Defaulted on an EFG Loan
Discussion
A friend of mine's business went into liquidation at the end of last month.
He and his co-director had signed up personal guarentees against an EFG (Enterprise Finance Guarentee a bit like the old SFLG) which the compnay has defaulted on.
Barclays are sending him some incredibly stiff letters and he's absolutly terrified. They're after their money obviously, but realistically he can't afford to repay the whole capital and now being on job seekers allowence, his income is minimal.
He, his wife and two young kids live in a two up two down terrace house that's morgaged to the hilt.
He's obviously now out of a job and has no income and no possibility of paying off the loan.
What should he do??
He and his co-director had signed up personal guarentees against an EFG (Enterprise Finance Guarentee a bit like the old SFLG) which the compnay has defaulted on.
Barclays are sending him some incredibly stiff letters and he's absolutly terrified. They're after their money obviously, but realistically he can't afford to repay the whole capital and now being on job seekers allowence, his income is minimal.
He, his wife and two young kids live in a two up two down terrace house that's morgaged to the hilt.
He's obviously now out of a job and has no income and no possibility of paying off the loan.
What should he do??
We are in the process of working towards an EFGS loan. I am fairly sure that the point of this scheme is that the Govt provide 75% guarantee and the bank the other 25%. The scheme was designed for directors of companies who needed capital for business growth but dont have personal equity to borrow against. If it was a ltd company then the Bank I believe gets the money back from Govt and the liquidators as they are a main creditors. The directors should be safe.
fullthrottlehyde said:
We are in the process of working towards an EFGS loan. I am fairly sure that the point of this scheme is that the Govt provide 75% guarantee and the bank the other 25%. The scheme was designed for directors of companies who needed capital for business growth but dont have personal equity to borrow against. If it was a ltd company then the Bank I believe gets the money back from Govt and the liquidators as they are a main creditors. The directors should be safe.
That was the plan, but afraid banks tended to want personal guarantees from directors, in my case for the full amount! No guarantee, no loan.I'm not sure how "legal" it is to make you sign a guarantee, but I imagine your friend sought independant legal advice before signing and risks were explained?
Kudos said:
fullthrottlehyde said:
We are in the process of working towards an EFGS loan. I am fairly sure that the point of this scheme is that the Govt provide 75% guarantee and the bank the other 25%. The scheme was designed for directors of companies who needed capital for business growth but dont have personal equity to borrow against. If it was a ltd company then the Bank I believe gets the money back from Govt and the liquidators as they are a main creditors. The directors should be safe.
That was the plan, but afraid banks tended to want personal guarantees from directors, in my case for the full amount! No guarantee, no loan.I'm not sure how "legal" it is to make you sign a guarantee, but I imagine your friend sought independant legal advice before signing and risks were explained?
I saw this happen elsewhere as well. Full Personal Guarantee or no loan.
The Banks tend to get a guarantee for as much of the loan as possible, the government g'teeing the rest of the exposure.
If the Bank thought the enterprise was high risk they would have taken supporting security from them i.e. a Charge over a property/life policy/cash/stock...
If they waived legal advice before entering into the g'tee I doubt there is anything which can be done to avoid it being imposed.
I would approach them looking to put in place a payment plan.
If I remember correctly they are joint and several g'tees also.
If the Bank thought the enterprise was high risk they would have taken supporting security from them i.e. a Charge over a property/life policy/cash/stock...
If they waived legal advice before entering into the g'tee I doubt there is anything which can be done to avoid it being imposed.
I would approach them looking to put in place a payment plan.
If I remember correctly they are joint and several g'tees also.
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