High street banks urged to lift unethical personal guarantees on small business loans

By citiesabc news - Apr 01, 2020
street banks

High street banks urged to lift unethical personal guarantees on small business loans

News Release
To be bylined to Oliver King, an associate solicitor in corporate law at Langleys Solicitors

Small business owners have been urged to check the type of loan they are signing up to before borrowing against their personal assets, as many have unnecessarily secured personal assets to the future of their business.

Despite the government offering to guarantee interest-free and charge-free loans, which are to be offered by as many as 40 of Britain’s biggest lenders, some banks continue to offer business owners their standard, and more expensive commercial loans, which are secured against their personal property.

Although some banks have said they will stop demanding personal assets, such as property or savings as collateral, the question still remains whether those that have already signed up for this financial help will be able to uncouple their hard-earned assets.

Oliver King, an associate solicitor in corporate law at Langleys Solicitors, said: “Businesses that quickly found themselves in trouble, due to the current economic situation, may have already taken out loans, and have been obliged to provide additional security and personal guarantees by lenders, which could come back to bite them at a later date.

“Following pressure from the Institute of Directors to stop this practice, we urge the banks that have taken personal guarantees to do the honourable thing and waive the guarantees, rather than punish already hard-pressed SMEs.

“This would need to be a voluntary act by the banks, and one that continues on the current wave of goodwill we have seen in recent weeks, to avoid punishing SMEs further down the line.

“It remains to be seen whether, as the Treasury has indicated they expect, all of the lenders on the scheme to drop the requirement or not.

“There have also been calls for a similar scheme to be opened up to smaller, challenger banks that specialise in lending to SMEs, making them agile enough to make swift decisions, something which is certainly required in the present climate. As well as separate calls to open up the Coronavirus Business Interruption Loan Scheme (CBILS) to all businesses with turnover of less than £45m, as opposed to just those businesses that cannot access other loans.”

“It is essential that any small business looking to benefit from the government’s support programme looks into the details of the loan scheme being offered by any lender, extremely carefully. If directors are in any doubt then they should take immediate legal advice on the implications of the terms being offered to them.

Greater adoption of video call facilities

“Further to this, we may see a development in the way high street banks deal with legal advice. Any individual providing security or a guarantee on behalf of a third party, must obtain independent legal advice on the form, content and effect before proceeding. This absolute requirement is almost never waived, and is done to ensure that the guarantor is under no undue influence or duress to provide the guarantee.

“Previously at high street lenders this has been obliged to be done via a face-to-face meeting. However, in recent years, challenger banks and forward-thinking lenders have permitted this advice to be provided via a video conference call, something which the larger, high street banks have not yet adopted. Although I expect high street banks to miraculously now realise that this can be carried out over the telephone or on a video call and update their practices.”

ENDS

For any queries or for further information, please contact Rick Hollister at PR Agency One:
T: 0161 871 9140
E: langleys@pragencyone.co.uk

Notes to editors

About Langleys
Langleys is a leading UK law firm situated in York, Lincoln and Manchester, providing a range of high quality, professional legal services in three key sectors, business, insurance and personal. Established in 1985, the firm is ranked in the Legal 500 and Chambers and Partners, with each of its offices providing quality advice and excellent service to clients across the UK.

Ben Goertzel’s Humanity+ Summit: Looking For Biological Solutions That Empower Human Dignity And Lessen The Destruction Of Life

Jul 08, 2020

The U.S.’s COVID-19 Testing: The Dishonesty Continues, By Randall Bolten

Jul 07, 2020

Interview With Sandra Tobler, CEO and Founder Futurae – Cybersecurity and Fintech

Jul 06, 2020

Getting Back into Business: The Comeback Costs After Lockdown

Jul 04, 2020

HealthTech: Dutch Intravacc to in-license CimCure’s iBoost Technology, Expanding its Vaccine Platform Portfolio

Jul 03, 2020

€60 Million For Innovators Awarded Under EIT Crisis Response Initiative

Jul 02, 2020

citiesabc Founder Dinis Guarda Ranks 4 In The Top 50 Blockchain Global Thought Leader Ranking By Thinkers360

Jul 01, 2020

World Bank Approves Financing to Strengthen Saint Vincent and the Grenadines’ Economic Resilience and Disaster Preparedness

Jun 30, 2020

COVID-19 Testing – The U.S. is STILL in the Middle of the Pack By Randall Bolten

Jun 29, 2020

Data Science To Assist with COVID-19 Re-opening

Jun 28, 2020