Breached covenants have been common in 2020 as borrowers and lenders manage reductions in revenues and asset values. Covenant waivers have been agreed for the months, or quarters, from March….
Read MorePrior to the global financial crisis, access to funding was relatively straight forward. Banks and specialist lenders would lend in most cases with light due diligence.
Following this downturn, banks have spent years trying to exit residential and commercial real estate transactions, with a glut of non-performing loans being sold onto specialist loan servicing funds to recover the debt.
As a result of this we have seen a seismic shift in the care and attention taken by borrowers when taking on fresh debt or restructuring. Many have had their fingers burnt, or know of someone local to them who has, with the ultimate backstop being the Personal Guarantee they signed.
I expect many didn’t appreciate the extent to which this would impact their personal situation, long after the restructure or Administration.
Borrowers now seem much clearer, and focused, on the personal recourse being requested from new funders. In the boom years borrowers would simply sign the documents so they could get on with the project in hand, without giving too much thought or attention to the potential recourse.
Most guarantees were via joint and several liability of the individual Directors of the business.
A Personal Guarantee is a written, legal promise from an individual to repay any shortfall on a specific loan or account which cannot be met by the principle debtor, normally the Single Purpose Vehicle (SPV) or trading business. As mentioned above, most guarantees require joint and several liabilities, meaning that each individual who signs a guarantee can be held responsible for the whole amount of the debt.
Personal Guarantees aren’t always standard, but can be negotiated to a certain point. However your willingness to sign a personal guarantee reflects your commitment to the success of the business or transaction, by putting your personal assets at risk. When a Personal Guarantee is signed, the signatory becomes personally liable for the loan, even if the business is incorporated with limited liability, or offshore.
We are finding an increasing concern from Directors of borrowing entities to put up personal guarantees to enable transactions to proceed. This effectively leads to a stalemate, if an amicable middle ground cannot be achieved.
One solution is Personal Guarantee Insurance. It is a fairly new product to the UK market, and is generating some serious interest from our customers. It helps Directors insure against the potential risk the Personal Guarantees would impose if the deal went sour.
Insurance policies are tailored for Directors who are exposed to Personal Guarantees, indemnifying a set proportion of the liability. The insurance will pay out a percentage of the liability under the Personal Guarantee, which is often capped after a certain amount of time to around 90% of the maximum value.
The amount of cover is dependent on the value of the Personal Guarantee given, and the length of time the insurance has been in place. This insurance is used to give the director of new enterprises peace of mind as they progress into success.
We have successfully negotiated a number of Personal Guarantee liabilities down on behalf of our borrowers. Across a range of sectors from Construction to Leisure we have exited positions for guarantees from £100,000 to £8,000,000.
We utilised a range of proven structures and negotiating strategies to deliver results, a recent example being a £2,000,000 personal guarantee liability being settled for £0.
If this advisory service would be of benefit then contact our Business Development Director Mark Reidy or our Managing Director Jamie Davidson to discuss on 0131 564 0172.
Jamie Davidson | Jamie@ConduitFinance.com
Mark Reidy | Mark@ConduitFinance.com
Please find below the latest product prices from Conduit Finance. Of particular note is the Expat Buy to Let Mortgage, we recently completed a deal using this lender and assisted a client who was struggling to find a lender in the UK.
Available to overseas clients with no current credit in the UK for the purchase of Buy to Let and second homes. We recently completed a deal using this lender. The borrower was a solicitor based overseas who was struggling to secure lending despite having substantial net worth.
Contact Ed Page page for loans below £1m and Andy Lawson for loans above £1m.
Call 0131 564 0172 or email Edward@ConduitFinance.com or Andy.Lawson@ConduitFinance.com
Prime pricing available for well located sites at a moderate loan to cost
Please contact Jamie Davidson for loans of £5m or more, Andy Lawson for loans between £1m and £5m and Edward Page for loans below £1m. Contact Jamie@ConduitFinance.com, Andy.Lawson@ConduitFinance.com or Edward@ConduitFinance.com or call 0131 564 0172.
New to market lender offering gearing up to 70% and pricing from 2.60% over cost of funds
Call Andy Lawson on 0131 564 0172 or email Andy.Lawson@ConduitFinance.com
Private debt lender with considerable experience in the sector is looking to deploy capital in to projects with a 25% min net profit on cost.
All purchase costs and build costs lent
Experienced developers only
Lender charges a flat interest rate and a % of profit equating to a total of 20%-30% of profit
Developer retains 70% + of the profit with any upside on projected GDV retained by developer
Scotland preferred but other locations considered
Loans from £1m to £10m
Loan term from 12 to 24 months
Please contact Jamie Davidson on 0131 564 1970 or Jamie@ConduitFinance.com for further information.
Lender providing highest available loan to value for buy to let purchase and refinance
5 year fixed rates available, security with interest rates forecast to rise
Available to experienced & first time landlords
No minimum income criteria
Rental income calculation based on interest rate of 4.99%
Please contact Stuart Cardozo on 0131 564 0172 or email Stuart@ConduitFinance.com for more information.
