At rebuildingsociety.com, all loans carry security, from personal guarantees to 1st charges on property.
We understand that when lenders make their lending decisions, the type of security offered by the borrower is an important consideration. To help you understand what security is being offered and how we go about ensuring it’s in place, we have explained each of the types of security that we take below.
All loan security is held by a separate legal company to rebuildingsociety.com Ltd, called Ameuri Ltd. This separation is in place for lenders’ protection, as it ensures that the assets and right to pursue the security is held outside of rebuildingsociety in the event of rebuildingsociety ceasing to trade.
Security is taken on every loan to give potential recourse should a business default on their repayments to you. However, we cannot guarantee that your loan will be recovered in the event of default.
What is a Personal Guarantee?
A personal guarantee (PG) is the minimum security required for a borrower’s loan. All loans on rebuildingsociety require a personal guarantee, regardless of additional security offered by the borrower. A person willing to sign a guarantee is often referred to as a guarantor.
Where a personal guarantee is the only security on a loan, we currently require the guarantor to have sufficient net assets to cover the value of the loan. For example, if a loan is for £25k, the borrower or guarantors must have combined sufficient assets of at least £25k. A personal guarantee is often offered by one or more of the business’s directors, but can also under certain circumstances be offered by others, such as a family member.
A personal guarantee makes the guarantor liable for the debt of the business should the business not be able to repay their loan. This means that if a business defaults, the debt can be pursued from the guarantor’s personal assets.
How do we determine the value of a guarantee?
To determine a borrower’s net assets, we asks guarantors to complete a Statement of Assets, Liabilities, Income and Expenditure (SALIE). This requires them to list all their assets, (such as property, shares, cash in bank) as well as all of their liabilities (such as, mortgage balance, credit card debt, sums owed on personal loans). These figures are used to determine the net worth of each of the guarantors. Our underwriters will evaluate the SALIE and will not take into account highly liquid assets or assets associated with the borrowing business e.g. shares in the applicant business and cash in the bank.
How does rebuildingsociety go about securing a PG?
Arranging a personal guarantee is relatively simple, and loans secured on Personal Guarantees often complete within 2-5 days.
Once a loan is 100% funded and the auction has closed, we send the borrower the loan agreement and Personal Guarantee documents for consideration and completion. If the borrower accepts the loan, they and any additional guarantors will be required to complete the Personal Guarantees. Some guarantors, depending on their association (or non-association with the business) may be required to seek independent legal advice before signing the PG.
Each PG must be signed and witnessed and the original returned by post. No funds are released until the originals have been correctly completed and received.
What is a Debenture?
Borrowers may offer a ‘debenture’ over the business in support of their loan. This means that, should a business default, some or all of its assets may be pursued to realise the debt. The assets of the company may include future and existing equipment, intellectual property, debtor books etc.
A debenture may often be referred to as a ‘fixed’ or ‘Floating Charge’ in reference to the manner in which it covers all of the businesses assets.
In some cases, the borrower may look to secure the loan on a particular asset, such as a piece of equipment or machinery, rather than all of their assets. When this is arranged, this is known as a Chattels Mortgage.
What is involved in securing a debenture?
Completing a loan secured by way of debenture is similar to the Personal Guarantee process, with two additional steps. Loans secured on a debenture usually complete within 2-7 days.
Once a loan is 100% funded and the auction has closed, we send the borrower the loan agreement, debenture and Personal Guarantee documents for completion.
Once a debenture is signed by the borrower, it must be certified and then registered at Companies House within 21 days. This prevents other funders from gaining priority security over the assets ahead of rebuildingsociety.com lenders.
rebuildingsociety.com always seeks to secure a first priority All Assets Debenture against the business. Where a debenture is to be ranked behind an existing debenture, this will be made clear on the loan listing.
No funds will be released to the borrower until all documents are correctly signed and received.
Charge on Property
A charge on property is often referred to as either a 1st or 2nd charge. This is a form of security offered by a borrower that means that they will allow a legal charge to be registered against a property associated either with the business or a director. The legal charge will sit on the Land Register in the name of Ameuri Limited, against the property. This notifies any potential buyers of the property, or any other lenders, that there are other parties with an interest in the land.
Before the property can be bought by anyone else or before another lender places a charge on the property, they will need to secure the permission of the lenders or repay the remaining debt to release the charge that sits ahead of them in priority. For example, a 1st lender (usually the mortgage provider) will need to give permission to anyone looking to register a 2nd charge.
If a business defaults, we will look to pursue the debt through the proceeds from the sale of the property.
How does rebuildingsociety secure a charge over property?
Securing a charge over property is a demanding loan security process and usually takes between 7-14 days to complete.
Where a second charge is offered, the first lender’s permission is required to secure the second charge. As such, we will write to the 1st charge holder just before or as the loan request is listed on the marketplace. This step is undertaken ahead of the loan reaching 100% so as to save time in the completion process. Should a 1st charge holder refuse permission, the loan will not be able to proceed, and funds will be returned to lenders.
Once a loan is 100% funded and the auction has closed, we send the borrower the loan agreement and Personal Guarantee documents for consideration and completion, and will instruct our solicitors to contact the borrower and their solicitors to begin the process to secure the charge at the land registry.
Funds will only be released to the borrower or their solicitor once our solicitors have confirmed that all documents have been correctly completed and the charge filed at the land registry.
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