Who Inherits Your Business Debts

Attention small business owners – What happens to your business debts if something was to happen to you??

Most businesses, in order to start or expand will have organised one or more loans. More often than not, because these loans are of substantial amounts, they require a personal guarantee.

A personal guarantee means that the loan is secured against personal assets, most commonly your home. These ‘guarantees’ are not extinguished until the loan is repaid in full or revoked by the bank or creditor. In the sudden event of death, the guarantees and loans do not die too! Repayment or renegotiation is a critical financial issue that is inherited by other guarantors or your family.

Appropriate Key Person Insurance, Business Succession Planning & Guarantor Protection Business Insurance can help remove this

Margaret’s Story:-
As Margaret and her two young children said their farewells to their husband and father on the day of his funeral, they did not realise that their pain and suffering was about to get worse.

Nathan was tragically killed in a car accident driving home one day after work. He had worked hard to build his business to the point where it provided a financially stable environment for his family.

As with many businesses, Nathan took out significant loan and gave personal guarantees without realising the full ramifications of what those guarantees meant.

Nathan’s business debts did not disappear with his death, as many people think will be the case. His estate became liable for his loan. As a consequence, Margaret was left with insufficient funds to discharge the liability and was forced to sell personal assets and the family home to meet his liability.

Had Nathan taken out personal guarantor protection insurance he could have provided the financial security for his family that he intended.

If you are a small business owner and would like to discuss in more detail, please contact the team at JBS.