BBL - extended repayment time

[Gettingthereslowly]

For those that have been successful in obtaining a BBL (and unfortunate enough to actually need one), are you sticking to the original 1+5year repayment schedule or opting for a longer term?

I was thinking of asking to increase the term up to the 10 years, but so long as I can afford it, make the repayments as if it was a 5yr term - giving me a bit of flexibility in case I need it.

It is the cheapest money my business has ever borrowed - if I can find a good use for it/return on it - then it would make more sense to string it out over 10yrs.

Are there any downsides to a 10 yr term?
(apart from extra interest, which one would hope is more than covered by the investment return in the business)

Will future lenders frown on it? (say in 5yrs time you need a business mortgage for a commercial property)
Will it affect credit scores?

 

[Gavin Bates]

Hi

In simple terms, they will look at it like any other loan. So moving forward if you are applying for a mortgage they will take the payments into account when calculating your ability to repay the mortgage that you want.

I also wouldn't surprise that some banks may try to consolidate your BBL with other loans in the future to get a higher interest rate. It is noted that the new Business Recovery Loan can have a rate upto 15%!

Regards

Gavin

 

[Ozzy]

I'm no lender so just my opinions if was in your position;

Are there any downsides to a 10 yr term?

Not beyond what you have already said, it is the cheapest finance you could really obtain and if you can make a return on it that would make sense. The only downside is that it's a debt, but if you can service that debt then all is fine.

Will it affect credit scores?

By asking this question I'm assuming you're a Sole Trader and not a limited company, because if you was a Limited company then the debt is with the company and not you. So if you are a Sole Trader then the debt will show on your credit history like a credit card would. So long as you are paying the loan within agreed terms then you'll be fine, and potentially by the time you've paid it all back it could help even improve your credit rating.

 

[Mr D]

For those that have been successful in obtaining a BBL (and unfortunate enough to actually need one), are you sticking to the original 1+5year repayment schedule or opting for a longer term?

I was thinking of asking to increase the term up to the 10 years, but so long as I can afford it, make the repayments as if it was a 5yr term - giving me a bit of flexibility in case I need it.

It is the cheapest money my business has ever borrowed - if I can find a good use for it/return on it - then it would make more sense to string it out over 10yrs.

Are there any downsides to a 10 yr term?
(apart from extra interest, which one would hope is more than covered by the investment return in the business)

Will future lenders frown on it? (say in 5yrs time you need a business mortgage for a commercial property)
Will it affect credit scores?

We extended the time. Its costing us an extra £155 in interest as I recall - and reducing the payments by about £20 odd a month.
I know I can turn that small saving into far more turnover and considerably more profit than the cost.
At a conservative estimate that £20 odd a month saving can be turned into an extra £500 a year turnover - call it £300 profit. And compounded over the 10 years....

 

[Mark T Jones]

There are no downsides other than, as you said more overall interest.

Credit wise, as long as you pay on time it will show up as a loan that is being paid.

 

[bodgitt&scarperLTD]

I was planning on stretching it out to 10 years, as the interest is fixed and inflation not so much! But interested to hear other opinions.

My only concern would be that my mortgage is up for renewal in five years too, but all the machinery finance was no problem originally as it was obviously business related and I would presume that the BBL woudl be looked upon the same way.

 

[Mr D]

I was planning on stretching it out to 10 years, as the interest is fixed and inflation not so much! But interested to hear other opinions.

My only concern would be that my mortgage is up for renewal in five years too, but all the machinery finance was no problem originally as it was obviously business related and I would presume that the BBL woudl be looked upon the same way.

So what happens to your mortgage if you reduce the loan payments on this loan for 5 years then pay it off before the mortgage is up for renewal?

 

[BustersDogs]

I'm due to start paying mine in June or July and so unsure. I want to pay it off earlier as I don't like to have any debt. Then I think maybe it would be better to string it out as long as possible, as it's cheap debt. I am hoping to need a second vehicle in the next year or two, I could save up for one, with the money I'm not paying on the loan. That would be cheaper than paying this off quick then having to get a loan at normal rates. And I think inflation will make this debt cheaper in the long term, and doesn't it do your credit score good if you have debt you are paying back regularly on time? I don't have any other debt (sole trader), including no mortgage...

