Question :
Do I use my personal funds to help my business get through this lockdown or do I use the banks ‘free’ money?

Question submitted 25/03/20 @ 08:47pm
Industry: Funding & Finance
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    Kia ora Tracey – this is a big question! There is no clean answer to this. It is personal choice based on you as an individual. No-one should sway you either way. But there are things you can consider to help your thinking:
    1. The cost of borrowing – the OCR, and more importantly the yield curve and the cost of money that banks pay on the wholesale markets is tracking all very very low. Central banks are rolling out quantitative easing programmes right now. The net result of this is that the cost of borrowing is going to stay dirt cheap for a long long time.
    2. The risk of repayment – regardless of how cheap money is to borrow, every loan carries the cost of you being able to repay interest (and principle). Which is dependent on you having the cash to repay. You need to establish your comfort levels on this. You could run some simple scenarios on excel to play out what you can afford.
    3. Blurring the lines between personal and business – many people advise to keep things separate. Not only is it cleaner, but it also stops anxiety, pain, fall out creeping into personal lives (impacting loved ones). There are lots of disaster stories here. THAT SAID, there are also lots of courageous stories of people’s success being hinged on them doing everything it takes to keep things going. This works well when people are really good at strategically pivoting and innovating. And this ultimately depends on the type of person you are.
    I hope this helps. Go well


    Take the banks loan if you can get it. It is not free money. You have to pay it back.

    I dont know if banks will require a personal guarantee for these loans

    If we dont get back to work soon and your business fails you may be able to retain your personal assets


    Depending on the terms available from the banks and how much you are talking about, then bank funding would be my choice. I noticed yesterday that ASB (who seem to have most facilities on offer now) said they would be posting in their website on Friday, what the Govt. guarantee bank funding structure will look like, so maybe worth holding out until the details of that are published – presume by all banks.

    My brother in the UK has been granted a very large loan repayable over 3 years under the UK scheme, with the bank firstly insisting on a PG from all customers but then retracting when the govt. got wind

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