Bounce back loan

[Mr D]

Looks like we will now have ten years to pay back our BBLs! That’s some cheap money once you take inflation into account. Invested wisely now some will do very well out of this. Others sadly will struggle to pay it back still.

Be afraid.
Why are they suddenly offering 10 years when 6 was already extremely generous. What are they expecting over the next few years more than we are?
Perhaps a very long recession? Even a depression?

Do we take the government are just deciding to be even more generous out of the goodness of their hearts? Or are they having to change things because the latest data suggests 6 years is nowhere near enough?

 

[jimbof]

I guess I kind of get it.

They've allowed folk to borrow 25% of a years takings over 6 years. There is a year's holiday, and then they pay back over 5 years. When you work it out, you need 6% profit in your business to only just be able to service the loan on the current terms over those 5 years. I'm sure that doesn't actually work out for a more than a few businesses that they have 6% profit after paying all costs, but they've still taken the loans as they were desperate for the funds now.

Increasing it to 10 years might have a significant impact on the number of businesses who'd otherwise be tipped over the edge by their repayments. Just seems sensible, as the Govt is on the hook for the loans anyway. This way potentially less fallout in the economy and on the public purse. And the banks certainly aren't going to be complaining about collecting 2.5% fixed for a few more years given we could be looking at negative rates in the not too distant.

 

[Mr D]

I guess I kind of get it.

They've allowed folk to borrow 25% of a years takings over 6 years. There is a year's holiday, and then they pay back over 5 years. When you work it out, you need 6% profit in your business to only just be able to service the loan on the current terms over those 5 years. I'm sure that doesn't actually work out for a more than a few businesses that they have 6% profit after paying all costs, but they've still taken the loans as they were desperate for the funds now.

Increasing it to 10 years might have a significant impact on the number of businesses who'd otherwise be tipped over the edge by their repayments. Just seems sensible, as the Govt is on the hook for the loans anyway. This way potentially less fallout in the economy and on the public purse. And the banks certainly aren't going to be complaining about collecting 2.5% fixed for a few more years given we could be looking at negative rates in the not too distant.

6%?
You mean some of the people borrowing the money did not figure out that 6% profit was needed to repay it?

Perhaps those unable to find 6% for a large lump sum injection need to rethink the business model. Especially with all the other changes that have taken place, good and bad.

 

[jimbof]

6%?
You mean some of the people borrowing the money did not figure out that 6% profit was needed to repay it?

Perhaps those unable to find 6% for a large lump sum injection need to rethink the business model. Especially with all the other changes that have taken place, good and bad.

The amount of financial illiterates in business is surprisingly high, and even those who could work it out - with so many firms looking down the barrel of the gun, it seems quite understandable for folk to have taken the money now without thinking about how it is going to be paid for later.

The choice for many was close now, or maybe close in 2/3 years time when you might not be able to make the payments - seems like an easy choice to make, surely? Rishi is just dealing with the reality of that situation.

As an asside, I'm sure there is lot of business that doesn't have 6% profit, particularly if directors are paying themselves sensible wages where the business is more than a 1 man band shell company taking a ton of profit as dividends...

 

[Mr D]

The amount of financial illiterates in business is surprisingly high, and even those who could work it out - with so many firms looking down the barrel of the gun, it seems quite understandable for folk to have taken the money now without thinking about how it is going to be paid for later.

The choice for many was close now, or maybe close in 2/3 years time when you might not be able to make the payments - seems like an easy choice to make, surely? Rishi is just dealing with the reality of that situation.

As an asside, I'm sure there is lot of business that doesn't have 6% profit, particularly if directors are paying themselves sensible wages where the business is more than a 1 man band shell company taking a ton of profit as dividends...

If they are taking a ton of profit as dividends then they presumably can pay the BBL.
Its the ones unable to afford dividends who will have problems!

 

[Red Wood]

Are the loans automatically extended to a 10yr term?

 

[ecommerce84]

I think so.

I wouldn’t be surprised if a future government writes them off (partially at least if not in full) at some point so we won’t be in a rush to pay ours back.