 

[Mr D]

I'm due to start paying mine in June or July and so unsure. I want to pay it off earlier as I don't like to have any debt. Then I think maybe it would be better to string it out as long as possible, as it's cheap debt. I am hoping to need a second vehicle in the next year or two, I could save up for one, with the money I'm not paying on the loan. That would be cheaper than paying this off quick then having to get a loan at normal rates. And I think inflation will make this debt cheaper in the long term, and doesn't it do your credit score good if you have debt you are paying back regularly on time? I don't have any other debt (sole trader), including no mortgage...

Yes, debt that gets repaid on time does help credit score, according to multiple credit score websites.

 

[Red Wood]

We extended the time. Its costing us an extra £155 in interest as I recall - and reducing the payments by about £20 odd a month.
I know I can turn that small saving into far more turnover and considerably more profit than the cost.
At a conservative estimate that £20 odd a month saving can be turned into an extra £500 a year turnover - call it £300 profit. And compounded over the 10 years....

What was the process of extending, was it straight forward? i'm 100% going to borrow it over the 10 years if we can, interest rate too good

 

[Mr D]

What was the process of extending, was it straight forward? i'm 100% going to borrow it over the 10 years if we can, interest rate too good

Literally go into the account at the bank (the loan shows like a seperate account in Santander website after logging in.
Then select repayment options. Then click the button for that option.

Followed by a series of questions.

Has the business ceased trading?
Plus a couple more. And then you have a screen giving you details of the extra interest etc. Click to accept. Process took probably 30 seconds or so.

Then a couple of days later apply for a different option.... payment holiday.

 

[Red Wood]

Literally go into the account at the bank (the loan shows like a seperate account in Santander website after logging in.
Then select repayment options. Then click the button for that option.

Followed by a series of questions.

Has the business ceased trading?
Plus a couple more. And then you have a screen giving you details of the extra interest etc. Click to accept. Process took probably 30 seconds or so.

Then a couple of days later apply for a different option.... payment holiday.

I didn't realise you could also take the payment holiday as well as the extension. Thanks, you've made my Saturday

 

[DEFCON1]

Literally go into the account at the bank (the loan shows like a seperate account in Santander website after logging in.
Then select repayment options. Then click the button for that option.

Can I please ask.. How long has the BBL Account been showing on your Santander Account?
We applied the first week & got accepted & I've always found it odd that we've not got anything appearing for our BBL.

 

[DEFCON1]

Regarding extending the loan to 10 years..
Even with the bit of extra interest as mentioned for the lower payments/potential longer term.
For me it's bit of a no brainer as overpayments aren't restricted or penalised in any way.
Therefore, even if you extended to 10 Years you can still pay off the loan (assuming you have the funds) any time you like later down the line. Meanwhile getting the benefit of lower monthly payments.

 

[Aniela]

While extending the BBL doesn't hurt your credit score, some banking providers state it may affect your creditworthiness with them if you apply for loans in the future.

In theory, extending the loan could affect any lending from that same provider. So plan to get a mortgage, or plan to get a loan etc with the same provider, it could affect that.

 

[Red Wood]

While extending the BBL doesn't hurt your credit score, some banking providers state it may affect your creditworthiness with them if you apply for loans in the future.

In theory, extending the loan could affect any lending from that same provider. So plan to get a mortgage, or plan to get a loan etc with the same provider, it could affect that.

I agree with this, however, banks have very strict lending criteria anyway, so take it while you can.

 

[Mark T Jones]

I agree with this, however, banks have very strict lending criteria anyway, so take it while you can.

Bank (or lenders) will look at where the money went, and how it affects affordability on future borrowings, so as long as you are borrowing sensibly it's unlikely to be a specific issue.

 

[SillyBill]

I'm due to start paying mine in June or July and so unsure. I want to pay it off earlier as I don't like to have any debt. Then I think maybe it would be better to string it out as long as possible, as it's cheap debt. I am hoping to need a second vehicle in the next year or two, I could save up for one, with the money I'm not paying on the loan. That would be cheaper than paying this off quick then having to get a loan at normal rates. And I think inflation will make this debt cheaper in the long term, and doesn't it do your credit score good if you have debt you are paying back regularly on time? I don't have any other debt (sole trader), including no mortgage...

