Checklist of Key Things When Dealing with Banks

  1. Choose carefully.
    You don’t always get it right the first time round. It’s best to try two or three banks and practice on them before making the final selection.

  2. Never sign a personal guarantee.
    If you can avoid it, do not sign a personal guarantee. Banks usually insist on this if you are taking out a major loan. If possible, direct the bank to other security such as the business assets. In addition, never ever allow your spouse to sign a guarantee.

  3. Borrow from different banks.
    It’s probably a wise move not to borrow from the bank that also holds the mortgage on your home. It is best to keep the business affairs separate from your private affairs, if possible. If the business runs into trouble the bank may want repayment of your whole mortgage as well as the business borrowings, so it is possible you could totally lose your home.

  4. Never put up your home.
    Keep your business affairs separate from your family and personal affairs. Do not raise a loan for the business on your home unless there is no other option (and even then think hard before you do it and be aware of the serious consequences). It’s better, if the business fails and your home and family are protected, than if the business fails and your home and family go down with it. .

  5. Watch the assets you declare to the bank.
    When you are dealing with your bank, they will require you to make out a statement of personal assets and liabilities, as well as your business assets and liabilities, as part of the application. This is because the bank will try and get security on those assets for any moneys they lend to you. Watch the assets that you declare. Get professional advice on this.

  6. Using family and friends.
    The general advice is that it is a bad move to borrow from your family and friends because if things go sour, it can destroy your good relationships. It may be better to strain a relationship temporarily, than to go bankrupt because you have borrowed from a bank and the business has run into difficulties. These are issues you have to weigh up at the time and talk over with family and friends as well as your accountant or other financial advisers.

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