What to do with Bounce Back Loan after switching from Sole Trader to Ltd company?

mrkat

I've been running a sole trader business and received a £20k BBL, I think in May. In January, I switched my business to a Limited company and my accountant has advised me that I need to close my sole trader bank account by April. I borrowed the BBL from my Santander business bank account so I'm pretty sure I can't close the account when I still have the BBL. I am in the position to pay back the £20k in full but this would affect my business as I was planning on using it to diversify my product range and increase sales.

Can anyone tell me what I can do in this situation? If I pay back the BBL to my sole trader santander bank account and then close it by April, could I then take out another BBL loan as a Ltd company with my new (Starling) bank account?

Jeremy535897

No, because the new company was not trading at 1 March 2020. As your sole trade has ceased, I suspect you won't meet the conditions of the BBL you took out either. You should talk to Santander, but be prepared to repay the loan immediately.

mrkat

Jeremy535897 said:

No, because the new company was not trading at 1 March 2020. As your sole trade has ceased, I suspect you won't meet the conditions of the BBL you took out either. You should talk to Santander, but be prepared to repay the loan immediately.

Wow, ok I'll look into that asap. Thanks for the info
I have another business that is still sole trader, do you know if I could take another BBL for that one? It was trading before March 2020 but only for a very short time with a profit of £209. Since then, it's turned over £30k.

Jeremy535897

mrkat said:

Jeremy535897 said:

No, because the new company was not trading at 1 March 2020. As your sole trade has ceased, I suspect you won't meet the conditions of the BBL you took out either. You should talk to Santander, but be prepared to repay the loan immediately.

Wow, ok I'll look into that asap. Thanks for the info
I have another business that is still sole trader, do you know if I could take another BBL for that one? It was trading before March 2020 but only for a very short time with a profit of £209. Since then, it's turned over £30k.

That makes a big difference. As a sole trader, your BBL covers all businesses in your name, so this may be the life saver you need, because you are still trading, and I would suspect that the BBL terms are unlikely to be sophisticated enough to identify such a situation and penalise it in any way.

mrkat

Jeremy535897 said:

mrkat said:

Jeremy535897 said:

No, because the new company was not trading at 1 March 2020. As your sole trade has ceased, I suspect you won't meet the conditions of the BBL you took out either. You should talk to Santander, but be prepared to repay the loan immediately.

Wow, ok I'll look into that asap. Thanks for the info
I have another business that is still sole trader, do you know if I could take another BBL for that one? It was trading before March 2020 but only for a very short time with a profit of £209. Since then, it's turned over £30k.

That makes a big difference. As a sole trader, your BBL covers all businesses in your name, so this may be the life saver you need, because you are still trading, and I would suspect that the BBL terms are unlikely to be sophisticated enough to identify such a situation and penalise it in any way.

Phew! that makes sense. Thanks so much for your advice

Grumpy_chap

mrkat said:

I was planning on using it to diversify my product range and increase sales.

As I understand it, BBLS is only supposed to be used to grow the original business not start a new business.  
What does "diversify" mean?
If the business sells Louis Vuitton handbags and will now "diversify" to start selling Gucci handbags in addition, that is clearly the same business.
If the business sells handbags and will now "diversify" to start selling laptops in addition, that is likely a different business.
On a practical level, I doubt the banks or HMRC have the resources to really look into BBLS that deeply so long as the funds are repaid in line with the requirements.

Jeremy535897

Grumpy_chap said:

mrkat said:

I was planning on using it to diversify my product range and increase sales.

As I understand it, BBLS is only supposed to be used to grow the original business not start a new business.  
What does "diversify" mean?
If the business sells Louis Vuitton handbags and will now "diversify" to start selling Gucci handbags in addition, that is clearly the same business.
If the business sells handbags and will now "diversify" to start selling laptops in addition, that is likely a different business.
On a practical level, I doubt the banks or HMRC have the resources to really look into BBLS that deeply so long as the funds are repaid in line with the requirements.

All businesses operated by sole traders are aggregated to produce the turnover figure for BBLs. The only issue here really is that at the time the loan was taken out there was one business of any significance, and now there is a different business from that. But in general terms, if you breed cows and do accountancy, you aggregate the two turnovers and get one BBL.