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Business Loan Protection

business Loan Protection 

 

Scott Robinson of Sabre Financial says “Following on from my last article on the risk facing business today I will discuss how Business Loan Protection can help cover any type of commercial debt in the event of death or critical illness of an owner, partner or director. 

If you have a mortgage, the chances are you also have some form of life insurance. This is a policy that can be used towards paying off a mortgage debt in the event of your death, thus keeping the roof over the heads of your nearest and dearest. 

Most small businesses have some form of debt, be it overdrafts, loans or mort¬gages. These loans can help a business prosper and grow. But a significant pro¬portion of small businesses do not have any form of insurance backing this debt. If the owner died, or was taken critically ill, these loans could quickly become a liability. Insurance can help keep the roof on your business, protecting partners, members, directors and employees – as well as their families.

With Business Loan Protection, owners, partners or directors can insure the size of any outstanding debt, and in the event of their death this will be repaid.

Many people starting a new business end up investing their own money in it, often by taking out a mortgage on their own home. A Directors’ Loan effectively enables you to ring-fence this investment, so that when the business becomes profit¬able you can take it out again. Individual directors can safeguard their own investments in the business by setting up a Directors’ Loan account. This can be particularly important if you run the business with other directors.

However, almost one in three business owners are unaware that these loans have to be repaid in the event of the director’s death. If neither the director nor the business have life insurance, it may be difficult to repay these loans.

If your business fails, due to the death of the owner, or a partner, and there aren’t sufficient assets to cover the debts, then a lender could seek repayment from the guarantor, or their estate. This could mean your personal assets, including your home might be at risk, and could leave a business owner’s family struggling to repay any business debts.

Next month I will discuss how Key Person Protection can help cover the key individuals in your business in the event of their death or suffering a critical illness.”

Sabre Financial is a trading title of Sabre Financial Planning Ltd. Sabre Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.

 


 

 

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