Many business owners borrow money to provide the working capital needed to run a business. This money may be borrowed from the bank or from the director’s own capital that is lent to the business.
Business owners’ loans
Lending your own money to the business has a number of advantages with regards to tax and flexibility, however you might not be aware that in the event of an owner dying these loans are immediately repayable to their estate. This often means that the business may need to sell its assets or turn to the bank to replace that borrowing.
In the current economic climate, how easy would that be? The business could also face the possibility of expensive legal action with the deceased’s legal representatives. There are several ways to avoid this situation by effectively enabling you to become your own business banker.
It is worth reviewing your situation with a specialist business protection advisor. The intial consultation to ensure the business remains trading after the death of an owner or shareholder is usually free.
Bank loans
If you have a bank loan, you need to consider how you would service this loan if you lost a key business owner or manager through death or through serious or long term illness. In the current financial climate can you be sure your bank would assist in a recovery plan or would they, as in many cases, simply recall the overdraft and close the business down? It is easy to prepare for any eventuality.
Personal security
This is even more important if you have been asked to provide personal security (commonly known as a personal guarantee), in particular where the bank has taken a charge over your house. This could mean that in the event of your death your family could be reliant on your shareholders, partners or co-owners’ ability and desire to service the debt to keep a roof over their head.
In all of these situations we can advise on the most cost-effective means of protecting your family and your company.
In some cases, but not all, the existing business protection cover in place may be sufficient and fit for purpose. Following our free initial consultation we may be able to advise on an alternative that provides additional benefit for the same premium or similar cover for a lower premium. Where there is limited or no cover in place, we can create a cost effective cover strategy to protect both your family and your business.
For more information contact Tony Pizzi, our independent business protection adviser at Temple Wealth on 01329 282882