Bounce Back Loan used to invest?

lurchajn

Apologies if this has been answered before.
Is it possible to use the BBL as an investment on behalf of the company? I don't mean taking a director loan and then investing as a person but opening an investment account in the company's name and using the BBL capital to invest for a short period.
TiA

Grumpy_chap

It all depends what your business does.
How do you interpret that use of the funds against the requirements in the FAQ, to support the trading economic activity of the business?
"Investment" is usually not "trading activity"

lurchajn

Grumpy_chap said:

It all depends what your business does.
How do you interpret that use of the funds against the requirements in the FAQ, to support the trading economic activity of the business?
"Investment" is usually not "trading activity"

Thanks, that makes sense. Investing is not a normal activity for the business but then again, it isn't a core function of many of the larger firms I've worked for and they would often hold retained profits in investments.

Jonesy1977

Your capital is at risk etc etc why would you not use it to invest in your own business?

Jeremy535897

Two conditions (out of many):

• More than 50% of the income of the business (together with that of any member of any group of which it is a part) is derived from its trading activity. This confirmation is not required if the borrower is a charity or a further education college.
• 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.

Refinancing is also acceptable.

I don't think what you propose is against the rules, but if you have a cash rich business and always intend to repay the loan within the first 12 months, so that the funds are only ever used to generate short term non-trading income, it is not within the spirit of the scheme.

lurchajn

Jonesy1977 said:

Your capital is at risk etc etc why would you not use it to invest in your own business?

Ta. Yes, I understand the risks and if anything it'd be in a cash or bonds rather than stocks/shares.
Investment in the business isn't practical for me. I'm on my own and take IT contracts, the market dried up in April and it's much harder than ever to get a role, the same as most other people.
I'm not eligible for any meaningful government help under the various schemes. I don't want to take the BBL if I have no practical use for it so this was me seeing if I could scrape something from BBL.

macman

The reality of it is that, once you have received the BBL, you can do what you want with it, as long as you pay it back as due. That is all the lender cares about.

Grumpy_chap

lurchajn said:

Ta. Yes, I understand the risks and if anything it'd be in a cash or bonds rather than stocks/shares.
I don't want to take the BBL if I have no practical use for it so this was me seeing if I could scrape something from BBL.

To take the BBLS and 'invest' in zero risk format (cash deposits) seems to be hardly worth the effort and offer limited benefit given the low interest rates that can be achieved.

Where I can see there being purpose in taking the BBLS even though it might not immediately be needed is on a "just in case" basis for the next 12 months.  A properly managed small consultancy business which operates with a sensible level of retained profits (= financial resilience) may well have been able to support itself through a 3-month lockdown, even with the limited coronavirus financial support such a business would be eligible for.

Maybe such a business would have sufficient resilience to survive up to a year of severely impacted turnover, so this 3-month lockdown has eaten a substantial chuck of that resilience and income now will take a while to recover the same level of robustness.  Part of the planning of a well-run consultancy business now will consider mitigation to allow trading to continue if there is another lockdown (local or national), or other coronavirus impact on the business operation.  However, there is a logic to holding the additional cash funding from BBLS available "just in case".  Presumably, then, the decision would be on repaying at the end of the interest free period or holding the finance available on a declining basis over the remainder 5-year term.