Re: New Business - Business loan, Overdraft, Personal Loan or Equity in house

Oct 24, 2005 3 Replies
M

In article , snipped-for-privacy@gmail.com writes


Hi,
>
>Between me and my partner we need £90K to start a new business. We are
>putting £20K each from our savings into the business.
>Bank have seen our business plan and are willing to give us the rest
>£50K. They are willing to give us £25K business loan and the rest
>£25K as an overdraft.
>They are also looking for security in form of second charge on one of >our houses.
>We have a fair amount of equity in our houses (around £180K each) and
>we have excellent credit ratings.
>
>My question is what is the cheapest money that we can get? Shall we:
>1) Get an unsecured loan for £25K each.
>2) Draw £25K each against equity in our homes through our mortgage >lenders.
>3) Go with banks offer - they have not given us the rate yet.
>4) Also like to know if we were to go with bank offer - is there a
>problem in having £25K in loan and £25K as overdraft instead of a
>loan of full £50K?
>
>Any feedback greatly appreciated.
>
>Thanks
>
>J Mann

I've added uk.finance to the newsgroups list


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J

In message , Mr X writes

No, too expensive

Yes, this is good and cheap and if the business goes bust your houses are safe if you can keep up the payments.

No. Just have the overdraft

Yes and no. If you have a bigger loan the problem is you will be paying interest on the full loan balance even when you have a credit balance in the business account. With the overdraft you only pay interest on the dosh you actually borrow on a day to day basis. But overdrafts are more expensive than mortgages and can be withdrawn at short notice. Unsecured overdrafts are more expensive than secured overdrafts (it would be secured with the second charge) but the difference is likely to be insignificant in this case.

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O

I've just gone through a similar process and I couldn't believe how expensive a business loan from Barclays would have been. Other lenders were cheaper but not much. I went the secured mortgage route and I can't see how any other option could be cheaper.

Phil

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M

In message , oxalto writes

Look at the flexible mortgage option, which can effectively be used as a big overdraft but at personal mortgage rates.

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