 

[Red Wood]

For 2.5% we won't be either =]

 

[Mr D]

For 2.5% we won't be either =]

Best rate most of us are ever going to get for a loan of that size.
Surely most of us could make more with money than paying it off early.
Spend x grand paying it off. Versus using that same x grand to expand the business, increase profitability, reduce costs etc.

 

[simon field]

Great innit, the opportunity to let some other poor soul sort all this mess out!

 

[gpietersz]

I wouldn’t be surprised if a future government writes them off (partially at least if not in full) at some point so we won’t be in a rush to pay ours back.

I doubt it. Once the economy starts growing again they will have no reason to do that.

 

[Mr D]

I doubt it. Once the economy starts growing again they will have no reason to do that.

If the economy starts growing again.

We expect it to. But no guarantees.

 

[Red Wood]

If the economy starts growing again.

We expect it to. But no guarantees.

The question is whether it will within our generation or the next. Covid aside, the economy was overdue a hard reset. Covid provided the perfect catalyst.

 

[Mark T Jones]

I doubt it. Once the economy starts growing again they will have no reason to do that.

exactly. Why write off performing debt?

big questions will revolve around how hard they chase defaulters - particularly sole trader / partners and how much they dig into fraudulent applications.

 

[Aniela]

Full details haven't been released yet have they?

Could it be that loans that need extending pay a larger interest rate or similar?

If it doesn't increase, it's some of the cheapest and best cashflow borrowing that most small businesses will ever see in our lifetime.

 

[Aniela]

exactly. Why write off performing debt?

big questions will revolve around how hard they chase defaulters - particularly sole trader / partners and how much they dig into fraudulent applications.

Curious if the extension is mainly to aid in that.

Then banks/government have no chance of chasing tens of thousands of small businesses based on the current situation.

This extension of the BBL allows the spread of defaults to quite literally be spread out more.

The other side effect is that it will be a lot harder for defaulters to justify the loans they had taken out.

You stated your business was viable but now you can't pay just under half of the original amount each month, that you originally stated the business could support? How does that work. Please explain where the business viability was?

 

[jimbof]

The other side effect is that it will be a lot harder for defaulters to justify the loans they had taken out.

You stated your business was viable but now you can't pay just under half of the original amount each month, that you originally stated the business could support? How does that work. Please explain where the business viability was?

Is there a statement of viability? I don't think so...

You have to state you have been affected by COVID.
There's an undertaking that you're not "a business in difficulty on 31 December 2019" - but this is a technical term (good explanation of it here: https://www.buckworths.com/can-a-bu...LS and BBLS definition,as at 31 December 2019 ). And even if you are a business in difficulty you still qualify for BBLS in most cases (unless you've benefited from a large amount of state aid already), subject so some limitations on export.

Note I'm not defending anyone setting out to default, but I think some of these things you think folk are agreeing to at application time are just not correct.

 

[Aniela]

Is there a statement of viability? I don't think so...

You have to state you have been affected by COVID.
There's an undertaking that you're not "a business in difficulty on 31 December 2019" - but this is a technical term (good explanation of it here: https://www.buckworths.com/can-a-business-in-difficulty-qualify-for-a-loan-under-cbils-and-the-bounce-back-loan-scheme/#:~:text=A business must meet both,classed as “in difficulty”.&text=The CBILS and BBLS definition,as at 31 December 2019 ). And even if you are a business in difficulty you still qualify for BBLS in most cases (unless you've benefited from a large amount of state aid already), subject so some limitations on export.

Note I'm not defending anyone setting out to default, but I think some of these things you think folk are agreeing to at application time are just not correct.

I wasn't directly referring to what you're discussing but more in a general term.

A business 'should' only have applied for a BBL if they felt the business was viable and able to pay it back. Otherwise, lets be honest, it was a fraudulent application.

If a business can't support repayments of nearly half of what they originally agreed they could afford, it starts to open a lot of questions that may be hard to answer in regards to fraudulent applications etc.

