Funding Circle is one of the largest lenders to businesses in the UK and has lent £17bn to 125,000 companies. The lender generally operates in the SME market with loans under £1m. It has been an essential provider of finance since the 2008 credit crunch that meant that many banks were not willing to lend.
Iwoca (“instant working capital”) has also provided smaller loans, to some 150,000 small companies that struggled to source finance from traditional banks. Iwoca particularly was able to approve loans very quickly to help growing businesses.
Bizcap also operate in a similar way to IWOCA with approvals of loans in as little as 3 hours. They currently have 66,000 small loans to companies across the world. They started in Australia and New Zealand and have expanded into the UK.
All these lenders required director’s personal guarantees to underwrite their debts. In the case of Funding Circle they sometimes secured their larger loans with a charge over the company’s assets.
The boom in technology also helped directors to source these loans easily.
However, in any business there can be stresses and strains and so what happens if you cannot pay back these loans for your company?
The debt collection arm of Funding Circle or Iwoca will try and contact you pretty quickly to find out what has happened.
Get in touch and see if they can accept a debt holiday or extend the term of the loan. This they may not be able to do but it is important to communicate and explain your situation. This should delay any legal action from them so buy you some time.
See Funding Circle support pages for more information and Iwoca support pages
Is your company viable? Can you cut costs, downsize, make people redundant? If so then take action quickly as debt has a habit of getting worse quickly. If you are not paying yourself a salary then consider whether the business is viable and if it is worth it. If your company has multiple debts then check to see if you company is insolvent
As mentioned before these loans will always have a personal guarantee attached, so it would be wise to check your own personal situation. However, it is not a good idea to always pay these lenders ahead of other creditors as that can be deemed a preference and could be reversed if the company goes into liquidation.
If the company is not viable in its current form then the directors have a legal duty to not make the position worse. So, it essential that you take professional advice. RMT have extensive experience of talking to lenders like Funding Circle and Iwoca as many struggling businesses have taken out these loans. In the main they are very reasonable as they trust us when we talk to them and tell them the situation.
If the company is viable going forward if it wasn’t ham strung by its legacy debts then a CVA may be an option. As long as 75% by value of the unsecured creditors agree then a proportion of the debts can be written off and paid off over 3-5 years. This is a powerful mechanism that can basically save a business from liquidation. Learn more about CVAs here
If the company is no longer viable then a CVL is the quickest and easiest way to close a company. The assets will be sold to pay the creditors and an investigation will be undertaken on the conduct of the directors. As long as you have been reasonable and honest there is no need to worry about any investigation. Companies fail and it is not always the fault of the directors. Obviously any personal guarantee will be called in by the lenders.
This is an informal arrangement between the debtor and the lender overseen by an approved FCA firm. Read here for more information.
If you cannot pay immediately the loan balance you might be able to go into a IVA and pay it off over 3-5 years. This is a formal process and needs to be overseen by an insolvency practitioner. Lenders are usually very receptive to this as long as you have potential to earn and maybe some assets. Read here for more information
This sounds worse than it is in that you will be discharged within a year. Yes, getting any credit will be very difficult and you cannot be a director of a company but this is usually the last resort of any lender and it costs them thousands to do. Read here for more information.
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Written ByRobert Moore
Marketing Manager
Rob has over two decades of experience in web and general marketing. He has extensive knowledge of the Insolvency sector and has helped many worried directors with their questions.
Rob is now working with the Board at RMT to develop strategic marketing programmes to support the business plan and drive more company rescues.
