My Business Loans have been Sold – What happens Now!
The sale of business loans is a very real issue facing businesses in Ireland today. A legacy of the financial crash, it is important that if you are impacted by such a sale you understand what this means and the options open to you.
The following are some useful next steps if your Business loans have been sold by your Bank.
- Read the information your Bank sends you carefully. Look out for the following:
- The date your current account, credit card or online banking services will cease to operate.
- What is being transferred to the new loan owner:
- Any Debit Balances
- Personal Guarantees
- What facilities are staying with the Bank and what has to be done in relation to them?
- What happens to your credit balance?
2. Act now to ensure you have the banking facilities that are critical to your business in place well before the deadline.
- Open new current accounts with another bank.
- Set up new online banking facilities.
- Apply for credit cards/overdraft facilities if required.
3. Get prepared prior to the loan transferring
- Know the current value of the security held for the loan.
- Calculate the viable level of debt your business can sustain going forward.
- Prepare a business plan and financial projections if you wish to refinance all or part of your debt.
4. What are your options in relation to the debt?
Buy Back the Loans
- Usually done at a discount to the face value of the debt. Typically valued at the market value of the security plus a negotiated premium. Companies cannot buy their own debt but this can be done through a group structure.
Negotiate an Agreed Settlement Figure
- A settlement figure can be agreed which again is typically based on the market value of the security plus a premium. This can include the voluntary sale of some of the assets and the refinancing (retaining) by you of the remaining assets. Or alternatively all of the assets would be sold.
- Be realistic in terms of what you can refinance.
- Understand and accept early in the process whether or not you can retain some or all of the assets.
What happens if you can’t agree a solution?
- The new loan owner may legally enforce their security to raise funds towards the repayment of the loan.
- A receiver may be appointed to your business. Will your business be able to trade through this?
- Personal guarantees may be called in.
There are significant incentives for negotiating a solution.
Recap on Key Points:
- Understand the process and time lines.
- Ensure your business has sufficient banking arrangements in place.
- Be prepared before your loan is sold.
- Know your objectives and limitations.
- Focus on negotiating a solution.
More more tips and advice check out our resources page.