Bounce back loan eligibility

Eassenav

Hello, 
Apologies if this has been asked and I have missed it.

I am a sole trader of a small online business but the income is needed to go towards outgoings but at the moment I am struggling with this business as my suppliers are not able to supply stock which obviously impacts my ability to sell anything and make money.

I also have other employment paid via PAYE.  I have a personal bank account with HSBC but not a business account.

Does my self employed income need to be at least a certain percentage of my income and if so, is that my profit or turnover?  HSBC are asking for turnover for the calendar year 2019 but my accounts and tax return are for the financial year 2018/19, will they accept that?

And finally, should I be eligible and take out a loan and before month 13 I am able to pay back any money I borrow will I pay any interest?

Thank you very much for your time in reading this and any advice given.
 

Jeremy535897

HSBC should accept the tax return for 2018/19. There is no requirement to look at the ratio of self employed income to other income.
You can pay the loan back in full within the first twelve months and then no interest is payable.

Eassenav

Thank you for taking the time to respond to my queries.

In the application process it states "You can prepay the Loan, or any part of it, at any time by providing 10 business days written notice. There are no charges for repaying your loan early but you will pay all accrued interest on the amount up to the date it is prepaid." 
This is the part that confused me, will interest not be accruing and I would need to pay it back?

Also, the following clausing are included in the statement:

"I/We confirm that if I/we or any member of my/our group receive income from sources other than my/our trading activity, more than 50% of my/our business' income, together with that of any member of my/our group, is derived from my/our business' trading activity."

Does this mean that more than 50% of my income must come from my sole trader business?

"I/We undertake to use the credit granted on the basis of this agreement only to provide economic benefit to my/our business, for example, providing working capital, or investing in my/our business. I/we also confirm that the Bounce Back Loan will be used wholly for business purposes and not personal purposes."

Does this mean I couldn't use the funds to pay off personal debt?

Sorry for all the questions but as I don't have a business account with HSBC it is proving hard to speak to someone and the personal banking agents aren't able to help.

Thank you again for your time in reading this and responding to my questions.

Jeremy535897

Good questions, don't be shy!

The loan is for six years, and after the first year, you are responsible for the 2.5% interest. Interest still accrues in year 1, but the government pays it.

The reference to "group" is the clue here. Companies, or groups of companies, must derive more than 50% of their income from trading. It is not applicable to sole traders, unless (possibly) you are in the unusual circumstance of putting other income through your trading accounts.

Yes, you should not use the bounce back loan to settle personal debt, but for sole traders it is often unclear where debt has arisen from. Often it is a mix of personal and business expenditure that makes up say a credit card debt.

Eassenav

thank you very much for taking the time to clarify.

I do have a personal credit card that has been used to purchase stock in the past (but has also been used for personal expenditure), it is currently at 0% interest but this may change.  My other income which is higher than the profit I make from my sole trader income is obtained through employment that goes through PAYE with my employer. 

So based on what you have said and my understanding is that I can take the loan (subject to HSBC approving it and I use my tax return 2018/19 although they ask for turnover for the calendar year 2019 which I don't have a figure for) and I could use it to pay my credit card debt or use some of it towards my mortgage as it would be considered covering loss income from my sole trader business.  And of course I would be able to use it to cover keeping the lights on within my business.

Should I find before month 13 that I am in a position to pay it back and I give the appropriate notice of 10 days I could clear the outstanding balance (for arguments sake less say it is £5k) and all I would pay would be the outstanding £5k and no interest would be applied to the amount I pay back, the Government would be covering the interest between the time I took the loan and the day I paid it back.

What I would not be allowed to do (as an example) would be to use the money to make improvements to my home or anything else that is considered a personal expense.

Does that sound right?

Thank you again for your help with this, I very much appreciate it.

Jeremy535897

It is going to be hard for them to police this if you have one bank account that you use for self employment income, other income, self employment expenses, mortgage and personal expenses. If the bounce back loan ends up in such an account, by definition it will help to pay non-business expenses, but so will your PAYE income.

Eassenav

I have an HSBC account for income (both sole trader and employment) but bills go out of other accounts with other banks.  I agree it is hard to police, but if asked I can show outgoings.  I just needed to confirm the eligibility of the loan so it looks good that I should be OK to apply.

Thank you very much for your help with this.