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My Business Loans have been Sold - What happens Now!

The sale of business loans is a very real issue facing businesses in Ireland today. A legacy of the financial crash, it is important that if you are impacted by such a sale you understand what this means and the options open to you.

The following are some useful next steps if your Business loans have been sold by your Bank.

  1. Read the information your Bank sends you carefully. Look out for the following:
  • The date your current account, credit card or online banking services will cease to operate.
  • What is being transferred to the new loan owner:
  • Loans
  • Any Debit Balances
  • Overdrafts
  • Personal Guarantees
  • What facilities are staying with the Bank and what has to be done in relation to them?
  • What happens to your credit balance?
2. Act now to ensure you have the banking facilities that are critical to your business in place well before the deadline.
  • Open new current accounts with another bank.
  • Set up new online banking facilities.
  • Apply for credit cards/overdraft facilities if required.
3. Get prepared prior to the loan transferring
  • Know the current value of the security held for the loan.
  • Calculate the viable level of debt your business can sustain going forward.
  • Prepare a business plan and financial projections if you wish to refinance all or part of your debt.
4. What are your options in relation to the debt?

Buy Back the Loans
  • Usually done at a discount to the face value of the debt. Typically valued at the market value of the security plus a negotiated premium. Companies cannot buy their own debt but this can be done through a group structure.

    Negotiate an Agreed Settlement Figure
  • A settlement figure can be agreed which again is typically based on the market value of the security plus a premium. This can include the voluntary sale of some of the assets and the refinancing (retaining) by you of the remaining assets. Or alternatively all of the assets would be sold.
  • Be realistic in terms of what you can refinance.
  • Understand and accept early in the process whether or not you can retain some or all of the assets.

What happens if you can't agree a solution?
  • The new loan owner may legally enforce their security to raise funds towards the repayment of the loan.
  • A receiver may be appointed to your business. Will your business be able to trade through this?
  • Personal guarantees may be called in.

There are significant incentives for negotiating a solution.

Recap on Key Points:
  • Understand the process and time lines.
  • Ensure your business has sufficient banking arrangements in place.
  • Be prepared before your loan is sold.
  • Know your objectives and limitations.
  • Focus on negotiating a solution.




 

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