Can I lose my home due to business debts?

Question

Can I lose my home due to business debts?

Answer

In general, your home is protected by the ‘veil of incorporation’ that separates the company as an entity from you as a director. Company directors can be exposed to this sort of risk under certain circumstances, however, including if personal guarantees have been provided as security for a lender.

When your company becomes insolvent

The provision of personal guarantees for business borrowing is sometimes the only option for directors trying to grow their company. A problem can arise if business takes a downturn, and you cannot keep up repayments on the loan.

Your bank may choose to call in the guarantee, which if secured on your home, can introduce serious problems for both company and personal finances. Various options still remain open, one of which could be to negotiate a Company Voluntary Arrangement (CVA) that would cease any legal threats against the company.

Seeking professional help

Taking out a CVA requires the involvement of a finance professional. A licensed insolvency practitioner can also identify other ways to inject cash into the business, allowing you to pay off some of the debts and protect your home.

Depending on your circumstances and the level of debt, these might include:

• Invoice factoring or discounting
• Crowdfunding
• Asset-based lending
• Property equity release
• Formal routes into insolvency, such as the CVA mentioned above

Successfully negotiating a Company Voluntary Arrangement halts any legal action against your company, and freezes charges and interest on the debt. You remain in control as a director, and have valuable breathing space from creditor action.

BTG Begbies Traynor has contact with a range of UK lenders, and will guide you to the best solution for your company. Our team can provide the information needed to protect your home, and offer a same-day meeting to discuss your needs.