Bounce back loans

NatalieAGC

So based on a month of new business I can’t imagine you needing it in the sense of a months business wouldn’t have provided an income or turnover for your business In that small time 
but don’t let that stop you. I’m sure many “businesses with personal accounts” will try to jump on the BBLS as it’s open to fraud at every angle. 

Pdavey5555

I have made a application and it’s says it’s accepted and checks will made so can only just wait And see

Grumpy_chap

NatalieAGC said:

So based on a month of new business I can’t imagine you needing it in the sense of a months business wouldn’t have provided an income or turnover for your business In that small time 
but don’t let that stop you. I’m sure many “businesses with personal accounts” will try to jump on the BBLS as it’s open to fraud at every angle. 

The 'new business' part is monitored by the fact that you can only claim 25% of turnover and the rules say to approach your own business bank first.  I assume / expect, therefore that if approaching a different bank, that bank will want to know why you did not go to your own bank before approving the loan - there is no competition as all banks have to offer the same interest rate and no fees.

Even if someone started a new business with a planned turnover of £100k / year and got going at that rate from day 1 but only has 2 months trading, that's only £16k so can only claim the loan for £4k.  Your own bank will know whether or not there has been the turnover claimed and operating as a business account (even if actually a personal account).  This is still a loan that has to be paid back.

Jeremy535897

There seems to be a lack of clarity about how the turnover test will work. Barclays seem to think it is turnover for 2019, but that makes no sense when it can apply for businesses that only started in February 2020. Also self employed businesses will often make their accounts up to 31 March (or 5 April), rather than 31 December. Presumably more details will be forthcoming.

NatalieAGC

Grumpy_chap said:

NatalieAGC said:

So based on a month of new business I can’t imagine you needing it in the sense of a months business wouldn’t have provided an income or turnover for your business In that small time 
but don’t let that stop you. I’m sure many “businesses with personal accounts” will try to jump on the BBLS as it’s open to fraud at every angle. 

The 'new business' part is monitored by the fact that you can only claim 25% of turnover and the rules say to approach your own business bank first.  I assume / expect, therefore that if approaching a different bank, that bank will want to know why you did not go to your own bank before approving the loan - there is no competition as all banks have to offer the same interest rate and no fees.

Even if someone started a new business with a planned turnover of £100k / year and got going at that rate from day 1 but only has 2 months trading, that's only £16k so can only claim the loan for £4k.  Your own bank will know whether or not there has been the turnover claimed and operating as a business account (even if actually a personal account).  This is still a loan that has to be paid back.

No, this is where the grey area will come into play.  If someone has ‘new business’ and deciding to claim when actually they don’t have a turn over yet or any established set up Due be being only into business 4 weeks for example.. 

the 25% is their “projected annual turnover” not what they have “turned over in 4 weeks” 

so joe bloggs comes along and think oooh al have a bit of that cheap loan and they project a figure they WILL try to claim the max they can. 

Like I said open to fraud.

Jeremy535897

Don't forget that if you don't pay the loan back the government will come to you for repayment if you are a sole trader.

Hardly_Quim

They did not ask me for accounts.

Hardly_Quim

Regarding the Bounce Back loan, I'm a bit confused. It's backed 100% by the Government, and it's not secured. So, fast forward 12 months, my business fails, for genuine reasons - will the Government chase me for the outstanding loan? I understand they can't take my house etc, but because I have a LTD company will I have to pay if it fails?  Normally, the company debt would die with the comapany? 

Pdavey5555

I have just been into the Lloyd’s branch and they have said won’t look into previous accounts so if you have been accepted with the criteria they have asked for everything should be fine, 24/48 hours pay out 

Grumpy_chap

@NatalieAGC - I am still thinking about the 'new business' part of this.

For a new Ltd Co, it had to be trading by 1st March, so not possible to just set a new company now and qualify.

For a new sole trader, there is not the same formal record, but still had to be trading (or claim to be) by 1st March.  This means notifying HMRC of being a sole trader, at the latest with 2019-20 tax return.  That could be as late as January next year, so too slow a process to be taken into account.

I was not aware that 'projected annual turn over' could be used rather than actual past turnover.  With the new business, I assume it is not possible to just go in and say "I'll turn over £200k so can I have £50k please?"  As a minimum, once that is the projected turn over, the business needs to register for VAT so it seems entirely reasonable that the banks check VAT number for any application for a loan above £21.25k, being 25% of the VAT registration threshold which I think is at £85k.  Need to register for VAT as soon as turnover goes over the threshold or you know it will.

This puts some limits that are easy enough to apply by the banks.  Still, £20k or just over is a big lump to have interest free.  BUT it still needs to be paid back, and we can be sure the Banks and Government will pursue personal assets of sole traders that default.  If going down this route, then the real benefit of the interest free period on £20k is not worth it if lumbered with tax returns etc for several years following.  

There could be some protections put in place easily, such as requiring HRMC notification of sole trader operation and VAT registration (if claiming above £85k turnover) to mitigate against the fraud risks.