with the likes of Lloyds/BOS who brick it I you even mention property. Take evidence to show why you are continuing to be able to trade despite the downturn.

I assume it's a limited co. If so a bond and floating charge will almost certainly be taken along with a persoanal guarantee. Whether they require these to be supported will depend on the amount. You and the other owner will be joint and severally liable, so if it goes tits up they can go after you both. If he can't pay any, your liable for it all. So please be careful as to how this could affect you should he do a runner.

[john_p]

Be aware of the "joint and several" guarantee

This means all involved are liable - and they go after whoever's most likely to be able to pay.. So if one of you has a house, and two others don't.. they'll slap a charge for the full amount on the house

[maser_spyder]

anonymous said:

[redacted]

You could replace LLoyd's with pretty much all UK high street banks.

Time wasters and idiots. Save yourself the effort and don't bother.