20k loan over 6 months?

Hello all,

I completed a management buyout in May 2004 of a company that I have worked for since June 2000. I had to borrow heavily to do this, which left me 1k in the red each month; my savings have now depleted.

The company was sold last month for three times the initial purchase price, leaving me with a multi-million pound sum. 50% of that sum has been re-invested into the company in the form of an earn-out.

The other 50% has been paid to me in the form of bank guaranteed loan notes, which cannot be redeemed until Jun 2005.

I have no cash at present. A well known private bank are keen to lend against the loan notes but are having difficulty with their legal dept as the supporting letter of credit is in my name and not transferrable, so they cannot take it as security thus far.

I need to borrow 20k over 6 months in order just to live. I have tried many banks but all are uninterested and want to see 6 months worth of bank statements, etc, etc. Not a problem - but as I have made clear to them, my outgoings currently exceed my income by 1k per month. They lose interest after hearing this! They just don't seem to realise that I'm showing them a

7 figure loan note issued by a FTSE 100 company and backed up with an irrovocable letter of credit; who cares about my credit cards and loans?

So in summary, I need 20k over 6 months whereby the lender wouldn't care that the proceeds of the 20k loan would actually go towards it's own payment for the 6 months. After 6 months, the loan notes will be redeemed, I will have plenty of cash and clear the loan.

The loan notes are bank guaranteed with an irrovokable letter of credit issued by Natwest. Even Natwest wouldn't give me 20k loan today though!

As things stand, I cannot meet my mortgage payments this month and I don't even have a christmas tree! Very depressing indeed. Does anyone know of a lender or service that might help me?

Paul

Reply to
Paulio Kwazakki
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I don't understand this part. If the letter of credit is in *your* name, what's the problem? *You* want to borrow, not someone else. Am I missing something?

If you only need 1k per month for 6 months to "break even", why do you need to borrow 20k? Why not just borrow 7k on an interest-only basis, to be paid back when the 6 months are up, use 6k of that to meet your shortfall, and pay the interest from the 7th k?

How much is your mortgage debt, how much equity do you have? Could you not top up your mortgage loan by 7k? Or even 20k, come to that?

Reply to
Ronald Raygun

You could always get a job couldn't you?

Reply to
usenet

Why did you agree to this?

Fair enough - they can hold the paper but only you can cause it to be encashed, and even then they can't force you to pay them back against it. Why don't you offer a second charge against your property as well - then they can take the 20K from your home if your co buyout does not reap the rewareds you claim......

Who did you talk to in NatWest? Did you talk to the person responsible for issuing the letter of credit? They will know how to lend against it and therefore will be able to assist. If you actually walked into a branch and said 'lend me money agianst this piece of paper', then I am not suprised they said no!

Either that, or your letter of credit is not as good as you think it is..........Oh, and BTW, NatWest generally only issue letters of credit against cash, or other easily liquidated assets, so I still have to ask why you agreed to accept a loan note as payment?!

Reply to
Marcus Collie

In message , Marcus Collie writes

Its a common ruse to avoid/defer CGT and preserves the purchaser's cash flow.

Reply to
john boyle

In message , Paulio Kwazakki writes

You are asking the bank for the wrong thing.

You do not need a £20k loan over 6 months.

You should ask for an overdraft of £1k this month, £2k next month rising to £3k thereafter etc., for full repayment in 6 months time from the loan note. Offer your house as security. Get the bank to claim the proceeds of the loan note against a letter form you irrevocably authorised the proceeds to be paid to your account with NatWest.

The chances of anybody in a branch of Natwest being able to understand this, never mind doing it, is virtually nil. You need to speak to a proper lending manager who has a personal lending authority. They are generally kept locked away in secret regional offices but with persistence you should find one.

Reply to
john boyle

John

The chance of a customer *ever* talking to a sanctioner, I can guarantee you, is nil. No amount of persistence will result in staff giving you the number for their lending unit - the staff would need to liase with them directly.

As a former sanctioner, I can advise that this form of lending is unattractive and unlikely to be sanctioned, unless, say, a 350.00-500.00 arrangement fee, with a rate of +5.00% were to be successfully negotiated - otherwise, why do it at all? The reality is that otherwise the deal is unprofitable, and the security meaningless until June, when the agreement would be repaid anyway. Also, the security cannot actually be drawn by the bank, and so is not a real security anyway!

Better for the OP to forget his letter of credit, and approach his mortgage lender.

MC

Reply to
Marcus Collie

In message , Marcus Collie writes

He he! That depends on the bank of course.

Same as above..

Me Too!

The LoC is no security at all, it is merely the source of repayment, which is why is suggested he offered his house as security. The LoC may be non transferable but it may allow for the direction of proceeds to the clients account. It could be handled along the lines of a memorandum of deposit with a letter of encashment.

BUT we do have what "appears* to be a high net worth customer and the Private/Personal Banking dept of many Lenders would regard this as routine, but, as you say, at a price.

But that would have to be on a 'non status' basis with no questions about income!

Reply to
john boyle

"Marcus Collie" wrote

I'm sure he wouldn't worry about a measly five hundred quid fee (if he can pay it now out of the borrowings, or later after June) - he'll be a millionaire soon!

"Marcus Collie" wrote

Presumably, the "why do it" would be to hope to keep the custom of the million+ client after June?

Reply to
Tim

Is it not customary to pay arrangement fees up front *before* the decision to lend is even made (to be refunded if declined)?

Exactly. On that basis they should be bending over backwards to please, and to extend the overdraft without fuss or fee.

Reply to
Ronald Raygun

Indeed. I have a some clients (married) whose main "income" comes from the annual encashment of Loan Notes - the first ~ 26,000 is tax free, and the next 62,800 is at at a max of 20%.

Reply to
Doug Ramage

In message , Ronald Raygun writes

NO!!

Reply to
john boyle

Dunno John, not unheard of that fees might be requested prior to a particularly complex lend was considered. Not often heard of in retail/small business circles but certainly possible in the corporate arena. It all depends on the size and complexity of the lend.

MC

Reply to
Marcus Collie

It happens with mortgages too, which are not generally particularly complex, though I dare say it might be more usual simply to deduct them from the advance, or add them to the loan.

You sometimes even have to pay "application" fees up front which are refunded on completion.

Reply to
Ronald Raygun

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