Same. Could pay it back in full now but if we need to borrow money later which is highly possible I'd rather have this very cheap debt facility kept online. I was astonished at how easily it landed last year and how generous the terms are, the abuse of this scheme must be monstrous.

 

[Aniela]

Same. Could pay it back in full now but if we need to borrow money later which is highly possible I'd rather have this very cheap debt facility kept online. I was astonished at how easily it landed last year and how generous the terms are, the abuse of this scheme must be monstrous.

You would think the government could have added an easy requirement of if the business no longer needs it, it's required to be sent back on the condition that if business worsens again, it can be re-applied for on a sort of fast-track system.

A way to protect taxpayers from businesses holding up to 50k that they don't actually need.

If a company is sitting on 30k of taxpayers money that they can pay back in full if they wanted for example, because business has been going really well, but chooses not to give it back as it's on cushty terms, that's a sort of abuse of the scheme too. (It's only not abuse because if it's paid back and then things worsen again, you're screwed, so people can call the card of "we've got it just incase.).

It's there to support a business to bounce back from bad times or stop them going under. It's not there for a business owner to be sitting back grinning on pretty much free money they've got sitting around.

 

[Mark T Jones]

Same. Could pay it back in full now but if we need to borrow money later which is highly possible I'd rather have this very cheap debt facility kept online. I was astonished at how easily it landed last year and how generous the terms are, the abuse of this scheme must be monstrous.

Not dissimilar here, but for me it's a trade off between the challenge of running a bit lean whilst things get back to normal or the comfort of having a buffer.

I dipped in by a few K; but am now in credit.

TBH it will be the toss of a coin in 6 weeks.

 

[SillyBill]

You would think the government could have added an easy requirement of if the business no longer needs it, it's required to be sent back on the condition that if business worsens again, it can be re-applied for on a sort of fast-track system.

A way to protect taxpayers from businesses holding up to 50k that they don't actually need.

If a company is sitting on 30k of taxpayers money that they can pay back in full if they wanted for example, because business has been going really well, but chooses not to give it back as it's on cushty terms, that's a sort of abuse of the scheme too. (It's only not abuse because if it's paid back and then things worsen again, you're screwed, so people can call the card of "we've got it just incase.).

It's there to support a business to bounce back from bad times or stop them going under. It's not there for a business owner to be sitting back grinning on pretty much free money they've got sitting around.

I look at it from this perspective: I'm out to make as much money as possible. Typically the government and local authority is an obstacle to be overcome in this pursuit, painfully so at times. On this rare occasion where they've made something easier (access to capital which is a requirement to grow a business) I won't look this gift horse in the mouth.

It was there to support a business is the key distinction.

I would also have agreed with you prior on tax payers money but with the roaring inflation ripping through (unparalleled IME) its fundamentally clear it wasn't anyone's money. It used to be the market bought the gilts. The money is now a stroke of a keyboard at the Central Bank who will print any deficit it is asked for, easy come, easy go. Nothing in life is for free though, it will be "stolen" back with interest via the stealth tax of inflation which is taxable on everything. And it isn't an attitude of a cynic to know exactly how things work.

 

[bodgitt&scarperLTD]

It's not taxpayers money. It's 'the banks money'. In quotations because as Bill says, they just print it. The Government's risk is in underwiting the debt- so the cash positive business holding on to 50k at very cheap rates isn't costing the taxpayer anything. Sounds like sour grapes to me....

Love, Your favourite BBL fraudster

PS. I mentioned this in another BBL thread, but I just extended my 50k repayments out to ten years, took less than ten minutes to do (NatWest). 2.6% flat rate is what I'd pay on a loan secured against a brand new machine, so to have 50k unsecured at the same rate is amazing. It's been a gift for me, and has allowed me to take a few big steps forward. New premises, new (secondhand) machinery- which is currently all paying off and I wish I'd been able to do it years ago. It's amazing how much more productive a dry indoor yard and a fairly modern forklift makes things. It's allowed me to jump ahead two years in terms of capital investment. I've bought so much stuff I can't remember it all, but it's a good job I did with inflation heading the way it is. Double bonus. And I bought a house at the start of lockdown with a discount.

