All responsible lenders have a duty of care to their customers to ensure that an applicant is not currently in financial distress and can reasonably afford the additional burden of a new loan repayment. A Personal Survival Budget (PSB) is a table that sets your own retained income against your own committed outgoings and calculates one of three possible results.
- Your retained income exceeds the value of your outgoings. No drawing will be required from your new business to meet your outgoings and the surplus is large enough to cover the additional monthly repayment of a potential start-up loan.
Ideal outcome. Your personal finances are unaffected by the new business and can cover the additional burden of the start-up loan.
- Your retained income exceeds the value of your outgoings. No drawing will be required from your business to meet your outgoings though the surplus is NOT large enough to cover the additional repayment of a potential start-up loan.
Positive outcome. Your personal finances are unaffected by the new business. However, the business will need to generate the necessary profit to be able to cover the monthly repayment of a start-up loan. Some evidence of Validation will be required (see BizBritain Guide to Validation).
- Your retained income is less than the value of your outgoings. You will be reliant upon your new business to provide a drawing to wholly or partially cover both your outgoings and the additional monthly repayment of a start-up loan.
Critical outcome. Your new business will need to generate profit from the outset. Clear evidence of customer demand or Validation will be required to demonstrate the likelihood of this.
Understanding the Personal Survival Budget (PSB)
The following are vitally important concepts and definitions which may affect the outcome of your start-up loan application. Please consider them carefully before completing your PSB.
PSB
Is designed to show your own financial position ‘right now’ as the business starts. Income that will no longer be received once the business starts, must not be included in the Income side of the PSB. Payments that will no longer be made once the business starts, must not be included in the outgoings side of the PSB
Retained income (if any?)
Your own income that is independent from the new business, that you will continue to receive once the business starts. Perhaps you work elsewhere on a part-time basis, or receive a pension, investment or property income? You may be in receipt of a benefit payment that is unaffected by your new business? You may of course, have no retained income at all. Income that belongs to spouses, partners or other household members must NOT be included in your PSB.
Outgoings
These must be yours alone. Again, the outgoings of spouses, partners or other household members must NOT be included in your PSB.
- Tip - Consider HOW your outgoings are actually paid?
- Are you 100% responsible for all of your ‘family’ outgoings?
- Are you 100% responsible for some of your ‘family’ outgoings, whilst others are 100% responsible for the remainder?
- Do you share all of your expenses on a 50/50 basis with a spouse or partner?