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Protecting Business Debt

Most businesses have bank loans or directors loans, and certainly many have overdrafts in place.  Depending on the size of these, the effect of the death of a director or business owner could have serious implications both for the business or the family of the deceased.

When taking bank loans it is important that you understand what happens on your death.  Do you have any life cover in place to cover these debts?  Have the banks requested a personal guarantee from you, which means that your estate would be liable to repay any outstanding debts?  Are there sufficient funds in the business to repay the debts and still continue to run profitably in the event of your death?

Amazingly, banks do not generally insist that life cover is taken when they grant business loans, so many business owners may not realise just how much their personal wealth is in fact tied into the business if the worst happened.  Limited liability does not apply to the repayment of bank loans.

A life policy would ensure that the family assets are protected from the banks.  Cash flow would remain in the business, allowing it to continue to run profitably in the event of your death, providing security to your family or employees. 

Term assurance policies are fairly cheap to purchase and can be cancelled at any time.  It is important to review the plans in place to ensure that they are still suitable.

For further information speak to Simon Ludden, Financial Planning Manager on 01227 763939.


 

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