If your limited company cannot afford to repay its Bounce Back Loan (BBL), you could:

• Speak to the lender about your options to repay
• Explore the government’s flexible repayment options
• Contact a licensed insolvency practitioner for free, impartial advice

Because BBLs didn’t require a personal guarantee from directors, the owed amount is classed as an unsecured debt and not a liability to the director.

What are the Bounce Back Loan repayment terms?

While the Bounce Back Loan Scheme (BBLS) didn’t require personal guarantees from directors, after the first year, your company is responsible for repayment. Interest is added after the initial 12 months, and at a fixed rate of 2.5% for up to 10 years.

Speak to your lender

You should speak to your lender if your company needs help repaying a BBL. Doing so can demonstrate a willingness to repay, and the lender may be more open to negotiating affordable repayments or amending the existing terms than if the company defaults on the loan.

Is there government support to help with BBL repayments?

There is government-backed support if your company cannot repay its BBL. The Pay As You Grow (PAYG) allows more flexible repayments for companies with a BBL.

Through PAYG, your company can:

• Extend a loan’s length from six years up to ten years at the same fixed rate
• Make interest-only payments for six months, which you can do up to three times in the loan’s duration
• Delay all payments for a further six months or eighteen months after the original loan was taken out

All lenders are expected to offer their borrowers PAYG, and your lender should outline your policy’s specific repayment options.

Can my company’s Bounce Back Loan be written off?

A Bounce Back Loan is treated the same as any other unsecured debt and can’t be written off. However, if your company becomes insolvent and enters a formal insolvency procedure such as a liquidation or administration, it is included as part of those arrangements.

Can I dissolve or strike off my company with an outstanding BBL?

Whilst you can apply to dissolve a company with an unpaid Bounce Back Loan, or your company may face compulsory dissolution for non-filing of statutory information at Companies House, BBL lenders and the Department for Business & Trade are objecting to any form of dissolution.

Can directors be held personally liable for a BBL?

BBLs didn’t require personal guarantees. If your company enters an insolvency procedure, the debt is tied to that company and not you as the director.

However, if the BBL has been misused, you may become personally liable for the debts.

Have I misused a BBL?

Bounce Back Loans were intended to help businesses with working costs and compensate for reduced takings due to COVID-19.

Appropriate uses included:

• Paying staff, suppliers, loans and running costs (utilities/rent)
• Marketing costs
• Investment into new production machinery and equipment
• Maintaining business cash flow
• Supporting directors’ income

Inappropriate uses included:

• Paying dividends without a profitable balance sheet
• Increasing employees’ salaries
• Loans to directors or connected parties

How we can help if your company can’t afford to repay its BBL

If you’re a director and are worried you can’t repay your company’s BBL, seek advice and take appropriate action as soon as possible. Contact our initial advisers. We can discuss your company’s situation and advise you of the options best suited to its circumstances.

If your BBL repayments become unaffordable, limited companies have several options to repay:

• Repay your company debts in a payment plan via a Company Voluntary Arrangement (CVA)

  A CVA is a payment plan between a company and its creditors that allows you to restructure your company’s unsecured debts, while continuing to trade, by making affordable monthly payments over a fixed period. We start by assessing your company’s financial position, determining a realistic repayment amount. These terms are then proposed to your creditors and if approved, your company enters the repayment plan. When in place, all interest and charges are dropped and creditors in the arrangement cannot take further legal action. The process lasts for up to 5 years and on successful completion, any remaining unsecured debt in the arrangement is written off.

  More on Company Voluntary Arrangements

• Restructure your company through administration

  Administration is an insolvency procedure for companies. Entering the procedure, your company will be in a temporary state of protection by a moratorium that halts creditor action, including legal proceedings, giving your company the breathing space to continue trading. We will act as administrator and our primary purpose is to rescue your company as a going concern, attempting to restructure and turn it into a leaner, more profitable organisation. If rescuing the company isn’t a viable option we will also look at the most appropriate exit strategies from administration, whether that be a potential sale of the business, assets, the whole company, or transitioning to an alternative insolvency procedure.

  More on administration

• Close your company down via a Creditors Voluntary Liquidation (CVL)

  A CVL is a liquidation procedure for companies that are insolvent. The process will formally close and liquidate your company, ceasing its trading operations, realising any assets, and removing the threat of creditor legal action. If your company has employees, they can claim for redundancy and other statutory entitlements through the government’s Redundancy Payment Service (RPS). The process is final and irreversible. Once completed, your company’s unsecured debt will be written off and the company is dissolved, allowing you, the director, to move on.

  More on Creditors Voluntary Liquidation

How to get in touch with us: The next steps

1. Speak with our initial advisers
   Make contact with our team, via phone, filling in a form, or online chat. We will assess your circumstances and, if suitable, arrange a free consultation with a consultant to discuss your company’s situation.
2. Initial assessment
   During the consultation, we will advise if an insolvency procedure is the most appropriate route forward or whether alternative solutions better suit your company’s problems.
3. Formally engage with Wilson Field
   If there is an appropriate insolvency solution, we will confirm the necessary steps to start the procedure and will issue you with the relevant documentation for you to formally engage us.

In summary

The Bounce Back Loan scheme was for companies struggling with coronavirus-related debt. Classed as an unsecured debt, lenders did not require personal guarantees, with the debt belonging to your company. If your insolvent company has unsecured debts and is formally wound up and closed, those debts die with your company. If your company cannot afford to repay a BBL, there are several options available to make payments easier:

• Speak to your lender about amending the loan’s repayment terms
• Explore the government’s flexible PAYG options
• Enter a formal repayment plan such as a CVA
• Wind up the company in an orderly manner, drawing a line under the debts

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