I feel like a proper jammy prick, but that doesn't mean I don't sympathise with people who's businesses have been impacted disproportionately. However, everyone needs some luck- the last generation bought up all the cheap houses, so it's my bite of the cherry as far as I'm concerned.

Does anyone reckon the banks will try to weasel out of the interest rates being fixed for the duration of the loan?

 

[Mark T Jones]

It's not taxpayers money. It's 'the banks money'. In quotations because as Bill says, they just print it. The Government's risk is in underwiting the debt- so the cash positive business holding on to 50k at very cheap rates isn't costing the taxpayer anything. Sounds like sour grapes to me....


Does anyone reckon the banks will try to weasel out of the interest rates being fixed for the duration of the loan?

Not strictly true - though that is the case for CBILS & Recovery Loan, BBL is actually a pot of cash provided by the Government via BBB

And no, they won't.

Ignoring active fraud - spending your BBL is excellent for everyone. - whether that is on business assets, marketing or a new lawn or just eating out. Sitting on it (like I am) could constsitute wasting taxpayers' money - albeat completely legally.

 

[Red Wood]

The last generation didn't get cheap houses from openly admitting committing fraud, they were just lucky.

No they didn't, but you can guarantee the self-certify mortgages of the past were abused by a vast number of people to buy these cheap houses helping to inflate the overall cost in the market due to lapse lending. So not a clear-cut rebuttal.

 

[Aniela]

No they didn't, but you can guarantee the self-certify mortgages of the past were abused by a vast number of people to buy these cheap houses helping to inflate the overall cost in the market due to lapse lending. So not a clear-cut rebuttal.

That's quite true, to be fair.

 

[Ozzy]

Interestingly, when we applied for a CBIL for our business. We didn't need one as it happens, but as the deadline for applying was closing and it was cheap finance we took out as much as we felt reasonable - with some guidance from our relationship manager at our bank (one of the big 5 - won't name because...)
Then as the CBIL was approved, along with the confirmation of money on the way he also included a product brochure of their short and medium term investment portfolios...just in case we wanted to invest some money into some funds for a year...and no we didn't ask for this information.

I also agree with @Mark T Jones above, whatever the covid loans is spent on is good for economic recovery. Sitting on it doesn't help anyone, but spending it on property, machinery, or basically anything gets the money into the system and helping businesses recover.

 

[Talay]

We have a number of BBLs and we crunched the numbers and decided to take all options up.

1. Extend to 10 years
2. No repayments at all for 6 months.
3. Use up all interest only options consecutively if available

Why ? the worst you are doing is paying 2.5% interest on capital which you can use to generate way more than a 2.5% return so it makes no sense to repay it until as late as possible.

Also, any inflation is going to eat away at the real value of the debt and if inflation hits 2.5% then the interest is inflated away anyway.

Lastly, the increased numbers are somewhat meaningless when you consider the impact over 10 years. I have previously repaid debts quickly only to rue the day and with I had kept liquidity available.

 

[Aniela]

We have a number of BBLs and we crunched the numbers and decided to take all options up.

1. Extend to 10 years
2. No repayments at all for 6 months.
3. Use up all interest only options consecutively if available

Why ? the worst you are doing is paying 2.5% interest on capital which you can use to generate way more than a 2.5% return so it makes no sense to repay it until as late as possible.

Also, any inflation is going to eat away at the real value of the debt and if inflation hits 2.5% then the interest is inflated away anyway.

Lastly, the increased numbers are somewhat meaningless when you consider the impact over 10 years. I have previously repaid debts quickly only to rue the day and with I had kept liquidity available.

The only (potentially major, in my opinion) downside is if you intend to borrow money or raise investment in the next 10 years.

You have to remember that when applying for a BBL you were declaring your business was being adversely affected; AKA the business was struggling or likely to struggle.

Extending it to 10 years then also has the side effect of self-declaring the business can not afford repayments and needs to extend the loan period to be able to afford them. So not only by getting a BBL did you say your business was affected, by extending, you're essentially saying to the lenders that you can't afford your debts

While it sounds good to extend on the surface, I feel this is going to come back to haunt some people in the future.

