Solvent business rejected for credit due to Bounceback Loan
Discussion
A chap I know has just called me spitting bullets because the Mortgage Works has rejected several buy to let applications because his business accepted a BBL.
He explained that the criterion for BBL was merely that the business had been affected, not made destitute.
I've put him in touch with our bank, but I am wondering whether he will get the same response.
It does make me wonder how many other businesses, in other sectors, will also be declined for similar reasons.
He explained that the criterion for BBL was merely that the business had been affected, not made destitute.
I've put him in touch with our bank, but I am wondering whether he will get the same response.
It does make me wonder how many other businesses, in other sectors, will also be declined for similar reasons.
Is the business a ltd company (& if so what shareholding of it does he have)?
If he is a sole trader and has taken a bounce back loan, then I can see the mortgage work's point: at some point the BBL has to be paid back. The government guarantee on the loan is for the lender's protection, not the borrowers.
Right now the business has a £50k unsecured debt. If he is a sole trader, that is his debt.
If he is a sole trader and has taken a bounce back loan, then I can see the mortgage work's point: at some point the BBL has to be paid back. The government guarantee on the loan is for the lender's protection, not the borrowers.
Right now the business has a £50k unsecured debt. If he is a sole trader, that is his debt.
JPJPJP said:
Is the business a ltd company (& if so what shareholding of it does he have)?
If he is a sole trader and has taken a bounce back loan, then I can see the mortgage work's point: at some point the BBL has to be paid back. The government guarantee on the loan is for the lender's protection, not the borrowers.
Right now the business has a £50k unsecured debt. If he is a sole trader, that is his debt.
I am not sure to be honest.If he is a sole trader and has taken a bounce back loan, then I can see the mortgage work's point: at some point the BBL has to be paid back. The government guarantee on the loan is for the lender's protection, not the borrowers.
Right now the business has a £50k unsecured debt. If he is a sole trader, that is his debt.
When I used to do business with him he was a sole trader. But I have a feeling that he may be both now. He is a BTL landlord.
Bank will be looking at affordability, so next year he is going to have to start paying monthly payments.
Banks decision will be based on wether they think he can afford it. A £50k loan will need decent monthly payments ents to clear it in 4 years.
Not a problem for a powerfully built PH director type, but for the rest of us....
Banks decision will be based on wether they think he can afford it. A £50k loan will need decent monthly payments ents to clear it in 4 years.
Not a problem for a powerfully built PH director type, but for the rest of us....
Ean218 said:
Louis Balfour said:
I am not sure to be honest.
When I used to do business with him he was a sole trader. But I have a feeling that he may be both now. He is a BTL landlord.
If you don't even know that then how can you possibly know whether he is solvent or not.When I used to do business with him he was a sole trader. But I have a feeling that he may be both now. He is a BTL landlord.
I have just searched him on CH and he does own an incorporated business. It's solvent. Or at least it was March 2019.
Looking at the balance sheet it would not appear that he incorporated what used certainly to be a sole trader business. So I would say that he probably holds property personally and in a company.
But the overriding reason I believe that he is solvent is that he told me. I don't think he has any reason to lie to me.
hepy said:
Bank will be looking at affordability, so next year he is going to have to start paying monthly payments.
Banks decision will be based on wether they think he can afford it. A £50k loan will need decent monthly payments ents to clear it in 4 years.
Not a problem for a powerfully built PH director type, but for the rest of us....
If he’s been offered the full £50k then he will be earning a fair wedge as the BBL is for a maximum of 25% of his earnings. So he (Or his co) will be earning at least £200k. Sure he will be fine with repayments. Banks decision will be based on wether they think he can afford it. A £50k loan will need decent monthly payments ents to clear it in 4 years.
Not a problem for a powerfully built PH director type, but for the rest of us....
JapanRed said:
hepy said:
Bank will be looking at affordability, so next year he is going to have to start paying monthly payments.
Banks decision will be based on wether they think he can afford it. A £50k loan will need decent monthly payments ents to clear it in 4 years.
Not a problem for a powerfully built PH director type, but for the rest of us....
