Can a company write off Bounce Back Loans?

What to do when you cannot repay your Bounce Back Loan

In an effort to help support businesses affected by the continuing Covid-19 pandemic, the government made loans of up to £50,0000 available to all companies through the Bounce Back Loan scheme. Bounce Back Loans came with a raft of appealing features at the time, however, many companies are now finding themselves in a precarious position when it comes to repaying these loans.

Can I write off my Bounce Back Loan?

So, what can you do if your company is unable to repay its Bounce Back Loan? Although Bounce Back Loans are provided with full security from the government, however, it remains the company’s responsibility for repaying the amount borrowed. The government security will only kick in should the company be unable to pay back the loan.

This does not mean the Bounce Back Loan will be written off if you tell the bank you are not in a position to repay. A Bounce Back Loan will only be, in effect, ‘written off’ in the event of the company becoming insolvent and entering into a formal liquidation process such as a CVL. Simply struggling to make your monthly repayments will not see your loan being written off.

“Called for help with closing non-trading companies and Chelsea advised me on what to do and instead of taking advantage as others would by taking on the case and charging loads. She gave me a solution that would cost £20. Very pleased with the service and thankful for Chelsea’s advice.”

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Chelsea Williams
Business Debt Expert

What happens if I default on a Bounce Back Loan?

Defaults happen when you fail to make a scheduled monthly repayment towards your Bounce Back Loan and the account subsequently falls into arrears.

Missing a repayment towards your Bounce Back Loan should be taken extremely seriously. Although Bounce Back Loans are secured by the government, the responsibility for making the monthly repayments lie solely with your company. Ignoring defaults on your loan will not make the problem disappear, in fact, this course of action is likely to make the situation much worse.

 If you have defaulted on your Bounce Back Loan, your first port of call should be to get in contact with your lender and explain the situation. You will not be the only one experiencing problems in repaying, and you may be able to negotiate a mutually agreeable solution which allows you to bring your defaults up to date and help you maintain your account going forwards.

If you have defaulted on your Bounce Back Loan and are unable to afford to clear your arrears, you may need to consider a formal insolvency process in order to resolve the situation.

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Company insolvency, liquidation, and Bounce Back Loans

If your company’s debt problems have escalated to such as extent that you believe it may be insolvent, you may need to consider whether placing the company into liquidation would the most appropriate solution. A company is classed as insolvent when its liabilities (or debts) outweigh its assets (the things the company owns), or when the company is unable to meet its outgoings as and when they fall due.

If the company is beyond rescue, placing it into liquidation ensures the business is closed down in an orderly manner and that creditors, employees, and customers are treated fairly.

As part of the liquidation process, all assets of the company will be identified and sold, with the proceeds going towards repaying creditors as much as possible according to a set hierarchy. Any debt which remains after this process – unless secured by a personal guarantee – will be written off.

As Bounce Back Loans are secured by the government, directors did not have to provide a personal guarantee. This means that in the event of the company being unable to repay the loan due to insolvency, the responsibility for repaying the bank falls to the government rather than the director.

Can I strike off my company with a Bounce Back Loan?

Strike off is an informal way of closing down a company which is no longer needed. The strike off process is achieved by submitting a DS01 form which requests that the company's name is removed from the register held at Companies House. As long as no objections are received from creditors, the strike off process is a relatively quick and inexpensive way of bringing an end to a limited company. 

Strike off is designed as a closure option for solvent companies. If your company has outstanding creditors, you can expect your strike off application to be suspended. If you have an outstanding Bounce Back Loan, therefore, strike off is not a suitable method of closing your business. As the government has given security to banks in the event of company's being unable to repay their Bounce Back Loans, they are keen to make it as difficult as possible for a company with an outstanding BBL in place to close. The government has requested that banks formally object to any company with an outstanding Bounce Back Loan which attempt to have their company closed through the strike off process. 

If you have a Bounce Back Loan you cannot repay, strike off is not an option. Instead, the closure of the company will need to be done through a formal liquidation process which must be administered by a licensed insolvency practitioner. Real Business Rescue can help you with this.

Where can I go for more advice on my Bounce Back Loan?

If you are struggling to repay your Bounce Back Loan, or you envisage having problems keeping up with the repayments in the future, you should make it a priority to seek specialist help and advice.

You can arrange a free no-obligation consultation with a Real Business Rescue insolvency practitioner where you can obtain help, advice, and guidance, across all areas of business distress. We will take the time to understand your situation and the challenges you are facing, before talking you through the options open to you, and providing you with our expert recommendation. Call our team today.