Big problem over loan

I opened my own business back in August 07 and I got a business loan from AIB for 20k. My father in law signed a guarantee for the loan. At the time AIB promised support should I ever got into difficulties. Anyways after a bad xmas period I found myself in trouble and not being able to make payments. I tried to explain the situation to the bank but I received little sympathy. Todate 2 payments have been missed on the loan.

I have been trying to manage since then and I have managed to release the equity in my house to expand the business and to repay all the debts etc. I have been approved for the remortgage and I am at the stage of getting insurances in place. I expect the funds to be released in 4 weeks at the outside.

The asst manager of the bank has sent a rather nasty letter to myself and father in law demanding 18K now or else. Now I need to write to him and explain that I am remortgaging and that he will have the 18k in 4 weeks max.

Now I am afraid to say too much as he may try to sabotage the loan offer from the new bank. Also I am afraid that he will seize my current account which is used to survive on and pay the current mortgage and bills. My partner receives his payments into this account and I would be in dire states if I lost access to this money.

All I want is some breathing space until I can repay the loan in full. What should I be saying to manager in my letter? I am trying to be reasonable as I can with him. Is it reasonable to say I will give him an undertaking to pay him as soon as the money is released?

I am beside myself with worry and I am loosing sleep and also there is pressure from father in law over this as he is now involved. I need to know how to deal with this without jeporadising the remortgage and to keep the dogs at bay.

Thanks for taking the time to read this. I hope that something good will come of this.

Have you gone to meet the bank manager?

That is the first step.

Banks are not charities and they are not there to help you out if you get into difficulties. Most businesses are set up without sufficient capital and then struggle to survive.

The guarantee is a serious matter. Your father in law should not have given a guarantee if he was going to panic about it later.

By missing payments on the loan, there is a real risk that it will get recorded on your file with the Irish Credit Bureau and that the new lender will pull the house loan.

Don't write a letter. Visit the bank manager and ask for a rescheduling of the loan or a suspension of the repayments while you are sorting matters out. He won't try to actively sabotage the loan offer unless it's from his own bank.

Have you an accountant? Maybe your accountant should visit the bank with you.

Brendan

Would agree with a lot of Brendan's advice ....

Here's how I think your bank will/should evaluate the situation ....

a) They've given you a loan...

b) Things haven't quite worked according to plan and you are now two payments in arrears - not an absolute crises but given that loan was only granted last August, it's early days to have run in to cash flow problems (I'll come back to this below)...

c) On the upside (from the bank's point of view) - is that as far as I can see they have a client not shirking her responsibility and has actually arranged an equity release to clear her debts with them - I see you say you have mortgage approval - assuming that there are no onerous conditions on same, you should be able to draw down within say the next month (which is only one more loan repayment with your bank) ...

d) I'd follow Brendan's advice and arrange meeting with your bank manager and explain your current situation - if, as it appears they have a concern in relation to your loan - they won't in any way jepordise your plans to raise finance elswwhere, and should give you a bit of breathing space .... they may seek an undertaking from your solicitor to direct the proceeds of your new loan their way - that will be a matter of negotiation for yourself ...

That's the 'bank' advice ...

However, please do ensure you are getting good quality financial/business advice, from say your accountant - a concern I would have is that, the business hasn't gone according to plan to date - what I'm unclear on is that a temporary cash flow problem or is the problem more deep-rooted (only you/your accountant can ascertain that) - if you believe you can work through your current difficulties fine - if not, be careful about raising loans to plug the current gap and throw more money in to your business.

Obviously I can't say which option you should take based on the limited information I've seen - all I'm saying is be absolutely sure of your ground before you invest further monies in to your buisness.

Whatever you do - I wish you the best of luck.

Regards,


BM