Using bounce back loan to repay personal credit cards

chrispiano

Hi, I'm a sole trader whos business has been negatively affected by the coronavirus. I am considering applying for the bounce back loan scheme in order to pay off a couple of personal credit cards, the balance on which I'm paying high interest. From reading Martin's emails and articles, it appears I think that this would be an acceptable use for the loan, but I'd like further confirmation that there is no issue doing this. No repayments for 12 months and the low interest would certainly help me during this time when my income has declined substantially.

Thanks for your advice!

justwhat

Yes , you are just taking it as a wage. Its fine batter in lol

[Deleted User]

No, you can not use it to pay personal debts, or for any personal costs, expenditure etc. 
The wording from the scheme is:
They will use the loan only to provide economic benefit to the business, and not for personal purposes. They have understood the costs associated with repayment of the loan and that they are able and intend to complete timely repayments in future.
You can not use it to pay your personal credit cards, mortgage, bills, food, holidays etc. as none of those are legitimate business expenses.

[Deleted User]

In addition to the above, the section "to provide economic benefit to the business" in relation to sold traders has been deemed to be costs which HMRC would allow under self assessment, personal debts, mortgages, food, etc. are not classed as allowable. 

sam8787

As a sole trader you are the business so you can use the loan to pay yourself a wage basically and spend it on whatever you like.  Therefore keeping the business going

Jeremy535897

See MSE Guide for small businesses.
"We've now had it officially CONFIRMED there's nothing in the loan rules stopping you using these loans to support your income (though there can be tax/regulation issues depending on your firm's structure). Of course it's far from ideal – these are loans, not grants – but it's an option. So we've rapidly put together our new Bounce Back Loans guide, outlining how the loans work."

Grumpy_chap

BBLS can only be used for business expenses.  One of the valid business expenses is your personal drawings, which will be subject to tax etc in the usual way.  Once you have taken the drawings, the money is yours to do with as you please, and it seems as though you will be pleased to pay off the credit cards.

Percy1983

Is any of the credit card balance due to business, could be classed as paying that back.

Overall if you are self employed you and your business are entwined, I just wouldn't pay the cards straight out of your business account.

davetheraver

I wouldn't worry too much, I am sure people will be spending these loans on a lot worse things (or better, depending on how you look at it)

Jonesy1977

As long as you take it as drawings or salary and pay the appropriate tax then pay the cards down you can theoretically do this.  If you however default on that loan and you have broken any of the terms and conditions (such as the reason you gave for the loan ) then you may be liable personally for the full amount. 

Hesel18

This is copied from Martins article on BBL scheme, I think a lot of the posters on here have missed the point you are a sole trader and are advising as though you are a business:
Sole traders / business owners: You can take cash from the business, quite simply because you are the business. And taking the money doesn't trigger any tax, because you pay that based on profit not withdrawals. Then again, of course, as this loan is your loan, you're liable to repay it.