The coronavirus situation has led to a number of financial solutions being put in place by the government to make sure businesses can stay afloat and remain open; one of these is the bounce-back loan scheme. It gives struggling businesses a way to get an injection of fast cash to keep the doors open among reduced demand. Unfortunately, the amount of businesses applying for the bounce-back loan has led to lenders becoming suspicious, and as a result, this has impacted the chance of successful application for finance with them in the future. So are you wondering what is the impact of the bounce back loan on getting a mortgage – read on…
With lockdowns coming to an end and then restarting again, more businesses are opening up their doors and trying to get back trading and get the UK economy back on its feet, but some businesses are left wondering what impact these helpful incentives from the government will have on their futures for them getting mortgages or remortgaging.
What is the bounce-back loan?
The bounce-back loan was put in place to allow a small business that was set up prior to February 2020 to apply for a business loan up to £50,000 or 25% of their yearly turnover, whichever is less. It would not require any repayments for the first 12 months and has an interest rate of 2.5%; you can expect to typically receive the funds to a business account in around 24 hours. When signing up for a bounce-back loan, you will have to sign a declaration to declare you have been impacted directly as a result of coronavirus.
Where do the issues lie around the Bounce-back loan?
Most business owners have been using this scheme legitimately to make sure their business does not go under during these difficult times. However, as with a lot of things, there is always that select few that will take advantage and use it for their own gain and not because they need it but because they want more money to be able to do things in the business, they could not afford before but not due to coronavirus impact.
This is what has led to issues with lenders and mortgage lenders; to be precise, they have grown wise to this issue of exploitation for the bounce-back loan and chosen to crack down on it. This is because some people will be trying to use the loan as a way to put a deposit down and get more property instead of using it to make sure the business is just staying open. This means that lenders have increased their checks for lending money to make sure the loan is being used legitimately; they do this by checking if you have had a loan firstly then doing increased background checks to make sure you were impacted for one and needed the loan but also to make sure your business is recovering. This also helps people that are still struggling not actually take on more debt they can not manage, as they need to be lending responsibly.
So can I get a mortgage if I needed the loan?
The answer to this is basically yes, you can still get mortgages, but you will be under more scrutiny by the lender to make sure you have started recovering from the impacts of the coronavirus and that you are not using the loan provided for the mortgage. They will require you to prove where the money has come from and make sure you have received it legitimately. If you are unable to prove that your business is viable and able to bounce-back sufficiently then it will be likely you can get that mortgage. It is not the loan directly that affects your options, but it merely puts you under a bigger spotlight for further checks, which can lead to you not getting the loan.
You need to make sure all your accounts are up to date and are recovering if you have had the loan. The lender will request they are accounts from a certified accountant, so make sure you have one and everything is in order before trying to request a mortgage or remortgage; if you have legitimately got the bounce-back loan and have in fact bounced back, you will have no issue getting mortgages, but as always it will depend on your individual circumstances and whether it is an affordable option for you.
If you have been affected by coronavirus and needed to use the bounce-back loan but are unsure of its effects, then hopefully, this blog will give you a better understanding and allow you to make the right choices for your business. As a whole of market broker, we have access to all lenders and know the criteria that each use for lending money so before you second guess, it’s worth chatting to one of our advisors first.
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