If he’s been offered the full £50k then he will be earning a fair wedge as the BBL is for a maximum of 25% of his earnings. So he (Or his co) will be earning at least £200k. Sure he will be fine with repayments. Banks decision will be based on wether they think he can afford it. A £50k loan will need decent monthly payments ents to clear it in 4 years.
Not a problem for a powerfully built PH director type, but for the rest of us....
Louis Balfour said:
A chap I know has just called me spitting bullets because the Mortgage Works has rejected several buy to let applications because his business accepted a BBL.
He didn’t accept a BBL, he asked for it.Most banks would see the need to take one as an indicator of vulnerability, I would think.
loafer123 said:
Louis Balfour said:
A chap I know has just called me spitting bullets because the Mortgage Works has rejected several buy to let applications because his business accepted a BBL.
He didn’t accept a BBL, he asked for it.Most banks would see the need to take one as an indicator of vulnerability, I would think.
Would a 1% reduction in net profit make a business a significantly higer risk of default? No. But it would be enough to qualify for the loan.
The fact that lenders are bouncing applications suggests to me that something else is afoot. Otheriwse they would just be scrutinising applications a little more closely rather than flatly saying no.
anonymous said:
[redacted]
Well, if we take our businesses as an example: We suffered an immediate loss of revenue and we applied for BBLs in anticipation of carnage.Carnage hasn't happened - yet.
Our businesses are still profitable, should we be declined future borrowing? Are we due some karma for being bad people?
If BBL = no more borrowing, regardless of profitability, I think there will be some big problems,
Louis Balfour said:
Well, if we take our businesses as an example: We suffered an immediate loss of revenue and we applied for BBLs in anticipation of carnage.
Carnage hasn't happened - yet.
Our businesses are still profitable, should we be declined future borrowing? Are we due some karma for being bad people?
If BBL = no more borrowing, regardless of profitability, I think there will be some big problems,
I think you've hit the nail on the head but the bank is looking at it from a slightly different angleCarnage hasn't happened - yet.
Our businesses are still profitable, should we be declined future borrowing? Are we due some karma for being bad people?
If BBL = no more borrowing, regardless of profitability, I think there will be some big problems,
The Bank can see that you have anticipated carnage (and you're the best person to make the assessment)
The Bank can see that Carnage hasn't happened yet but the worst may be yet to come.
The Bank probably wants to wait at least 6 months and then decide how the land lies rather than risking its own money on potential carnage.
Louis Balfour said:
A chap I know has just called me spitting bullets because the Mortgage Works has rejected several buy to let applications because his business accepted a BBL.
He explained that the criterion for BBL was merely that the business had been affected, not made destitute.
I've put him in touch with our bank, but I am wondering whether he will get the same response.
It does make me wonder how many other businesses, in other sectors, will also be declined for similar reasons.
I assume that he was applying for Ltd Company BTL mortgages........and the Ltd Company he was using was the one that took the BBL.........the reality is that on paper you were recently telling the bank/Government that you needed an immediate loan to help the business continue trading.......and then a few months later you want a lender to assess you as being completely solvent for them to borrow you more money.......He explained that the criterion for BBL was merely that the business had been affected, not made destitute.
I've put him in touch with our bank, but I am wondering whether he will get the same response.
It does make me wonder how many other businesses, in other sectors, will also be declined for similar reasons.
Sarnie said:
Louis Balfour said:
A chap I know has just called me spitting bullets because the Mortgage Works has rejected several buy to let applications because his business accepted a BBL.
He explained that the criterion for BBL was merely that the business had been affected, not made destitute.
I've put him in touch with our bank, but I am wondering whether he will get the same response.
It does make me wonder how many other businesses, in other sectors, will also be declined for similar reasons.
the reality is that on paper you were recently telling the bank/Government that you needed an immediate loan to help the business continue trading.......and then a few months later you want a lender to assess you as being completely solvent for them to borrow you more money.......He explained that the criterion for BBL was merely that the business had been affected, not made destitute.
I've put him in touch with our bank, but I am wondering whether he will get the same response.
It does make me wonder how many other businesses, in other sectors, will also be declined for similar reasons.
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