Can I close or liquidate my company with a Bounce Back Loan?

Can I close my company with an unpaid Bounce Back Loan?

Yes, it is possible to close a company when it has an unpaid Bounce Back Loan, however, care must be taken to ensure this is done in the correct way.

If the company is insolvent - meaning it cannot pay its debts and other liabilities as and when they fall due - then the only way to formally close the business is via liquidation. 

Attempting to simply strike off a company which has an outstanding balance on a Bounce Back Loan is likely to result in the strike off application being rejected.

What should I do if I cannot repay my Bounce Back Loan?

If you are unable to pay your Bounce Back Loan, you should contact your lender immediately to discuss your options, or alternatively seek professional help from a licensed insolvency practitioner. Being unable to repay your Bounce Back Loan may hint at deeper financial problems within your company, including the possibility of insolvency.

By taking appropriate insolvency advice, you will be able to explore a range of options for dealing with the outstanding Bounce Back Loan, as well as any other debts your company may have. At Real Business Rescue we regularly speak to directors who are unable to afford their Bounce Back Loan repayments. Solutions our insolvency practitioners have put in place for companies in this situation include:

• Company Voluntary Arrangement (CVA) - A formal repayment plan which encompasses all debts not just the Bounce Back Loan
• Refinancing - Refinancing the Bounce Back Loan onto a traditional loan over a longer term making the repayments more affordable
• Restructuring - Streamlining the company to improve efficiency and highlight non-profitable areas of operation
• Liquidation - Closing down the company when debts, including an outstanding Bounce Back Loan, become unmanageable 

Can a Bounce Back Loan be written off?

A Bounce Back Loan can only be written off as part of a formal company insolvency process like liquidation. A Bounce Back Loan cannot be written off while the company is still active and trading.

If a company enters liquidation, the Bounce Back Loan is considered an unsecured debt that can be written off, and the government guarantee will cover the loss for the lender.

The exception to this, however, is if the loan was obtained fraudulently or misused for purposes other than the company's direct benefit. In this instance, directors can face personal liability, meaning the loan might not be written off. If you are worried you may have misused your Bounce Back Loan, you should speak to an insolvency practitioner to understand your options.

Can directors be held personally liable for Bounce Back Loans?

Bounce Back Loans came with 100% government security for the borrowing which meant no personal guarantee had to be signed by the director of the company.

Due to this, directors will not be held personally liable for the remaining balance of a Bounce Back Loan should their company be liquidated. The exception to this is if it can be proven that the Bounce Back Loan was obtained or used fraudulently.

If the Bounce Back Loan was used correctly - that is for business purposes rather than personal purposes - then the director will not be liable or responsible for covering any shortfall following liquidation of the company.

“After submitting my '60 Second Test' I received a complimentary Insolvency Options guide packed full of useful information. The team of insolvency specialists phoned me back in less than 10 minutes after reviewing my details and guided me through the next steps. Really helpful! Thank you Sophie!”

Patricia 

 

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Sophie Schofield
Business Debt Expert

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Can I liquidate a company with a Bounce Back Loan?

It is possible to liquidate a company even if there is a Bounce Back Loan which remains outstanding. If you have already fallen behind on your bounce back loan repayments, or believe you will struggle to repay the loan in the future, you should make it a priority to seek the guidance of a licensed insolvency practitioner as soon as possible.

An insolvency practitioner will be able to conduct an independent assessment of your company, its finances, and its likely future viability, before recommending the best course of action. This may be liquidation, or alternatively, the company may be able to be rescued through a process of restructuring or by initiating negotiations with creditors.

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

You cannot strike off your company at Companies House if you have an outstanding Bounce Back Loan.

Striking off a company - also known as dissolving a company - is an informal way of closing down an unwanted business and having its name removed from the register held at Companies House. Strike off is designed as an easy and affordable way of closing down a business which has neither assets nor liabilities. If you cannot afford to repay your Bounce Back Loan, this strongly suggests that your company is insolvent, and therefore not eligible for strike off. 

Insolvent companies need to go down the route of formal liquidation in order to ensure creditors are treated fairly.

With billions of pounds lend in the form of Bounce Back Loans, the government is urging banks to formally object to any strike off application made by a company with an outstanding Bounce Back Loan. An objection to a strike off application would prevent the company from being formally closed down using this method. This makes strike off a very slim possibility for companies holding an outstanding a Bounce Back Loan.

Can I transfer a Bounce Back Loan to another company?

It is not possible to transfer a Bounce Back Loan to another company. The loan was issued to a specific company for its economic benefit and must remain with that original borrower until it is fully repaid or the company enters a formal insolvency process. Attempting to transfer it is considered a misuse of the loan and can have serious consequences. 

Instead of transferring the Bounce Back Loan to another company, you should:

• Repay the loan: The most direct option is to repay the loan in full.
• Refinance the loan: You can apply for a new loan to pay off the Bounce Back Loan, however, be aware Bounce Back Loans did come with highly attractive terms which you may not be able to secure with an alternative form of borrowing.
• Incorporate the loan into a liquidation process: If the company is insolvent, the remaining balance on a Bounce Back Loan can be included in a formal liquidation process such as a Creditors' Voluntary Liquidation (CVL).

How Real Business Rescue can help with Bounce Back Loans?

If you have a Bounce Back Loan that your company simply cannot afford to repay, you should make it a priority to seek the advice of a licensed insolvency practitioner as a matter of urgency. At Real Business Rescue we have a nationwide network of licensed insolvency practitioners who can:

• Explore restructuring options allowing you to continue to trade while dealing with your Bounce Back Loan arrears
• Help you understand your options for closure if the company is insolvent
• Advise on the most appropriate course of action for you based on your circumstances
• Provide free initial advice 
• Guarantee you a partner-led service and a named contact throughout the process.

For further help and advice with an outstanding Bounce Back Loan, or to arrange a consultation with a licensed insolvency practitioner, call our expert team today on 0800 644 6080.