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Post by smudge on Aug 22, 2014 14:17:21 GMT
Hi,
this may be really naive but having used our home as security for a large loan about 15 years ago to buy our last business, we have just been told we can't use equity in the property as our share of a loan to buy a new busimess.
We have around £300k equity in our home - for various reasons we now need a new income (nothing sinister!) and felt sure we could borrow 95k from bank with our equity allowing us to borrow the other £95k. Bank business team say this is no longer allowed. We must have cash.
is it likely that p2pfunding would be a possibility at reasonable rates for us if we have this as secuirty? Are there schemes that cover purchase of a new business? It has a great track record and our accountant agrees it is sound.
(to be honest we would be happy getting £90k equity release instead since this would mean we wouldn't need a new business -the small business we have is sufficient if we could clear remaining mortgage which has 7years to run.
we are planning to downsize in about 7years in any event - but the only equity release we have found which does not include monthly repayments wants 40% of any increase in property value over the term. It would be ideal but we worry they will value it low when providing the equity release and then over value it in seven years!
any help much appreciated!
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Post by smudge on Aug 22, 2014 14:33:29 GMT
Sorry, i realise my first post is misleading. Bank said we could use equity in the house to raise £95k mortgage as our share of purchase price (great!). What is different from years ago is that current income would not allow us to qualify for an extra £95k on the mortgage - we would qualify on the income we will have from the new business but last time, when we bought a post office they accepted the post office income for the mortgage application but they now won't take the i come from proposed business into account because we don't own it yet.
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pikestaff
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Post by pikestaff on Aug 22, 2014 17:47:51 GMT
If I understand correctly you are looking to buy a business for £190k. The bank is willing to lend you half that, if you put up the other half. You are unable to raise your half as additional mortgage on your home, because your income (excluding the business being acquired) is not enough.
If the business is a decent one and you pass the platform's checks I'd have thought that you might well be able to raise the whole amount on a p2b platform, secured on the business assets plus a personal guarantee, possibly supported by a second charge on your house.
From this distance it's impossible to say what the rate would be. However, p2b borrowing is unlikely to be a cheap option. Nor should it be, as we are lending where the banks won't. Rates to p2b lenders on business loans tend to be 10% and upwards, and rates to borrowers will be at least 2% higher, once all fees are taken into account. There is a wider range of rates on FC, but I suspect that a loan to buy a business, with only moderate security, is not going to attract the lowest rates.
If this has not scared you off then I suggest you look at the websites of the bigger p2b players (FC, TC and AC) and take it from there. In the case of TC you have to go via a sponsor, but you will find links to the sponsors on their website.
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j
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Post by j on Aug 22, 2014 19:19:17 GMT
As pikestaff said, you'd do well to contact the various platforms to take the matter further, bearing in mind the level of interest you will have to pay so, don't know if it would be a viable option or not. Will you ever be allowed to get the mortgage/equity release you need at some point in the future? You might use p2p for a period of time then switch to normal avenues after a while if feasible
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bugs4me
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Post by bugs4me on Aug 22, 2014 21:38:31 GMT
Agree with all the responses you have received and whist P2B may certainly not be the cheapest route often it is not far off the banks and usually a damn sight easier. Recently looked at a proposed loan contract being offered by a high street bank to a business acquaintance and whilst the rate looked good on the surface, you had to factor in the 'hidden charges' of documentation fee, arrangement fee, legal fees, monthly monitoring fees and a final settlement fee. By the time these were added in then the supposed teaser rate being offered was not that far off a good 50% higher than that teaser rate.
So the banks are still at it although I'm sure each case is treated differently. My acquaintance did have to jump through several hoops and it seemed there were endless queries generated by that infamous HO computer.
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j
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Penguins are very misunderstood!
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Post by j on Aug 22, 2014 21:46:54 GMT
Agree with all the responses you have received and whist P2B may certainly not be the cheapest route often it is not far off the banks and usually a damn sight easier. Recently looked at a proposed loan contract being offered by a high street bank to a business acquaintance and whilst the rate looked good on the surface, you had to factor in the 'hidden charges' of documentation fee, arrangement fee, legal fees, monthly monitoring fees and a final settlement fee. By the time these were added in then the supposed teaser rate being offered was not that far off a good 50% higher than that teaser rate. So the banks are still at it although I'm sure each case is treated differently. My acquaintance did have to jump through several hoops and it seemed there were endless queries generated by that infamous HO computer. Can I be somewhat intrusive & ask if the final rate was far less that those on offer on p2p site at the moment (ie around 10% mark)?
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pikestaff
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Post by pikestaff on Aug 23, 2014 6:20:51 GMT
10% (and up) is the rate to lenders, not the rate to borrowers who will have fees to add. For example, the fees on TC are given on the "About borrowing" page of their website, as follows:
"There are a few fees attributed to arranging a loan through us, these are:
£500 (plus VAT) listing fee
1% (plus VAT) of the value of the loan on drawdown
0.5% p.a. to cover administration fees (charged monthly on the oustanding loan balance)
Our Sponsors also charge a fee which varies depending on which Sponsor and the loan itself. Typically their fees range from 2-4% on drawdown and 0.5% p.a. to cover monitoring fees (charged monthly on the oustanding loan balance)."
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bugs4me
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Post by bugs4me on Aug 23, 2014 7:40:19 GMT
Agree with all the responses you have received and whist P2B may certainly not be the cheapest route often it is not far off the banks and usually a damn sight easier. Recently looked at a proposed loan contract being offered by a high street bank to a business acquaintance and whilst the rate looked good on the surface, you had to factor in the 'hidden charges' of documentation fee, arrangement fee, legal fees, monthly monitoring fees and a final settlement fee. By the time these were added in then the supposed teaser rate being offered was not that far off a good 50% higher than that teaser rate. So the banks are still at it although I'm sure each case is treated differently. My acquaintance did have to jump through several hoops and it seemed there were endless queries generated by that infamous HO computer. Can I be somewhat intrusive & ask if the final rate was far less that those on offer on p2p site at the moment (ie around 10% mark)? Yes it was 10% plus but it was only the back of a fag packet calculation on my part. There was also an early settlement penalty in addition to the settlement fee. Maybe banks are cheaper than P2B but you have to factor in the red tape to get there - your time, etc.
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