 

[Ozzy]

The only (potentially major, in my opinion) downside is if you intend to borrow money or raise investment in the next 10 years.

In practice what will happen is a lender will look to consolidate any loans into the new facility. They don't tend to decide on whether a business is viable or able to borrow by looking at the borrowing new and old separately, but look at what the consolidated position will be, and whether the business can afford the consolidated position.

So not only by getting a BBL did you say your business was affected, by extending, you're essentially saying to the lenders that you can't afford your debts

Speaking to my contacts in the banking sector about this, as we have many times as it's always the topic of conversation, they don't look at CBILs and BBLs in the same why they do traditional lending. They know and realise many businesses took out C loans "just in case" as it has been low risk and low cost lending, and the banks are encouraging businesses to extend the lending term.
Our business bank gave us a couple hundred K covid loan and then also offered an investment fund to put it in so we could earn some interest on it, and then pay it back in full at the end of the interest free period. That was the banks recommendation, not ours.

 

[MarkOnline]

You have to remember that when applying for a BBL you were declaring your business was being adversely affected; AKA the business was struggling or likely to struggle.

Extending it to 10 years then also has the side effect of self-declaring the business can not afford repayments and needs to extend the loan period to be able to afford them. So not only by getting a BBL did you say your business was affected, by extending, you're essentially saying to the lenders that you can't afford your debts

While it sounds good to extend on the surface, I feel this is going to come back to haunt some people in the future.

The word "adversley" has a different meaning in the dictionary to the one you have adopted. If the criteria for a BBL loan was " will your business go bankrupt without the loan......" then you may have a point.

As for affecting your future ability to raise funds it depends. If you took a BBL loan for £50K and your cash position is growing at £10k a month since receiving the funds (for arguments sake) Im sure a lender might consider extending more funds if the numbers work.

You seem to assume that anyone who took out a BBL loan was either a con merchant or a deadbeat. Extending the loan may also indicate to a lender, providing your numbers show financial prudence etc, that you understand how to leverage funds intelligently.

 

[Aniela]

Speaking to my contacts in the banking sector about this, as we have many times as it's always the topic of conversation, they don't look at CBILs and BBLs in the same why they do traditional lending. They know and realise many businesses took out C loans "just in case" as it has been low risk and low cost lending, and the banks are encouraging businesses to extend the lending term.
Our business bank gave us a couple hundred K covid loan and then also offered an investment fund to put it in so we could earn some interest on it, and then pay it back in full at the end of the interest free period. That was the banks recommendation, not ours.

In regards to your bank offering that, I would argue that's legalised fraud. Can completely understand why businesses would choose to do it. It's literally free money.

However, to me, it's abuse of the system. If anyone can see 6 months in or whatever, that you're not going to use it, it should be returned.

 

[Aniela]

The word "adversley" has a different meaning in the dictionary to the one you have adopted. If the criteria for a BBL loan was " will your business go bankrupt without the loan......" then you may have a point.

As for affecting your future ability to raise funds it depends. If you took a BBL loan for £50K and your cash position is growing at £10k a month since receiving the funds (for arguments sake) Im sure a lender might consider extending more funds if the numbers work.

You seem to assume that anyone who took out a BBL loan was either a con merchant or a deadbeat. Extending the loan may also indicate to a lender, providing your numbers show financial prudence etc, that you understand how to leverage funds intelligently.

I don't assume that about anyone taking out a BBL. A lot of businesses that needed it and might not have survived without it, took out a BBL and rightly so.

That being said, based on what some people have said on these forums, it does seem like there was a lot of dishonest/mis-use of the scheme too.

It will be interesting to see how banks actually treat BBL's (especially extended ones) in the years following. Maybe it wont make a difference, maybe it will.

Depending on who you talk to, some people are saying certain lenders are treating a BBL as a business in distress automatically. There hasn't been any real case situations to show that causing problems, so hard to know how true it is.

 

[Ozzy]

In regards to your bank offering that, I would argue that's legalised fraud.

I had a feeling you’d think that

It will be interesting to see how banks actually treat BBL's (especially extended ones) in the years following. Maybe it wont make a difference, maybe it will.

