Bounce Back Loan Impact on Ability To Remortgage

loveka

I run a small business  (sole trader) and I am now considering a bounce back loan as we fear a lockdown. We managed last time another would be difficult.

I took out a loan a year ago, before lockdown obviously. I would pay this off with the bounce back loan which would give me some breathing room.

My partner is worried that a bounceback loan might impact on our ability to remortgage in 2 years time as it implies financial hardship.

Neither of us have any late payments or anything. We didn't take a mortgage holiday.

I don't think that it will impact my credit rating especially as it will just replace a loan I already have. Who is right? Thanks.

Thrugelmir

If you remain with your current lender then there's no remortgage. Just a product switch with no checks. 

MattMattMattUK

Firstly you will probably now struggle to get a BBL, almost all banks have stopped accepting new applications and unless you already have a business bank account with the few that are still offering them you will not be able to get one.

Yes it will have an impact if you apply for a new product with a new lender, as @Thrugelmir mentions above it probably will not if you do a product switch with your existing lender.

It will show on your credit record (ratings are irrelevant), what impact it has no one knows at the moment. Also if you pay it back before you apply for a new product then it will have virtually no impact and even if not it will likely be no worse than having any other standard form of unsecured loan (payday loans are huge red marks). 

If the alternative was to default on payments then the BBL would be a far better option than that, so you have to keep that in mind. All being said though, I think you have probably left it too late an it is unlikely you will be able to get a BBL.

loveka

Hi there, thanks for the advice. 

It isn't too late to apply for a bounce back loan. I have a business account and applications close in 2 weeks time.

Grumpy_chap

There have been some other threads where people suggested a BBL would have an impact on future mortgage, but those were considering a mortgage in the rather short term.

The rationale was that, if you operate as Sole Trader or have your own Ltd Co., then mortgages normally look at the past 2-3 years of business accounts and tax returns.  If you took a BBL (or even SEISS in some cases), then you are declaring that the business has been adversely affected by COVID and, in the absence of firm information, no lender can assess the extent of the adverse impact at this point in time, or whether the impact was so small as to be inconsequential and the BBL was only really an "insurance policy".

That does give an understandable point of view in terms of assessing the risk from a lender's perspective.

There is also what appears to be a wholesale tightening of lending criteria right now affecting pretty much all kinds of finance, including people with finance facilities pre-arranged finding the future borrowing is being curtailed (particularly credit cards). Logic says the tightening of lending criteria to the extent currently being applied cannot continue indefinitely because lenders only make money by lending and without that the business model fails.

The difference for the OP is that they are considering a BBL now and remortgage in 2 years.  By that time, it is likely that the BBL will have been repaid if it is only being taken as an "insurance policy".  In any event, by the time the OP is looking to remortgage, there will be accounts available for this year and next so the impact of COVID on the business / individual finances will no longer be guesswork / trust but backed up by the proper accounts.  Whatever the "new" post-COVID business will look like will be an established basis by the time the OP is re-mortgaging.

Given all that, the impact of the BBLS may be less for the OP because time is a healer.