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Westender Magazine Glasgow's West End Lifestyle magazine
Westender Magazine Glasgow's West End Lifestyle magazine
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52 | Westender www.westendermagazine.com<br />
Magazine Promotion<br />
Legal Matters<br />
Don’t bank on it!<br />
by Donald Reid, chairman at Mitchells Roberton<br />
There are lots of small businesses in the<br />
West End. They need working capital<br />
and bank support to operate<br />
successfully.<br />
Banks, as we all know, are happy to lend<br />
money to anyone who can show they don’t<br />
need it. For the rest of us they want the shirt<br />
off our backs.<br />
Last week I was asked to provide<br />
independent advice to the director of a<br />
small company running a shop. The shop<br />
had traded well for some years and was<br />
increasing its bank facility to fund expansion.<br />
But the Bank wasn’t happy just to lend<br />
to the company. It required the trader to<br />
provide her personal guarantee as well.<br />
Now the whole point of having a limited<br />
company is to protect yourself from personal<br />
exposure in the event of the company failing<br />
and going into liquidation.<br />
Conscientious traders, which my client<br />
is, work very hard to prevent that happening<br />
but sometimes trading conditions can<br />
deteriorate overnight. Say like when the big<br />
banks all collapse at once. It is therefore<br />
prudent management to limit liability.<br />
What this Bank was doing was demanding<br />
of this careful trader that she abandon her<br />
limited liability so far as the Bank’s lending<br />
was concerned, and undertake to go into<br />
her own pocket to pay off the Bank if the<br />
company should default.<br />
My job was to advise her as to the risks<br />
she was taking in giving the guarantee.<br />
We met to discuss it. I said to her that a<br />
guarantee is a bottomless pit: did she want<br />
to jump down it? She told me the bank<br />
had assured her this was very unlikely to<br />
happen but their internal procedures require<br />
them to insist on a guarantee. I asked if she<br />
could afford to pay up on the guarantee<br />
if things did go wrong despite all her hard<br />
work and careful management. She said she<br />
wasn’t sure, but felt she had no choice as<br />
the intended expansion of her business is<br />
essential to its ongoing success.<br />
In discussion with the Bank I was able<br />
to get a cap on the maximum she would be<br />
obliged to pay up if the worst happened.<br />
This was still a frightening figure but better<br />
than no limit at all. I warned her that no matter<br />
how pleasant and re-assuring the Bank might<br />
be when setting a facility up, they will be<br />
utterly heartless when it comes to enforcing<br />
a default.<br />
If Donald can help<br />
please contact him<br />
on 0141 552 3422,<br />
or email dbr@mitchells-roberton.co.uk.<br />
Mitchells Roberton Solicitors<br />
& Estate Agents<br />
George House<br />
36 North Hanover Street G1 2AD<br />
0141 552 3422<br />
www.mitchells-roberton.co.uk
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