Banks force businesses to put up homes

Insolvency experts have warned that tougher bank practices are forcing
entrepreneurs and family-run businesses to use their homes as collateral for
business loans.

The current credit crunch has left SMEs having to put up more than they
bargained for with many banks now charging penal rates of interest or refusing
to extend loans, unless personal assets are offered as security with the
favoured being the main home,
Guardian reported

Burley CA Mark West said firms were rushing to their banks for unsecured
loans only to find strict conditions applied.

‘The credit squeeze has given lenders the opportunity to compel SMEs and
specifically the directors to provide personal guarantees to secure the
corporate borrowings of their business, clearly at a time they need the most
help,’ he said.

Personal insolvencies have risen dramatically and business insolvencies have
remained steady. Insolvency specialists fear this may change in light of current
bank practices.

Further reading:

crunch gets personal for directors of family firms

for change in insolvency law

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