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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

to not want DH to put our house up for collateral to fund new business venture?

28 replies

Nanga · 06/08/2009 15:04

DH currently self-employed (recruitment) and business is slow. he's been buying and selling car parts on eBay as a side-line for a few months now and has been doing well - he's good at the wheeling and dealing and has found a definite niche.

He now wants to do this full time and has found a franchise opportunity. The thing is, it would require putting £75k against our house - we wouldn't have to actually find the money, but if the business failed, we would have to pay up.

Finding £75k would mean us having to sell the house and downsize considerably(we have 2 kids and are bursting to the seams already) so this kind of risk is not to be underestimated.

So.. he wants to do this... I don't want him to do this - the very thought of it brings me out in a cold sweat. I'd rather he continued with his current job and try and ride out the recession. We're at a deadlock. What do we do?

OP posts:
expatinscotland · 06/08/2009 15:07

YANBU.

Bad time to do it.

He needs to get a business loan.

If you're on the mortgage, he can't borrow against it without your permission.

So don't consent.

This is a roof over your heads, too much to risk during a recession.

weegiemum · 06/08/2009 15:07

£75k against your house in this economic climate?

Not on your nelly would be my response!

BecauseImWorthIt · 06/08/2009 15:11

This is a really hard one. I run my own business but have not been able to invest in new enterprises because my DH wouldn't countenance the house being used as collateral.

I have had to accept that he is much more risk averse than I am, and that it would be terribly distressing for him if all had gone wrong and we lost the house, so I really sympathise with you, and would concur that this is an untenable risk.

But it's not an easy one. I still, sometimes, resent him for it, even though I know how important financial security is to him.

All I can say to you is this - ask him to take you through the financial side of the new venture. If it's a franchise, is it already a business that's operating profitably, or is it one to start from scratch? In other words, for the risk, is there already a known level of revenue? How much of a risk is this really?

Don't just say 'no' out of fear, but find out about it before you (both) reach your decision.

PeggyGuggenheim · 06/08/2009 15:11

It's hard, obviously, because you want to support and encourage him - but I think your cold sweat is exactly the right response. He might interpret your unwillingness as a vote of no confidence but you're going to have to cross that bridge. Absolutely NO WAY should you let him do it. Good luck.

FedUpWithRainyDevon · 06/08/2009 15:13

Why does he need 75k? If he's doing ok at the moment why not just build on what he's got? Franchises seem to me a way to get someone else rich while you take all the risk. I own half of a business which we've built up from scratch with no risk, and it's all ours, far more satisfying!

I wouldn't be able to sleep if I put that much into a business so why can't he just carry on with his current job and build the ebay business up slowly, until he can do it full time?

A good website, high ranked on google, coupled with a few ads in a relevant magazine will get his business name out there, and that definitely doesn't cost 75k.

MrsBadger · 06/08/2009 15:14

my gut is right with yours

when dh left his job to set up his own business that was my one condition - he could borrow from the family funds: all the rainy-day money, all the holiday money, all the emergency-new-boiler money (and indeed he did and it worked and he has paid it back) but he could not risk the house

It is one thing to have to take out a loan if the boiler explodes and you have no savings to draw on, but another to have to sell the house.

However you do have to consider the likelihood and extent of business failure - we had very fixed 'review points' and 'escape strategies'. This wa s5y ago so I can't remember exactly, but we had a 6m Review to see if the plan was workable at all, at which point DH was prepared to go back and get a job if it looked like it wasn't going to. Same again at 12m etc
The trouble with this frachise opportunity seems to be the huge potential startup cost - DH's business, like your DH's current one, needed very little startup capital as it was basically him in the spare room with a PC and a phone - no premises and no stock.

How often do these opportunities come up? Is it realistic for him to spend (say) 6-12m working up the carparts business by himself and see how he's doing after that?

ajandjjmum · 06/08/2009 15:14

DH and I sold our house to finance our business when we set up BUT it was before we had children. That puts a whole different slant on it - I wouldn't do it now.

I have friends in recruitment and it is very very hard at the moment. Could your DH not continue doing bits on ebay, rather than invest in a franchise?

Good luck - must be hard for you.

Callisto · 06/08/2009 15:17

£75k is a big amount of money to raise for something like this - I would be looking very closely at the franchise 'opportunity' to make sure it is legitimate. Why can't he grow things slowly - get a smaller loan from the bank and invest in some parts and continue to be entirely his own boss?

atworknotworking · 06/08/2009 15:33

nanga I am soo with you on this, please don't agree to it, house prices are still falling, youv'e got equity not many people have these days please hang onto it.

Franchises are designed to look fab, with catchy marketing and a couple of write ups about how well, bill n ben have done and sue and phil realised their dream and retired in three months, it's all pants. If you have £75K that will buy you a hell of a lot of car parts, in these hard times you could get some fab discount deals / payment terms with suppliers, if you have to invest capital try to take it out of what DH is currently making, or reach a compromise and re-mortgage 10 - 15K to buy stock set up a site with, paying back 15K is a lot easier than 75 if it all goes tits up and for a relitvely small amount on top of your mortgage payments you may not notice so much.

