(edit title) Releasing equity in flat to setup business Flat mortgatge to invest in new business Options

[Jules]

Hi all,

Just wondering if anyone out there could help me? I bought my flat 3 years ago, and was lucky enough to be able to pay cash for it, so I have no loans against it. I recently left my job to focus on setting up my own business. I have since then found a business that is currently trading, that is for sale, and that I wish to purchase. The total sum needed for the purchase comes to about a third of the price of my flat given average current market values in the area.

Having been to my bank (SEB) for a meeting they said they would be unwilling to loan me the money for the purchase of the business, against the value of the business, even with my flat as security. Given that my flat is worth roughly three times the value of the business I find this strange. I am also now unable to take a personal loan against the flat to fund the purchase as I have left my job, and they require me to be in employment to take a loan, i.e. they need to see that I can repay the loan from salary, and will not accept the business accounts as a demonstration of an ability to pay as I am not at this time employed by the business. This leaves me in a bit of a catch 22 position I can't buy the business until I have an income, and I won't get an income until I buy the business. All this whilst I have the necessary money to purchase the business locked up in my flat, which at the moment it seems I cannot use without selling.

What I need is some institution that will lend me the money to buy the business using my flat as security (some kind of equity release) hopefully that does not charge an extortionate rate of interest or commission. Does anyone on here have any experience of this, or know somewhere in Sweden I would be able to find the appropriate finance?

Many thanks in advance for any help,

Jules.

[Yorkshireman]

Have a chat with these people, maybe they can find alternatives:

http://www.almi.se/

Whichever way you want to look at it, from the banks perspective it is You that wants a personal loan using your apartment as security, what you want to do with that is not relevant. You cannot have the loan because you do not have a source of income to make the repayments right now. The fact that you want to buy a company using the apartment as security is a non-starter since the apartment is not owned by the business, it cannot be used as security, only You personally can do that.

[Jules]

Hi Yorkshireman,

Thanks for the reply. Firstly to answer your post, yup thats exactly what the bank said to me... basically they are not interested for those reasons. However I am sure that I have heard of situations where you could give a personal guarantee against a business loan providing you could provide adequate security. I was hoping that there may be someway of doing this over here in Sweden. In which case I could provide the equity in my flat as the loan guarantee. In fact it seems that most banks these days want some sort of personal liability/guarantee against business loans by small companies directors in addition to any other company held security. I am sure there must be a way of financing this as the money is there to secure the loan, however it seems finding it will prove difficult.

I have looked into ALMI in the past, but had been warned away several time due to the prohibitive rates of interest they charge. I don't want to saddle a new business with crippling repayment schedules for obvious reasons. I will however have another look and see if they have something more reasonable to offer at the moment.

Thanks for your help. If you, or anyone else can think of anything else that would be greatly appreciated.

Jules.

[PDX]

Is selling the flat totally out of question? Use 1/3rd of the money for your business, 2/3rd for a new, smaller/more remote flat. Just an idea...

~~~PDX~~~

[Jules]

Thanks PDX, I had considered that too. I was hoping to avoid having to sell the flat as my wife and I are very happy here. I had thought that I could sell, invest a third, keep two thirds in the bank, rent a flat somewhere and pay myself a salary for six months. Then go to the bank with proof of income and borrow up to the original amount to buy a similar flat in the area. It just seems a hell of a polava to access the capital that is there anyway. Also I am not sure how long it would take to sell, and if the business were to be sold to some one else in the meantime I would have no business, no flat, and a very angry wife! However if it comes to it that may well have to be the course of action.

[PDX]

Right, actually I think you should have the same discussion with other banks as well. This is purely anecdotal but from what I have heard, SEB is the most strict of the bank whereas Handelsbanken and perhaps Nordea may be much more accommodating in this kind of situation.

~~~PDX~~~

[Jules]

Thanks PDX, I had heard that in passing too, and I will be contacting them this week, after all it can't hurt to ask.

[Yorkshireman]

Problem is that Swedish banks are not that fond of small businesses, for some reason they tend to view it as high risk ... I would expect that if they do offer a loan it would probably be a a high rate of interest. Talk with Almi, maybe they have alternatives, but as you already mentioned, it is likely they are also reasonably high interest rates

Is the wife working? If so, and She owns half the apartment, why doesn't she go for the personal loan, if the apartment is in your name, sign over (or sell if you dont want to give it away ) to Her and then She can try for the loan?

One source that would most certainly offer a loan is Bluestep, as they loan to just about anyone! ...but they charge a premium rate as far as I understand. They are partners with Barclays Bank from the UK amongst others, so less dodgy than alternatives ... Swedbank, Ikano bank, ICA Bank, SBAB ...all would be more reasonable than SEB as they are quite tough just now.

[Jules]

Hello Yorkshireman,

Thanks again for your input. Yes it certainly seems that the banks are very risk averse at the moment and especially so with small businesses. I guess that, along with some prohibitive tax structures, would go along way to explaining the low start up rate in Sweden.

My wife is currently studying, and only working part time so I'm not sure I'll get too far trying that, but it was a good idea.

I have contacted Almi and it seems that they might not be for me as they say they are more into investing in people with no funds or security, but I am trying to setup a meeting to discuss that, and see if they have any leads that may prove useful.

I will contact the others to see what, if anything they can offer, hopefully some one somewhere will crack and offer a loan at a decent rate!

Thanks again for the help,

Jules.