 

[jimbof]

I wasn't directly referring to what you're discussing but more in a general term.

A business 'should' only have applied for a BBL if they felt the business was viable and able to pay it back. Otherwise, lets be honest, it was a fraudulent application.

If a business can't support repayments of nearly half of what they originally agreed they could afford, it starts to open a lot of questions that may be hard to answer in regards to fraudulent applications etc.

Well the exact undertaking from the BBB terms is:
"I/We have reviewed and understood the costs associated with repayment of the loan, that is, the principal and interest and repayment of capital during the period beginning from the second year of the loan until its expiry five years later. I/We confirm that I am/we are able and intend to complete timely repayments in future."

Clearly if you took the loan with no intention of paying back then you're committing fraud, but I think most other cases of business failure will be too difficult to unpick 2-10 years later for the sums involved (unfortunately).

 

[HungryforBBL]

I m in the process of opening a Barclays Business account and it is taking a long time. My Ltd Company used my personal account for all this time. Is there anyone here successfully applied BBL with Barclays? Do they look at personal credit score? Mine is a fair score with experience.Please advice Many thanks in advance

 

[greggy]

i have just opened a business account with my bank to apply for bbl,,,,i had to send my 2019 tax return to open it,,,,when i apply for loan do i need to put exact amount shown on 2019 account 85000 or can i put down 100000........will the bank check against the tax return i sent them and maybe turn down the loan...thanks

 

[Mr D]

Answer the question.

They asked for 2019 turnover? Give them 2019 turnover.

Many businesses don't have annual accounts covering 1st Jan to 31st December so figure can be different than annual accounts.

Not all BBL are given however. Perhaps they are more wary now of people who vastly overestimate figures.

 

[greggy]

Answer the question.

They asked for 2019 turnover? Give them 2019 turnover.

Many businesses don't have annual accounts covering 1st Jan to 31st December so figure can be different than annual accounts.

Not all BBL are given however. Perhaps they are more wary now of people who vastly overestimate figures.

i meant to say 2018/2019 tax return

 

[jimbof]

i meant to say 2018/2019 tax return

It has nothing to do with tax returns. They're asking something very specific which is the 2019 calendar year turnover. This is the turnover between Jan 1st and Dec 31st 2019. It would not figure anywhere on your tax return, but you should be able to calculate it from your accounts and records.

They asked for your tax return for another purpose, to show you are really self-employed.

However, the exact process the banks are going through is a bit opaque. No-one can really be sure exactly which bits of info they're stringing together. Worst case they can decide to freeze all your accounts if they suspect anything like fraud - there is a whole Facebook page of folk this has happened to with Natwest.

 

[Mr D]

If asking for 2019 turnover work it out.

If someone later asks you to prove the figure you should be able to from your records.

 

[Jazz1966]

My understanding is that you can use the loan to pay salaries but not to pay dividends.

Sorry to be dense, but if I, as a LTD company director apply for this, do I have to pay tax on it if I take it out of the business?

Say I borrowed £10,000, will I pay corporate tax when it arrives in my account?

Could I use it to pay myself a salary or dividend?

Or could I, as a LTD Company directory, apply for it myself, not through my company? As if I'm a sole trader?

Thanks

 

[wiz]

I m in the process of opening a Barclays Business account and it is taking a long time. My Ltd Company used my personal account for all this time. Is there anyone here successfully applied BBL with Barclays? Do they look at personal credit score? Mine is a fair score with experience.Please advice Many thanks in advance

Hey There

I'm in the same position. I use a Barclays personal account for my business. I'm looking to get a bounce back loan. Rather than spend hours on the phone, shall I just go ahead and open a business account? Is that the process? Thanks

 

[Capitaltree]

What is best bank to apply if never had a business account?
Business was in process of applying for a business account before Covid hit. Also, as new company how do you provide turnover? Have estimated figures.

 

[jimbof]

What is best bank to apply if never had a business account?
Business was in process of applying for a business account before Covid hit. Also, as new company how do you provide turnover? Have estimated figures.

