I Cannot Afford to Repay My Business Bank Loan - help!

What are my options if my company can't repay a business bank loan?

If your company is struggling to make the repayments on a bank loan it is taken out, this should be seen as a huge warning sign that all is not well with the company's finances.

A temporary squeeze on cash flow is relatively common, however, if the financial difficulties your business is experiencing threaten to be longer-term in nature, swift action should be taken to protect your company, its creditors, and its directors from a slide into insolvency.

If you cannot pay your business bank loan, taking advice from a licensed insolvency practitioner can help you understand your options and ensure you deal with your company's financial problems in the most appropriate way possible.

Struggling to pay business bank loan? If you cannot pay your business bank loan, you need to speak to a member of the expert team at Real Business Rescue to understand your next steps - Call Today on 0808 253 5217

What are the consequences of falling into arrears with a business bank loan?

Once you default on a business loan, this will trigger a series of collection efforts by the bank to recover the money they are owed. These escalate in terms of severity, so taking action to bring your account up to date or otherwise come to a mutually-agreeable repayment plan, should be seen as a matter of urgency. 

• Fees and Interest - If you cannot repay your business bank loan, the next course of action the bank will take is to enforce late payment fees, interest and administration costs for each payment that you miss. Depending on the provider, if you miss between three to six payments, you will default on the business loan. 

• Default registered - If you can’t keep up with commercial loan repayments, the agreement between the business owner and the bank will be terminated, no longer binding both parties. A loan default damages the credit record of the business as it will be visible to all lenders, making it harder to secure borrowing in the future. A credit record is a reflection of responsible borrowing behaviour, risk factors and previous credit held with lenders and banks. A poor credit record can affect future eligibility for finance and make the creditor reluctant as they will have a smaller risk appetite as a result of your borrowing history.

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• Seizure of personal and business assets - If you have taken out a secured business loan, including any form of asset-based lending, your borrowing will be secured against a specified property or other asset. This works as a safety net for the bank, so if the business owner was to default on payments, the outstanding amount would be recovered as a result of seizing the assets. Assets such as commercial property, vehicles, machinery and equipment can be repossessed if you can’t pay your commercial loan. If you are a company director taking out an unsecured loan with no track record of borrowing, the bank may request a personal guarantee agreement. By agreeing to a personal guarantee, the director agrees to pay the loan back should the company not be in a position to do so. This agreement still stands even if the company was to be formally liquidated at any point in the future.

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• County Court Judgment - The bank may issue a County Court Judgment, also known as a CCJ, which can affect the credit rating of the business. This is a formal declaration that the business owes money to the creditor and that repayment has been ordered. This will remain on the business credit record for six years, minimising your chances of qualifying for future finance.

• Winding Up Petition - Once all other recovery methods have been exhausted, your bank may choose to petition the courts to have your company wound up and forced into compulsory liquidation. This is done by presenting you with a Winding Up Petition. This petition will be advertised in the Gazette and a court hearing set to determine the future of your company. If you cannot adequately contest the winding up petition, the judge will grant a winding up order which will see your company liquidated by order of the courts. 

What does it mean when a bank calls in your business loan?

When a bank calls in your business loan, this essentially means that they want you to repay the full amount outstanding immediately. A bank will typically only take this action once you have broken the original terms of the loan agreement, such as by not making your scheduled repayments on time.

Unfortunately, if you have fallen into arrears with your bank loan, it is unlikely that you will have the necessary funds to clear the outstanding balance of the loan as the bank is requesting. If you find yourself in this situation, you should make it a priority to seek the advice of a licensed insolvency practitioner to better understand your options. 

Depending on the overall financial position of your company, you may be able to explore refinancing or restructuring options to get your business back on a solid financial footing. Alternatively, if your company's problems have taken it beyond the point of rescue, you may need to consider your options for closing the company.

Can I refinance my business bank loan?

Depending on the overall financial and operational health of your company, you may be able to refinance your existing bank loan for a channel of funding more suitable for your business and its needs. 

Refinancing a business bank loan may work out to be a cost efficient option and a quick way to pay off your commercial loan if you are struggling to raise funds. If you are able to source a cheaper option than your current loan, refinancing can help minimise current debt, replacing it with a slightly cheaper debt.

By refinancing, you may be able to find a better deal with reduced interest, longer payment terms and free up money to pay off your debt. This may involve a form of invoice finance, or another traditional business bank loan.

How Real Business Rescue can help with company debts

If you are unable to meet the repayments on loans or other finance agreements your company has taken out, it could be the case that the company is heading towards - or may already be - insolvent. If this is the case, you may need to consider entering into formal insolvency proceedings to either rescue your company, or else wind down its operations in an orderly manner if it beyond the point of rescue.

It is important to know that you have a number of legal obligations as the director of an insolvent limited company, and one of these is to seek the services of a professional - such as a licensed insolvency practitioner - once you know your company to be insolvent. 

At Real Business Rescue, we have a team of licensed insolvency practitioners in our nationwide network of offices, who can look into the best option for your company if you are struggling to pay a business bank loan. Contact our team today for expert advice on dealing with your company's debts and the understand the options open to you and your business.