Stop bank raid on our homes, say business owners
CAMPAIGNERS are demanding urgent reforms to stop banks from seizing entrepreneurs’ homes if their businesses fail.
Lenders insist company owners must agree huge personal guarantees – putting their homes on the line – as a matter of routine before bank finance will be authorised.
Reformers argue that those seeking bufsiness loans have no choice but to sign on the dotted line.
Campaigners claim the properties are quickly confiscated as soon as a problem arises. They argue that this is deterring people from starting or expanding their own businesses.
There will be a major House of Commons debate on Thursday about the treatment of small businesses by banks. The issue of personal guarantees is almost certain to be raised.
More than a million small business owners have signed personal guarantees underwriting their bank loans.
Dean D’Eye, a property developer who lives in Beckenham, South East London, was bankrupted in 2012. He said: ‘You can’t do anything as an entrepreneur without a personal guarantee. You need them for bank loans – even for a trade account at your builders’ merchant – for leases and freeholds.’
Mr D’Eye had loans with RBS and small lender Dunbar. He said that when his business ran into trouble, the banks immediately went after the £2.8million guarantees he had signed rather than allowing him to try to make up the shortfall.
He had to pay fees totalling another £3million – including huge sums to professionals for work on his bankruptcy and charges for defaulting on his loans.
As a result, he says the initial £2.8million debt rocketed to more than £6 million. ‘You can never catch up,’ he said. ‘It grows at such a rate.’
His bankruptcy trustee chased him for his 82-year-old father Derek’s home, which Mr D’Eye had bought.
Derek, who lives in Orpington, South East London, was evicted and had to move into council accommodation.
The Mail on Sunday has been campaigning for justice for firms mistreated by banks. Entrepreneurs have little recourse when things go wrong because all but the very smallest are barred from complaints procedures. We want to see a tribunal and an Ombudsman for firms.
Campaigners argue that the system of guarantees means limited liability company status – which prevents creditors from pursuing shareholders for their assets in times of trouble – has been rendered worthless.
Mel Loades, a specialist consultant, believes directors do not always understand what personal guarantees involve. He says they should be forced to seek professional advice before signing them.
A spokesman for UK Finance, which represents the lenders, said: ‘In some circumstances personal guarantees are needed to secure a loan. We support the Financial Conduct Authority’s proposals to improve the complaints process.’