Debt ProtectionBusiness loans and other debts are often secured by the personal guarantees of the principals and partners. If one of the principals were to die or become permanently disabled the creditors may not be prepared, for example, to roll the loan over, electing rather to call it in. If this happens, your personal assets or those of your business partner(s) may remain encumbered or need to be sold. By ensuring adequate cover is in place to cover these business loans, the business can ensure continuation unaffected if any of the personal guarantees are called upon.
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As the name suggests these bind you personally and are not extinguished by your death or total disability. It is critical to ensure that you as an owner are released from these guarantees in the event of your death or total disability. To achieve that you will need to engage with your finance providers to agree on what debt reduction would be required to achieve that.
Businesses can also be given loans by directors or shareholders. In the event of death their estate usually has the right to demand immediate repayment. However, if the loan has been used to provide working capital the business may not have the cash reserves to pay out the loan.
In some instances shareholders may have retained their earnings in their shareholders current account, and this debt would also need to be cleared. Of course there are numerous other creditors of a business. These amounts, when totaled, can be substantial. One debt, or class of debts, often overlooked is unexpired leases. Consider particularly if you are renting your premises. That can present a major liability to the business.
Through the business identifying these liabilities and ensuring the owner (or a key person) is appropriately covered, it can ensure that the business is not interrupted through early repayment of a loan, and can also reduce the chances of creditors forcing the closure of the business during a period of significant loss.
Ultimately, if you are the partner/ owner directly impacted by the catastrophic event you want to ensure that you and/ or your estate can move on unencumbered. As one of the other owners you would want to make sure that as much of the business debt as is possible is repaid, not only helping with cash flow but also enabling you to seek release from the personal guarantee you may have signed. If you would like us to help you with this, or if you would like to know more, click here to email us or call us on the numbers below.
Businesses can also be given loans by directors or shareholders. In the event of death their estate usually has the right to demand immediate repayment. However, if the loan has been used to provide working capital the business may not have the cash reserves to pay out the loan.
In some instances shareholders may have retained their earnings in their shareholders current account, and this debt would also need to be cleared. Of course there are numerous other creditors of a business. These amounts, when totaled, can be substantial. One debt, or class of debts, often overlooked is unexpired leases. Consider particularly if you are renting your premises. That can present a major liability to the business.
Through the business identifying these liabilities and ensuring the owner (or a key person) is appropriately covered, it can ensure that the business is not interrupted through early repayment of a loan, and can also reduce the chances of creditors forcing the closure of the business during a period of significant loss.
Ultimately, if you are the partner/ owner directly impacted by the catastrophic event you want to ensure that you and/ or your estate can move on unencumbered. As one of the other owners you would want to make sure that as much of the business debt as is possible is repaid, not only helping with cash flow but also enabling you to seek release from the personal guarantee you may have signed. If you would like us to help you with this, or if you would like to know more, click here to email us or call us on the numbers below.