At this stage in the game I'll be very surprised if you get an account set up and a loan applied for with any of the banks before the end of the scheme.

For turnover for the purpose of the BBL, you just tell the bank your turnover or estimated turnover. It is self-certified. They will probably want more in the form of proofs though at the first stage when you come to set up account with them...

I know that at least Starling Bank and Metro Bank have both been opening business accounts through the lockdown.

 

[YPC2017]

What is best bank to apply if never had a business account?
Business was in process of applying for a business account before Covid hit. Also, as new company how do you provide turnover? Have estimated figures.

You can just make it up and state whatever you like. Nobody checks. Or they didn’t back when the loans were first released.

 

[Mr D]

What is best bank to apply if never had a business account?
Business was in process of applying for a business account before Covid hit. Also, as new company how do you provide turnover? Have estimated figures.

So what happened in the past year that prevented the opening of a bank account?

This would have been easy last spring. Now ..... you may end up with a business bank account in a month or two. Or longer.

 

[Capitaltree]

So Starling would be quickest option for company based on projected turn over? How fast are they at opening accounts and approving?

 

[japancool]

Fastest? That would be one of those online only bank-on-your-phone type accounts like Mettle. You can have an account setup in 5 minutes.

Opening an account for a BBL - almost certainly not going to happen at this stage. Starling require you to go on their BBL waiting list, and then you wait to get invited to apply.

 

[Capitaltree]

What's best option at this stage? Seems they just want people to open business accounts with them.

Barclays not accepting new applications if done trading with another bank. Before seems could apply to them if had personal account.

Maybe just apply for Starling - seems decent business account anyway - and wait on waitlist? Meanwhile apply some place else? But where?

 

[jimbof]

So Starling would be quickest option for company based on projected turn over? How fast are they at opening accounts and approving?

It took me about a week to open a business account with Starling as a limited company about a year ago via their app, no idea if that still applies. No knowledge of how fast they get through their BBL application list as I did my BBL with Metrobank that I used to bank with, that took a couple of days, but I already had an account which was obviously actively trading.

Metrobank are only opening small numbers of accounts each day, and you have to have an account with them to apply (as you do with Starling I believe).

By all means give it a go, but I wouldn't rate your chances very highly at the moment with only 2 weeks to go. The banks have been pushing the doors shut on these for a long time now.

 

[Capitaltree]

Have personal account with Metro - do they need set up a business account? Actually just checked states business account needed.

Actually Starling seem to be able to go on wait list before opening business account. So If have feedback about applying ten quickly open a business account in app as seems can be done very fast but no point opening yet.

 

[Mr D]

What's best option at this stage? Seems they just want people to open business accounts with them.

Barclays not accepting new applications if done trading with another bank. Before seems could apply to them if had personal account.

Maybe just apply for Starling - seems decent business account anyway - and wait on waitlist? Meanwhile apply some place else? But where?

Best option now? You have just over 2 weeks to open an account and apply for a BBL.
Ring up each bank and ask them the timescale. Open accounts with one that is able to provide in timescale - if there are any.

 

[japancool]

Welp, have now applied with Barclays. We shall see.

 

[LouS79]

I applied for a feeder account on the 14th March 2021 for a BBL with Natwest, had the account opened and sent all the documents for the loan across.
Then had an email from them stating they need to conduct a few checks on my application which could take up to 7 working days....also states that if my application does not meet their usual eligibility and assessment the application will be cancelled.....has anyone else had this? I had no problems getting the feeder account opened.....

 

[japancool]

I applied for a feeder account on the 14th March 2021 for a BBL with Natwest, had the account opened and sent all the documents for the loan across.
Then had an email from them stating they need to conduct a few checks on my application which could take up to 7 working days....also states that if my application does not meet their usual eligibility and assessment the application will be cancelled.....has anyone else had this? I had no problems getting the feeder account opened.....

Out of interest, were you a Natwest customer? I was, but they refused to let me open a business account because I hadn't been with them long enough.