Business Debt
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Meeting loan repayments
Have you considered your ability to pay back debt if something happened to a shareholder? If you, your business partner or a key person were to become ill, be injured or die, could your business continue? What would become of the assets associated with any loans taken out to support the business? Appropriate business debt protection helps guard your business assets should you be unable to service a loan. Often the ability to borrow is dependent on the income generated by a key person. If that person were to die or become seriously ill or injured, insurance could help you meet your repayments. Most businesses protect their physical assets such as their plant, equipment, stock and buildings. However, it is their human assets which provide the initiative, drive, skill, specialist knowledge and ingenuity to make the business successful and profitable. Often your ability to repay any borrowing is dependent on people. On the death of a key person (such as a salesperson), your business may have difficulty in meeting its commitments under a loan agreement. In addition, lending institutions may need to rely upon personal guarantees and supporting security in credit rating or ability to borrow? |
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Insurance for business debt
When a guarantee is signed by a director, it generally means the director has secured a loan for the business using personal assets. There may be variations within guarantees. If you’re in a partnership, you are liable for your partner’s share of the business and debts, in addition to your own. By taking out appropriate cover, business debt can be fully repaid. The payments can be used to protect business owners and guarantors from the ramifications of death or disablement of a key person.
The purpose of business debt protection is to:
When a guarantee is signed by a director, it generally means the director has secured a loan for the business using personal assets. There may be variations within guarantees. If you’re in a partnership, you are liable for your partner’s share of the business and debts, in addition to your own. By taking out appropriate cover, business debt can be fully repaid. The payments can be used to protect business owners and guarantors from the ramifications of death or disablement of a key person.
The purpose of business debt protection is to:
- Protect the guarantor and their assets. The proceeds can be used to repay the loan (in full or in part) and thus release the guarantor
- Protect the business and the remaining business owners. Often banks make shareholders or directors personally responsible for the whole debt
- Reduce the risk of company/personal insolvency or administrations
- Meet obligations under the law
- Reduce the risk of losing personal wealth.
- If something happened to a key person, would your business have difficulty meeting its commitments under any loan arrangement?
- What would become of the assets associated with the loan? Would they be sold to repay the debt?
- Are any of your (or other directors’) personal assets (such as a home) linked to the business loan?
