What is a bounce-back loan?

Bounce Back Loans (BBLs) formed an important part of the Government’s attempt to mitigate the damage to businesses inflicted by Covid restrictions.

The Bounce Back Loan scheme has assisted greatly in ensuring main businesses could continue in the short term. However, for some Companies, this has merely delayed the inevitable and meant that a business that was no longer viable continued to trade.

If your business took a BBL out but are now struggling or cannot pay it back, there are several options for you going forward.

The Bounce Back Loan Scheme allowed eligible businesses to borrow upto £50,000 to cover expenses to protect customers and staff, and to recover from the difficulties caused by Coronavirus.

A number of calls we receive are from directors who are concerned about what will happen if they cannot continue and repay their BBLs.

If you find yourself in a situation like this, there are many things to consider, like looking for further funding, coming to an arrangement to repay the Company creditors, or even closing the Company down.

Am I liable for paying back the loan?

Do I have to pay this back myself if the Company cannot?

The short answer is – no.

There was no personal guarantee attached to the BBLs for loans under £250,000. This means you cannot be held personally liable for the amount borrowed unless there was wrongdoing on your part such as ‘Misfeasance’ which is when Company funds are mishandled deliberately.

Bounce Back Loans and Liquidations

Can I liquidate my company if it has taken out a Bounce Back Loan?

In short yes. Businesses may still find trading difficult during or after this turbulent period, even with the extra funds from the loan. Recovery may not be realistic so liquidation and closure is the most suitable course of action.

What happens to the loan in liquidation?

In the event of a company being liquidated, the bounce back loan turns into unsecured debt

Can I be held liable for an unpaid bounce back loan?

No. Usually, in the event of a company being liquidated, for any personal guarantees signed by a director to secure funding, that director remains liable for the debt.

Directors, however, are not liable for an unpaid bounce back loan because they are 100% guaranteed by the Government and not by the director.

What should I do?

The rules surrounding insolvency, money owed by the company and personal guarantees can be difficult to understand.

Due to the complex nature of Company insolvency, it can cause severe implications for Company directors if it is not properly handled.

If you feel that your Company is struggling to meet its commitments or even if you feel it is getting harder to pay each invoice on time, then you need help. The worst thing you can do is just hope it will improve. The best thing you can do is call us. Our dedicated team specialise in providing free and impartial advice to any Company that needs it.