These too good to be true things always are, I know from experience, support DH in this go through all the facts and figures etc, make some suggestions be a team and work together that is so important. But please don't buy a franchise if it were that simpe everyone would do it and we'd all be retired. It's good to diversify at these times and there are things that people will always need to buy car parts, food etc, you can set your own website up really easily now, a lot of companies charge a fortune and monthly subscritions, I know cos I've tried, your'e probably better off on ebay, gets the traffic, and people are looking for bargains, I sold loads on ebay, as opposed to 3 things of my very expensive shop in a year.

Also look at being a ltd company if your'e not already.

macdoodle · 06/08/2009 15:44

DONT DO IT!!
My XH business loan for his (now failed) business is secured on my house and in joint names!
I am now in the position of going through a nasty divorce, having to keep funding my XH business whilst not seeing a penny and at rsik of losing my house!
When I did it I never expected to be in this position in a million years DONT DO IT!!

Original poster
Nanga · 06/08/2009 15:58

this is absolutely solid gold advice from all you amazing, wise women. i really thought i was being an absolute cow to put a brake on his idea. there is so much here i'm going to take away and suggest we do. thank you so much.

OP posts:
LadyGlencoraPalliser · 06/08/2009 16:50

My father ran a very successful family business for 30 years. Then it got into trouble and he secured loans against our house in order to rescue the situation. Unfortunately, the business eventually failed and we lost everything - our house, our income (all of us who were old enough worked in the business) and everything we owned that didn't fit in a suitcase or we couldn't ask relatives and friends to store for us. We had to start all over again in a different country. I can't even begin to describe how horrible the next few years were.
Moral of the story - never, ever, secure a loan on your house or sign personal guarantees for business loans. It's just not worth the risk.

Morloth · 06/08/2009 17:16

Hell NO.

DH likes to play with money, mostly stock market and property but our house (the one in Australia) is absolutely off limits. It is paid off and in my sole name. If all of this goes pear shaped we at least have someone good to live.

You MUST keep your house safe, there is no amount of money worth risking your home for IMO.

atworknotworking · 06/08/2009 22:23

LadyGlencoraPallister that is so sad, I hope that you are settled again now.

OP Please be careful, I'm desperate to expand my bis but on no account will I ever secure my home, it's my DD's security and she has to come first. Try the bank for a business loan, the deals are a bit naff atm, and you will need a hefty % to put in thats if your bank are actually lending they seem to be making a profit again but they arn't passing it around, but that's another issue. Their are some grants kicking about and theres the Government backed guarantee scheme, which will guarantee 75% of a bank loan, get in touch with your local business link they offer advice on funding and its free.

georgimama · 06/08/2009 22:26

YANBU.

If the franchise is worth its salt, a bank will lend it to him.

Don't be bullied and don't let him do it.

LadyGlencoraPalliser · 07/08/2009 00:14

Thanks AWNW. It is a very long time ago now and we're well over it, but it scarred our family quite deeply. I wouldn't want any other family to go through what we went through.

Quattrocento · 07/08/2009 00:17

YANBU

Did you know that over 75% of start-ups fail?

choosyfloosy · 07/08/2009 01:13

Not with kids to look after. My father guaranteed a business with our house and we lost it. My parents' relationship never recovered.

Why can't he just do the car parts work full-time? What will the franchise offer him that his own sweat won't?

SpankyCnut · 07/08/2009 05:11

Don't do it. Don't even think about it.

My DH started his business about nine years ago, and even though we didn't have any kids and I was earning very good money, it was still terribly stressful. But at least we always knew that as a limited company, he could walk away. If we'd had the threat of losing the house hanging over us, it would have been truly horrific.

I can't see why it has to be a franchise opportunity either. Surely building up from a sideline is the most stable way to grow.

SparkleandShine · 07/08/2009 06:35

Ok I have a question. he's doing well selling car parts on ebay - why not continue on a bigger scale - why does he need a franchise?

3littlefrogs · 07/08/2009 07:08

NEVER NEVER NEVER use your house as collateral.

Even when not in the midst of a recession this is a very risky thing to do.

What is his contingency plan if you lose your home???

3littlefrogs · 07/08/2009 07:09

Franchises usually make money for the people selling you the franchise...............

refriedbeans · 07/08/2009 07:13

100% NO

traceybath · 07/08/2009 07:17

Well it depends.

We sold our house last year and all our equity has been invested in DH's business. However i have a lot of faith in DH and it is a succesful business which has built on what he's done over the last 15 years.

It clearly is a risk though and its whether you're prepared to take that risk. I'd want to know a lot about the proposed venture - returns/profit etc.

As an aside Mr Boden put his house up as collateral for his business and he's done quite well

cookiemonster100 · 07/08/2009 09:22

Hi Nanga - my advice - don't do it!

My DH wanted to do the same a few years back and I refused to let the house act as security. To cut a long story short he
lost his business last yr and unbeknown to me he borrowed alot of money on cards/loans etc. I only found this out when we started to get demands. It caused alot of upset and it has taken a long time to trust him again. If we lost the house I know I would have finished it.

The lesson I learnt is I wish we started small and built up a client base/ reputation / learning curve etc so when we went big we had something to build on.

Get him to increase the scale of what he is doing and put a % return away for investment when he needs funds to go to the next level. It may take awhile but he would have a good customer base to build on.

Hope this helps and good luck!