What to do if you cannot repay your Bounce Back Loan?

What happens if I can't afford to repay my Bounce Back Loan?

If your company cannot afford to repay its Bounce Back Loan, there are several options available.

If you believe your business is viable and you believe you will eventually be able to repay the loan in full, you should discuss this with your bank and see if they would be open to amending your repayment terms. This may involve extending the term of the loan which will reduce the monthly repayments due, but this will cost you more over the life of the loan.

If your Bounce Back Loan and other debts are causing serious problems for your business, you may need to consider entering into formal insolvency proceedings. This could involve restructuring and renegotiating existing obligations either through a Company Voluntary Arrangement (CVA) or by placing the company into administration while a route forward is plotted. 

 

 

 

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Am I personally liable if I cannot pay my Bounce Back Loan?

If your company is unable to repay its Bounce Back Loan, you may be worried about how this will affect you personally.

The good news is that the government gave the banks 100% security for Bounce Back Loans. This means that directors were not required to provide personal guarantees, meaning that if your company can't pay the Bounce Back Loan and ultimately enters liquidation, the government will step in and ensure the bank receives payment for the outstanding balance.

Unless you have misused the Bounce Back Loan funds, you will not be held personally responsible for repaying the money owed. It must be stated, however, that your company cannot just declare that it cannot repay the Bounce Back Loan and have it repaid by the government. The government security on the loan will only take effect should your company enter a formal liquidation process such as a Creditors' Voluntary Liquidation (CVL).

“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

Can I close my business with an outstanding Bounce Back Loan?

It is possible to liquidate a business with a Bounce Back Loan.

The voluntary liquidation of an insolvent company is achieved using a formal insolvency procedure known as a Creditors’ Voluntary Liquidation (CVL). A CVL can only be entered into under the guidance of a licensed insolvency practitioner who will oversee the whole process on your company’s behalf.

All assets belonging to the company will be identified before being sold for the benefit of https://www.realbusinessrescue.co.uk/advice-hub/what-is-the-order-of-creditors-in-liquidation. Once this has been done, the company will be wound up, and its name removed from the register held at Companies House. At this stage, the company will cease to exist as a legal entity.

Any debt which remains at this point will be written off unless this has previously been secured with a personal guarantee. As Bounce Back Loans did not require a personal guarantee, directors will not be held liable for the Bounce Back Loan once the company has been liquidated so long as the funds have been used in an appropriate manner.

What is deemed misuse of a Bounce Back Loan?

The criteria around what a Bounce Back Loan could be used for was relatively broad and could be used for a variety of purposes, including to help cash flow, as investment in the business, or providing working capital. It was crucial, however, that the Bounce Back Loan was used to provide an economic benefit for the business. 

The Treasury confirmed that a Bounce Back Loan could be paid as a dividend; however, rules regarding unlawful dividends and insolvent companies still apply. Taking dividends from a company known to be insolvent may need to be paid back if the company enters a formal insolvency process later down the line. If a liquidator feels that excessive dividends played a part in a company going bust, again the use of these funds would be scrutinised and directors could be liable to repay the money. 

Worried about potential Bounce Back Loan fraud?

If you are worried that you may have misused your Bounce Back Loan, you should seek expert help and advice as a matter of urgency. It is much easier to voluntarily deal with these types of situations while you still can, rather than wait for an investigation to be forced upon you.

A licensed insolvency practitioner will be able to assess the situation for you and help you understand the options available to you and your company when it comes to your outstanding Bounce Back Loan. 

What are the options for refinancing or restructuring my company with a Bounce Back Loan?

If your company is struggling financially and is currently unable to keep up with the repayments of a Bounce Back Loan, there are a range of both formal and informal restructuring options which can help you save the business from closure.

If your Bounce Back Loan is one of a number of credit agreements your company has, you can attempt to enter into negotiations with your other creditors to see whether they can offer any flexibility when it comes to your monthly repayments. This can be done formally through a process known as a Company Voluntary Arrangement (CVA).

If you owe money to HMRC, you could consider a Time To Pay (TTP) arrangement, which allows you to repay your tax arrears over a period of up to 12 months. You can open these negotiations yourself, or we can facilitate these discussions on your behalf if you would prefer. 

We can also look at ways of refinancing any existing credit that you have that is not the Bounce Back Loan. We can scour the market for the most cost-effective finance options on the market, and work towards securing borrowing on terms which are both more affordable and also more sustainable.

Get free advice on Bounce Back Loans with an initial consultation

If you are a limited company director and are worried about how you are going to repay your Bounce Back Loan, or maybe you have already registered a default on your loan, it is vital you seek expert help and advice as soon as possible. The sooner you take action, the more options will be open to you and your company. We can consider your options for both rescuing your company and closing it down if you no longer believe it is viable.

Real Business Rescue operate from over 100 offices across the country and offer a free initial consultation to all directors and shareholders. Call our expert team for immediate advice on your Bounce Back Loan today on 0800 644 6080.