I asked John how long he had been a taxi driver.
Three years, he said, although he previously drove taxi’s in the 70’s.
So, I asked him, what happened in between?
He told me that he ran a large transport company for many years, unfortunately, the margins were low and one year his company suffered a large bad debt.
He lost everything as his bank had asked him to sign a personal guarantee on the loan to his business.
I have heard similar tales many times over the years.
If you run a business, you need to speak to someone who understands what needs to be put in place to protect your business and family. Who understands accounts and taxation and also has some legal and financial planning knowledge. Someone who can provide the comprehensive financial planning input that a business owner needs. Someone who can connect all of the dots.
John should have received advice before he signed the personal guarantee:
- is there any alternative to taking a loan?
- is the business viable? If not, why take a loan, as you are only postponing the inevitable
- could John have converted his pension plans so that a loan could have been taken from his own pension?
- if there was no other alternative then John should have been advised how to limit the financial downside of the personal guarantee? This is something that we do, for our clients.
If you think that this does not apply to you, think, think again, and again.
Finally, John turned to me and said, you know this week I would have made the final payment on the house.
That really hit me.
I have thought about little else, since my chance meeting with John. A nice man let down by a lack of advice.
What I didn’t do during our brief discussion was to enquire about the effect on his marriage, I didn’t have to, it was etched on his face.
I felt John’s pain.
If you think that this does not apply to you, think, think again, and again.
Almost all the business owners I meet believe that it will never happen to them, it is good to be optimistic about life – but it is also sensible to have a safety net around both your business and your family.
If one of your Directors falls ill, or has an accident, or dies – how would this affect the company both operationally and financially. Of course, a catastrophe may not occur, but if it did, then sod’s law dictates it would happen at the worst time for the business.
Yes, there is a cost to setting up shareholder or partnership agreements.
Yes, there is a cost in drafting and executing wills and trusts for your family.
Yes, there will be a charge for advice.
Yes, you do need Lasting Powers of Attorney.
Yes, it is easier to do nothing, maybe you will strike lucky, maybe you won’t …
BUT
What sort of cost might you and your family have to pay without these arrangements?
