BBL confusion

Natsplus

I applied for CBIL for my limited company which has been with my bank for 5 years, I received a call from their business loan team last week and the lady on the phone said that instead of CBIL I should go for BBL, I told her my turnover is not enough for me to get the full amount, she asked how much salary (plus dividends) do I withdraw every year, I can apply x 2 to that to gain more amount, I draw nearly 30k and she said on this basis I can apply full amount of 50k.
I applied and got the BBL, but my worry now is I don't have the lady's name and what if I get in trouble due to that?
Ofcourse I plan to payback the loan, but how much weight would the fact that a bank lady called herself and recommended me this would hold?

Jeremy535897

The conversation would make a little bit of sense if BBLs were based on profit, because in a sole director company it is the owner director's choice whether to leave profits in the company, or extract them by way of salary or dividend. Even then the multiple of 2 is odd, unless it was net salary/dividends she was referring to, which if grossed up for tax, employee and employer NIC might approximate to twice the net.

But BBL eligibilty is based on turnover, and salary and dividend withdrawals have no effect on that. My concern would therefore be that it looks like you inflated your turnover to increase the BBL, and you don't have any physical evidence that you had this conversation (even if it was recorded, it could have been with anyone).

It is too early to say what, if any, follow up due diligence the banks will do regarding BBLs. My guess, for what it is worth, is that inflating the turnover is unlikely to be an issue if the loan is repaid on or earlier than the due dates of repayment. If the company defaults, there is normally no recourse to the directors, but there might be in a case like this.

One issue is what turnover figure were you using? Was it a historic figure that is easily checked, or a projected future turnover that the company simply might not meet? Obviously it is much harder to defend the former than the latter.

It seems to me that you have two choices. The first is to explain to the bank what has happened. The problem is that one possible outcome is a demand for immediate repayment of all the loan in full, which I would guess is not possible? The second is to do nothing, although you should make a record of everything you remember about the conversation, who was involved at the bank and when, and the consequential actions you took. The issue with not coming forward is that if there is a request to justify your turnover that supported the loan application, you are on the back foot compared with raising the issue yourself.

Grumpy_chap

The comments form the lady on the phone seem confused and incorrect.  This has resulted in the OP making an erroneous application for £50k loan.
I wonder whether the best route would be to work out how much BBLS you were eligible for, say turnover £60k so loan permitted £15k and now make an immediate repayment of the amount in excess of this £35k.  If the OP is then ever challenged through audit, they can say there was and administration error and this amount was repaid swiftly after the mistake came to light.
I suspect, so long as the loan is repaid in accordance with the terms, then any checking will be very light-touch.
The OP says they had a business for at least 5 years, so the turnover used should be actual turnover and forecast turnover is irrelevant.
Maybe part of the confusion is that the OP started by applying for CBILS, which is only for loans £50,001 and above.  Loans below must be BBLS.

Jeremy535897

Grumpy_chap said:

The comments form the lady on the phone seem confused and incorrect.  This has resulted in the OP making an erroneous application for £50k loan.
I wonder whether the best route would be to work out how much BBLS you were eligible for, say turnover £60k so loan permitted £15k and now make an immediate repayment of the amount in excess of this £35k.  If the OP is then ever challenged through audit, they can say there was and administration error and this amount was repaid swiftly after the mistake came to light.
I suspect, so long as the loan is repaid in accordance with the terms, then any checking will be very light-touch.
The OP says they had a business for at least 5 years, so the turnover used should be actual turnover and forecast turnover is irrelevant.
Maybe part of the confusion is that the OP started by applying for CBILS, which is only for loans £50,001 and above.  Loans below must be BBLS.

My suspicion is that if such an immediate repayment could be made, the issue wouldn't have arisen in the first place.

I think CBILS were only restricted to above £50,000 when BBLs were introduced, but it looks like the CBIL application was made after BBLs were introduced. If that was the case, it was the wrong product to apply for, and it might have caused some confusion, although I can't think why.

Grumpy_chap

CBILs are subject to the bank setting lending criteria.  Maybe the 2x drawings is that bank's lending criteria?  We will never know.
BBLS can be repaid early without penalty.

Natsplus

I applied for CBILs before BBL was introduced in May, it took a long time to hear from bank and when I heard they asked me to reapply for full 50k BBL, main CBILS application was for 65k.

Jeremy535897

Natsplus said:

I applied for CBILs before BBL was introduced in May, it took a long time to hear from bank and when I heard they asked me to reapply for full 50k BBL, main CBILS application was for 65k.

Which of course gave the bank the comfort of 100% rather than 80% guarantee. No wonder they pushed you towards a BBL. That explains why they might have been creative in trying to get you up to the BBL maximum, since you applied for more than that (CBIL doesn't have a 25% turnover test). What documentation did you provide to the bank in support of your CBIL application? Did that provide details of turnover for example? I think this puts a different complexion on the whole matter, as if you have a paper trail with turnover in the CBIL application, why would the bank accept a different turnover figure on a BBL application? It would still be their word against yours, of course, but it sounds believable.

Natsplus

I just completed a form online, no trail of that unfortunately,  but applied in April, I will call back the bank next week and take name of the person I spoke to in my last conversation just to make sure I have some kind of record.