Business bounce back loans

[JMI]

Yep.. the middle class will pay for it in the end. The tax dodging big boys won't care like the Branson's, Amazons, Googles - how the airlines like Virgin have the nerve to ask for bailouts is unreal.

By printing all this money the government is borrowing from the future and shafting our kids to save the lifestyles of today..

 

[geniejjc]

To answer the original question.

If you're a limited company and you cant pay it back in 12 months you can always liquidate the company - no personal liability.

And i suspect at least initially the bank will want to work with you.

I broker insolvency - have done for 10 years.

From numerous enquiries and conversations I`ve had regarding this with IPs as long as people dont just rip it out as a lump sum day 1 and dump it, then even if it just pays your wages for the next 12 months while you are trying to make a living that would be ok.

Obviously if you are taking it out as dividends and there are no profits you run up your directors loan account which an IP or official receiver can ask you to pay back - so it may be better to take it as salary.

Remember this is the cheapest business loan you will ever get, with little admin AND with no pg and we need the economy to grow.

If you are a sole trader or partnership for me it gets a bit murky - but in my eyes they've left it open to be chased like an unsecured debt.and could affect your credit and sanity going forward.

 

[twostepsbehind]

What about the turnover and the amount you can borrow? I imagine people may be tempted to be too optimistic...

 

[twostepsbehind]

I saw on the telly a hairdresser complaining of not getting her loan through yet and that she applied for £50k

Would that be a potential option for banks to go after directors if they weren’t too accurate with turnovers

 

[boxfish]

No doubt, 25% of turnover isn’t it? I took £2000 out, I know this is the best loan I’m ever going to get in my life from HMRC, but I didn’t want to take the piss. I could’ve got 50 grand, But if everybody did that and thought like that, then the economy will certainly be screwed if it isn’t already

You have a turnover of over £200k but borrowed £2000?

Why?

Seems a massively insignificant amount for a business of that size.

 

[boxfish]

Absolutely not no. I’m just saying. I could have got £50k there’s nothing stopping me. All you have to do is agree that your turnover is surplus 200k.

I think one of the reasons banks are only issuing loans to customers they had an existing relationship with is so they can verify their stated turnover with their accounts. I'm sure some don't match and need further info/proof but I don't think it's as easy as saying your turnover is over £200k and them handing over the money.

 

[Alan Fletcher]

Hello, just seen this thread - I've worked in banking/lending at a senior level for 20 years, and I'm currently involved in arranging CBILs/CLBILS and CFFs.

BBLS or "bounce back loans" - very different beast to the above, small loans unsecured business loans - I think 11 banks offer them including ourselves. The criteria is slightly different at each bank, but the core requirements remain the same.

It's not a deep dive underwrite, it's an unsecured business loan, designed to be repaid over 6 years aimed at SMEs. There is still however a due diligence process applied on the applicant's application as per the FCA directives, AML checks etc.

The government are doing 2 things - covering the interest for year one (the first 2.5%) + and providing a limited PG to the bank. (Rather than some of the more complex products listed above where an unlimited PG is required from the borrower, and there is a full underwrite into company structure/accounts, measured against each individual lenders criteria, CBILs for instance.)

Essentially - it is open to abuse - and the lenders have hedged for that in the deal they have done with the government, that's what the government are providing - a guarantor service against a proportion of the loss essentially.

The criteria is minimal, as long as the metrics fit, the checks are passed, and the correct usage is evidenced - off you go. The banks - want to lend these loans out, it's like betting in a casino, and the house refunding the losing bets. The only way it can go wrong for the banks is if the overall tranche of BBLs they hold - becomes completely non-performing.

Usually, you expect 15%-20% of your book to be, shit essentially - in this instance, it will be 50% + total dogshit, a huge amount of these businesses will fold.

For people that do cut and run - well, the same thing happens as if you have just defaulted on a standard unsecured bank loan, it goes down the collections route and into the county courts and you have the guys from "can't pay, we'll take it away" turn up, hence why a lot of the businesses will fold and the directors will run off.

Hope that helps!

 

[boxfish]

Interesting post, thanks.

For people that do cut and run - well, the same thing happens as if you have just defaulted on a standard unsecured bank loan, it goes down the collections route and into the county courts and you have the guys from "can't pay, we'll take it away" turn up, hence why a lot of the businesses will fold and the directors will run off.

I don't quite follow this bit though - why would the directors do a runner if there are likely to be pursued by bailiffs?

 

[Alan Fletcher]

Sorry, by that I meant to liquidate the business through the insolvency services and set up a phoenix company - to run off from the bad debt attached to that business, rather than a literal runner. Otherwise, you would have people at the door of your premises in big black jackets... which could involve a more literal chase...

 

[twostepsbehind]

Do you reckon the directors inflating their revenue figures to £200k so they get a £50k loan will be pursued for fraud?

 

[Alan Fletcher]

Do I think inflating your income on an application form to obtain a loan is fraud - yes, it's obtaining funds by deception and it could very well come back to haunt you. Do I think the directors of those companies will be pursued for fraud.... probably not aside from a few unlucky ones who are made examples of. Just because of the time and money it will take to go after the volume of everyone suspected. Self-cert is tricky, because people can plead ignorance if it's just a form filled in, it's harder to plead stupidity if they have doctored accounts or payslips for instance, it will depend on what they have done, who has filled the paperwork in, were there brokers involved, etc. What tends to happen is the client and broker point the fingers at each other and it muddies the water so much it becomes a difficult case to prosecute. If the government reneges on the deal, or their own balance sheet starts to wain, that's when the banks will investigate that as a way of getting some of this bad debt written off their books through their own insurance setups. They don't want to do that though, as their own premiums go up. Essentially monitoring fraud levels are important to banks, it's not for moral or societal reasons, it's because it's a default indicator. When fraud levels spike, default levels usually follow the same upward trajectory not long afterwards, so they can plan ahead on how to counter.