Protecting you and your business: Managing debt

Protecting you and your business: Managing debt

Many people have a mortgage on their home. Many will take out life cover so the debt would be repaid if they died. This type of insurance provides peace of mind that their family can go on living in the home with no lender chasing the debt if the worst was to happen. 

Many businesses also have some type of debt - commercial loans, mortgages, overdrafts. These will hopefully help the business grow and prosper. However, what if owners or the loan guarantors die or become critically ill? The debt could soon become a significant liability if the business doesn’t have sufficient assets to repay the loan. 

A commercial loan will almost certainly have to be repaid on the death of the guarantor even if it’s a director’s loan. If this is the case, where does that money come from? It could leave a deficit in the accounts if taken from the business. 

The business could take the financial burden because if there aren’t sufficient assets to cover the debts, lenders can seek repayment from the guarantor’s estate. This could even mean calling on personal assets including the family home. 

Essentially, every business should consider insuring debt. Ironically, the businesses that are least able to repay their debts (often smaller businesses and start-ups) are more vulnerable and less likely to have bought cover. 

Business Loan protection is a type of Insurance policy for businesses which will help pay off business debts if the owner/debt guarantor dies (Critical Illness cover option is also available). 

Anyone who has guaranteed the debts is covered – usually the owner, but this can be a partner or director of the business. The business benefits from this because debts are repaid at a difficult time. 

We are here to help 

At Azets, we have a team of Financial Planners whose aim is to help businesses and individuals ensure they have the right protection for them, their families and their business. Our Wealth Management team will discuss and explore with you your particular circumstances, with the aim of developing a strategy so that appropriate arrangements and protection mechanisms are in place should anything untoward happen. 

For further information on managing debt, please get in touch with your usual Azets advisor or a member of our Wealth Management team.

The purpose of this blog is to provide technical and generic information and should not be interpreted as a personal recommendation or advice. 

Azets Wealth Management is a trading name of Azets Wealth Management Limited, which is authorised and regulated by the Financial Conduct Authority. Registered Office: Bulman House, Regent Centre, Gosforth, Newcastle upon Tyne, NE3 3LS. Company Number 05674020. Incorporated in England. Azets Wealth Management Limited is a subsidiary of Azets Holdings Limited.