Bounce back loan

pedropony100

Hi there, I wonder if anyone can advise me- I am self employed, and a sole trader. I have been using savings to get through this period of having no business, and periods of self isolation. If I take advantage of the bounce back business loans that are now on offer, to replenish my savings, (I am saving for a deposit on a house) will this affect my ability to get a mortgage? 

Does the fact that the loans are 100% guaranteed by the government go in my favour?
thanks in advance!

Thrugelmir

The Government is underwriting the banks lending. Recovery of debts in the future will follow standard practice. Charges against property assets will be one of the options. 
The debt wil not assist your mortgage application. 

1canshortofasixpack

Hi, I have a question about the bounce back scheme. It appears that every bank that is offering this requires you to have a business bank account with them. Does this mean I have to go through the whole process of switching accounts just to find out if i can get a loan ?

Jeremy535897

See FAQs: 
"What happens if I find I’m struggling to repay the loan?

You should talk to the lender if you are experiencing financial difficulties and they will have standard processes in place to support customers in those circumstances.

Lenders are not permitted to require personal guarantees for the Bounce Back Loan Scheme.

For sole traders or small partnerships, who often risk their personal assets when borrowing, the terms of the Bounce Back Loan Scheme means no recovery action can be taken over a principal private residence or a primary personal vehicle."

https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/faqs-for-small-businesses/

Grumpy_chap

It seems as though, with Barclays at least, they won't offer any other type of lending unless BBLS has been exhausted first.
Makes sense I suppose as nothing will be cheaper (for the applicant) or more secure (for the bank).

Grumpy_chap

What is the correct turnover figure if using VAT Flat Rate Scheme - not a Low Cost Trader?

Say value invoiced is £10k + VAT = £12K.  If the flat rate percentage is 14, then VAT paid to HMRC is £12k x 0.14 = £1.68k

Does the turnover for Bounce-Back, use the simple pre-VAT turnover (£10k), or the post-VAT turnover (£12k) or the balance turnover that will end up going into the accounts (£12k - £1.68k = £10.32k)?

Jeremy535897

Grumpy_chap said:

What is the correct turnover figure if using VAT Flat Rate Scheme - not a Low Cost Trader?

Say value invoiced is £10k + VAT = £12K.  If the flat rate percentage is 14, then VAT paid to HMRC is £12k x 0.14 = £1.68k

Does the turnover for Bounce-Back, use the simple pre-VAT turnover (£10k), or the post-VAT turnover (£12k) or the balance turnover that will end up going into the accounts (£12k - £1.68k = £10.32k)?

The banks look at the turnover that is declared on the tax return, so that will be the accounts figure.

Grumpy_chap

Thank you.

nickologjam

Jeremy535897 said:

Grumpy_chap said:

What is the correct turnover figure if using VAT Flat Rate Scheme - not a Low Cost Trader?

Say value invoiced is £10k + VAT = £12K.  If the flat rate percentage is 14, then VAT paid to HMRC is £12k x 0.14 = £1.68k

Does the turnover for Bounce-Back, use the simple pre-VAT turnover (£10k), or the post-VAT turnover (£12k) or the balance turnover that will end up going into the accounts (£12k - £1.68k = £10.32k)?

The banks look at the turnover that is declared on the tax return, so that will be the accounts figure.

My conversation with Barclays yesterday indicated that they were looking at turnover through my account as a basis on which to calculate the maximum BBLS entitlement. In fact the call handler actually said "because that is the money that you will use to repay your loan with."
This is clearly a nonsense and not how the scheme is intended. Turnover should be as declared to HMRC on your returns.
How you bank cash and utilise it through your business is your concern.

Grumpy_chap

@nickologjam - the approach you described is logical as a simple check by the bank.  They know whether the business is or is not VAT registered and can reasonably assume that in the most part, small business accounts will be operated as simply as possible, so whatever comes in is all turnover.  If they see £10-12k per year coming in and the BBSL application is for £2.5 - £3k, that is probably a fair assessment.  If the bank sees £10-12k per year coming in but a BBSL application for £50k, then it is reasonable that the banks ask for further verification or do further checks.

Obviously, this simple approach works for B2B companies with most transactions by credit / debit transfer.  It won't work for cash business or B2C as simply.

pipster547

I'm confused about the Bounce Back Loan. Martin tonight on ITV said that its open to Sole Traders and he advised if we don't have a business account to open an account to Staring Bank. I just went on Starling Bank and chatted to an adviser who said the scheme is for small and medium sized businesses but is not available for Sole Traders!