NFU Mutual Smallholding Insurance

Author Topic: Loan required for LTD comp, smallholding project  (Read 1300 times)

RareAGcoinz

  • Joined Nov 2016
Loan required for LTD comp, smallholding project
« on: November 17, 2016, 11:12:55 am »
I would appreciate some help in going about applying for a loan to develop our smallholding.

We have an established business there, going to make it into a ltd company with two directors, we need a loan for developing the site. Any help much appreciated?
Voss Electric Fence

farmers wife

  • Joined Jul 2009
  • SE Wales
Re: Loan required for LTD comp, smallholding project
« Reply #1 on: November 18, 2016, 08:45:05 pm »
why not apply via any financial institution - all banks have agricultural specialists? Best of luck

bazzais

  • Joined Jan 2010
    • Allt Y Coed Farm and Campsite
Re: Loan required for LTD comp, smallholding project
« Reply #2 on: November 19, 2016, 03:45:27 pm »
A new company will have problems getting a loan as it wont have any previous books.

My advice would be to get a personal loan - make the improvements, make it profitable - then sell your 'sole trader' activities to the ltd company to pay off the personal debt when it reaches the point of profit.

bazzais

  • Joined Jan 2010
    • Allt Y Coed Farm and Campsite
Re: Loan required for LTD comp, smallholding project
« Reply #3 on: November 19, 2016, 03:46:49 pm »
And why two directors? - Your opening a can of worms taking on someone elses risk assessments.

greenbeast

  • Joined Jul 2014
Re: Loan required for LTD comp, smallholding project
« Reply #4 on: November 22, 2016, 08:19:53 am »
A new company will have problems getting a loan as it wont have any previous books.

My advice would be to get a personal loan - make the improvements, make it profitable - then sell your 'sole trader' activities to the ltd company to pay off the personal debt when it reaches the point of profit.

People start new businesses all the time and banks are always yellling on the tv and radio that they're looking to help new starters.
Just apply for a business loan with a bank. We went with HSBC and got enough money to buy our property and some initial infrustructure/machinery investment

Womble

  • Joined Mar 2009
  • Stirlingshire, Central Scotland
Re: Loan required for LTD comp, smallholding project
« Reply #5 on: November 22, 2016, 08:29:52 am »
And why two directors? - Your opening a can of worms taking on someone elses risk assessments.

Why is that then?

True, if the bank demand personal guarantees, they'll check the credit ratings of the directors. However, if those two directors are linked personally, surely so are their credit histories anyway?

If the governance of the business is genuinely between the two of you, it makes sense to have two directors. However, if the two directorships are purely for the purpose of distributing the profits, there's no reason not to make one person a director, and the second person a non-director shareholder, and possibly also an employee. (Note, if the second person is a spouse, beware of a thing called S660 - lots of information online about how to comply with the current rules, but if you're both working in the business, it shouldn't be an issue).

Also, re Bazzais' suggestion of taking a personal loan as a sole trader, you can also do that as a ltd company director if you wish. Just take out a personal loan, then in turn loan that money to the limited company. You can then charge the company a commercial rate of interest on the loan, which to be beyond reproach, will be the same rate of interest that you're paying the bank.

Oh, and get a good accountant!!   :)  HTH!
"All fungi are edible. Some fungi are only edible once." -Terry Pratchett

 

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