Independent Legal Advice for Coronavirus Business Interruption Loan, with SAM Conveyancing
Independent Legal Advice for Business Interruption Loan
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Independent Legal Advice for Coronavirus Business Interruption Loan

4 min read
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Independent Legal Advice from SAM Conveyancing
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The Government has made available £330 billion to small businesses to help them through the Coronavirus outbreak. 

The minimum loan limit threshold is above £25,000 and the maximum loan limit is £5 million. The Coronavirus Business Interruption Loan scheme is managed by the British Business Bank and there are over 40 lenders currently working to provide finance.

The banks providing the funding require you to bank with them, a formal application, including audited accounts and future projections, and if successful some lenders, such as Barclays, require personal guarantees from the directors of the company. 

There are some mortgage lenders, such as the Royal Bank of Scotland which also owns NatWest, that don't require business owners to give personal guarantees. 

As we explain below, the risk of a personal guarantee extends to all your own assets if your company doesn't adhere to the terms of the loan.

Who are the lenders?
The British Business Bank have listed all the current providers here - CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME (CBILS). For the main high street lenders we list the links below:

Independent Legal Advice
Frequently Asked Questions

What is a Directors Guarantee?

A director's guarantee makes you personally liable to repay the debt should the loan not be repaid. There are considerable risks to a directors guarantee (click to see) which the mortgage lender requires you to obtain independent legal advice to ensure you fully understand - it quite literally means your own home could be at risk.

For example, if a business interruption loan of £100,000 was provided to a business and the company failed in their duties toward the repayment of the debt or any other term of the guarantee then owner/s who signed the personal guarantee would be liable to pay. 

If they cannot afford to repay the debt (which may be the full amount on demand), then the bank would look to repossess the assets of the owner or the business. 

After this the government would step in to cover 80% of whatever loss remained and the bank would only have to fund whatever was left after that.

The financial risk is so high, especially with the real chance of the business failing whilst the economy is struggling, that any mortgage lender asking for a Directors Guarantee will need the company owner to seek independent legal advice from a solicitor.

What independent legal advice is given?

In general, the solicitor confirms the following matters using words such as the following:

    I am an independent solicitor acting for the above named Guarantor;
    The Guarantor produced adequate evidence of identity;
    I explained to the Guarantor that it is a requirement of the Company that the nature and implications of this document are explained to the Guarantor by a solicitor so that the Company can be satisfied that the Guarantor understands the nature of the document and is freely entering into it, so that there can be no dispute in future as to whether:-
    undue influence was placed on the Guarantor to sign this document; or
    the Guarantor was misled as to its nature or the implications of signing it.
    I confirm that I explained the nature and implications of this document and pointed out the risks of entering into the document and explained that the Guarantor has a choice whether to do so. The Guarantor has signed the document and confirmed that he/she does want to proceed;
    The Guarantor appeared to understand my advice which was given at a face to face meeting with no other party in attendance; and
    I confirm that the information given to me by the Company was sufficient to enable me to properly advise the Guarantor.

How long does the independent legal advice take?

The meeting lasts between 15 minutes to 1 hour. The solicitor must satisfy themselves that they are comfortable you understand the risks of the personal guarantee.

Who can provide independent legal advice?

A qualified solicitor.

Do all mortgage lenders allow Skype meetings?

The majority of mortgage lenders do. Barclays Bank have done for some time and under the current Coronavirus pandemic it is advisable that you do not visit your solicitor. You should check with your scheme provider to confirm if they will accept Skype independent legal advice.
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Independent Legal Advice through SAM Conveyancing

Independent Legal Advice

Directors guarantee - the risks of personal guarantees by directors

Directors guarantee - the risks of personal guarantees by directors

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