It won’t make a difference. They’re taking a pragmatic approach, so long as they get repaid they won’t mind how it was used and whether it was needed or not.
The ones that don’t get repaid the Gov as we have seen are laying on the pressure to investigate for fraud.

 

[bodgitt&scarperLTD]

Natwest refused to consider my personal overdraft history when switching to a business account, but then in the same breath gave me 50k as opening balance on a brand new business account via a BBL. You can be sure they are assessing credit worthiness behind the scenes. This will most likely work both ways, so I reckon you are both right in a way.

 

[Ozzy]

You can be sure they are assessing credit worthiness behind the scenes.

The irony is if you don't have any debt you are not credit worthy, but if you are in debt and keeping your head above water (servicing that debt) then you are credit worthy.
It's always worth having a bit of debt hanging around incase you need to borrow some money.

 

[japancool]

Reading these threads just makes me all the more annoyed that I couldn't get one, after I was turned down for a business account from my personal bank, and had to jump through hoops for months before I could get an account anywhere else.

Oh well. Not that I would have any use for the money, although I'm sure I could think of something. I need a car.

...and driving lessons.

 

[Mr D]

Interestingly, when we applied for a CBIL for our business. We didn't need one as it happens, but as the deadline for applying was closing and it was cheap finance we took out as much as we felt reasonable - with some guidance from our relationship manager at our bank (one of the big 5 - won't name because...)
Then as the CBIL was approved, along with the confirmation of money on the way he also included a product brochure of their short and medium term investment portfolios...just in case we wanted to invest some money into some funds for a year...and no we didn't ask for this information.

I also agree with @Mark T Jones above, whatever the covid loans is spent on is good for economic recovery. Sitting on it doesn't help anyone, but spending it on property, machinery, or basically anything gets the money into the system and helping businesses recover.

Helping businesses recover. In Poland, Lithuania, Thailand, Kenya, USA etc.
Even some in UK.

Money gets sloshed around. Too much money is a bad thing for some, good thing for others.

Think much of what I borrowed got spent in UK businesses buying imported goods from overseas. Plus Ebay, Amazon, and one very nice old gentleman in France.

 

[Mr D]

I don't assume that about anyone taking out a BBL. A lot of businesses that needed it and might not have survived without it, took out a BBL and rightly so.

That being said, based on what some people have said on these forums, it does seem like there was a lot of dishonest/mis-use of the scheme too.

It will be interesting to see how banks actually treat BBL's (especially extended ones) in the years following. Maybe it wont make a difference, maybe it will.

Depending on who you talk to, some people are saying certain lenders are treating a BBL as a business in distress automatically. There hasn't been any real case situations to show that causing problems, so hard to know how true it is.

The terms for the BBL were very loose. My business did very well from the lockdowns. Was the business also negatively impacted by the lockdown? Yes.
That is the nature of the trade. Everyone in the gift sector would be able to answer yes even if they were piling up the money from online sales - which at the time BBL came out they may not have been.

No gatherings. No parties. No weddings. Three major sources of spending taken out of the equation. No travel? Another major source of spending gone.
There will have been a lot of businesses both positively and negatively impacted by lockdown.

 

[commadus]

It seems as a no brainer to extend the term to 10 years?

No early repayment charges so you can say after 5yrs 1 month pay it all off.

So if you extend to 10 years and have paid off 30% and pay off another 20% in a lump sum - does the interest going forward be calculated on the outstanding amount or on the initial amount?

What I don't understand is when are the extra payments recorded against the capital outstanding? At the end of the month or year?

 

[jimbof]

It seems as a no brainer to extend the term to 10 years?

No early repayment charges so you can say after 5yrs 1 month pay it all off.

So if you extend to 10 years and have paid off 30% and pay off another 20% in a lump sum - does the interest going forward be calculated on the outstanding amount or on the initial amount?

What I don't understand is when are the extra payments recorded against the capital outstanding? At the end of the month or year?

I don't know if this is the general rule, but my own BBL with Metro is acruing interest on the outstanding capital daily as can be seen on their portal. I think it is safe to assume that there is no interest accruing on an amount repaid from the moment it is received by the bank.

Otherwise it would not be possible to pay back early and avoid interest payments.