Guarantor Loans: Real Life

The Mistake

Unfortunately for Jack, after 10 years in business, he and his father made the decision to trust a new addition to their family: his sister’s husband Mike. Mike was in property and proposed a merger of the business to help expand its income stream. In the end, he made some very bad decisions with the family’s money and they lost everything. Jack’s father had to remortgage his house. Jack had two young teenage children at that time and a family to support and so he was forced to go and work for a big property developer, where he was living a fast-paced life that took a toll on his relationships and his health. It also prevented him from completing jobs in his own way – he knew he could do better.

New Options

When the opportunity arose to work for a much smaller developer, Jack jumped at the chance. He had no savings and he would have to accept a pay cut if he took the job but he would have more freedom and be able to work with a smaller and more focused team. He took the job and never looked back.

Then one day he was faced with a choice – he was offered a partnership with the developer but would need a £5,000 buy in to have even a small stake in the business. His father had also hinted he could take over the business he rebuilt after Mike’s disastrous investments – for that he would need £7,000 to transfer ownership and ensure he had enough to cover the first few months. Plus, Jack was offered the chance to take over the lease his local coffee shop where he breakfasted every day for two years.

Jack is a huge foodie and his passion for food had begun to feel more important by the day. His children were now grown up, he and his wife had recently divorced and he wondered whether this new challenge was the right direction for him. He and Mary, the owner of the coffee shop, had become increasingly close over a shared love of bacon sandwiches, fantasy travel destinations and great coffee and she had said he could take over the business at a discount – all he needed was £8,000.

Problem Getting Finance

Although Jack had yet to make up his mind about which option was best for him, he knew that he would need cash to take advantage of any of these opportunities. He had been unable to re-save what he had lost to Mike due to the pressures of supporting a family and then through the divorce. So, he started by making an appointment with a well-known high street bank to talk about his credit options. He thought he could ask for a personal loan based on his income. Unfortunately, the bank was not helpful. Two late mortgage repayments during the divorce had damaged his credit score and he still had substantial debts that had been allocated to him as part of the divorce settlement.

Next, Jack went to see a small business advisor about a loan. He hoped that either his father’s business or the coffee shop business could act as security for what he wanted to borrow. He thought that the lender would be more open to allowing him to borrow if the loan was being made to a business, despite the issues with his credit. However, the business advisor was clear that he was not an appealing candidate. He did not currently own either of the businesses, neither of which had a particularly high income, and he had no proven track record with them. So, any lending to either business would have to be guaranteed by him. Because his credit score was poor he didn’t have enough financial clout to be the guarantor.

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The Guarantor Loan

This gave Jack an idea. Although he didn’t have a great credit score he knew plenty of people who did. All of them knew how hard he worked at whatever he put his mind to and they would want him to have a second chance. So he asked his sister about her credit score – having divorced Mike she was working in IT and had a great salary, her own house and no debts. She had a very high credit score and agreed straight away to be Jack’s guarantor. So, Jack applied for a guarantor loan with his sister providing the creditworthiness where his own credit history was letting him down.

Jack’s application for the loan was accepted and he was able to borrow at a rate of interest that felt reasonable and to make repayments over a period of time that he could afford. As for the route that he decided to take at this big crossroads in his life? Well, you can now find Jack behind the counter at The Roasted Bean serving up his speciality coffee to local patrons who love his lattes with their breakfast bacon butties. Or you might find him in a mobile coffee van at festivals or foodie events – Mary was leaving the business to buy a van to convert so she could pursue her dream of travel + coffee. When she and Jack realised they had fallen for each other they decided to merge the two businesses to combine their shared passions, brewing and roasting in the café and being on the road. Good thing Jack was smart enough to apply for that guarantor loan.